2015 African Fintech & Telecoms Trends - Notes from The Annual Round-Up 2015

This article lists some notes and quotes from the Enterprise Panel of the annual breakfast held by the African Tech Round-Up team. It follows on from notes shared about the opening keynote address which equally had some interesting insights about Technology in Africa.

Facilitated by African Tech Round-Up (ATRU) co-host, Tefo Mohapi, the Enterprise Panel was made up of two African Tech Round-Up Conversations (ATRUC) Alumni. In case you missed it earlier this year, Pursuing Excellence With Dominique Collett is a laid-back interview where ATRUC host, Andile Masuku, discovers the force behind the over-achiever that is Dominique Collett-Antolik. From Punk Rocker To Tech VC With Brandon Doyle is another episode where Andile explores the life of a leading player within Africa’s ICT Infrastructure Venture Capital scene, Brandon Doyle.

Brandon Doyle (CEO and Founding Partner - Convergence Partners) and Dominique Collett-Antolik (Senior Investment Executive - RMI Holdings)

Bitcoin & Blockchain in Africa

Starting off with focus on the current bitcoin and blockchain hype in Africa, Tefo asked Dominique to explain why the year 2015 had a lot of news around remittance services in the African FinTech industry.

Tefo: “What’s happened that we’re perhaps not aware of around trends such as blockchain and bitcoin? And what do you see going forward in 2016?”

Dominique: “For me 2015 has been the year of bitcoin and blockchain. This is the year that financial services have actually started to pay attention to it. What’s really interesting is how regulators have started to engage with it...”

Dominique: “What’s been interesting to see is that all of the big global investment banks have all set up blockchain innovation labs to start to actually understand the power of blockchain and what they can use it for..”

Dominique explained how BitPesa (one of the most successful blockchain startups in Africa), started with a remittance services use-case and are now seeing themselves as an alternative forex trading desk.

Tefo: "Could you give us more light on the trading platform that they’ve pivoted to?"

Dominique:“They’ve found that what they are able to do with it is help businesses facilitate forex transactions using bitcoin. They’re not using bitcoin as a currency. So really what they’re doing, say for example, if you have a business in the US that needs to make payments to their subsidiary in Kenya. It’s a lot easier for them do the transfer in the US from US dollars to BitCoin and then from BitCoin back to Kenyan shillings... because it takes minutes as opposed to a couple of days. And it’s a couple of basis points as opposed to a couple of percentages.”

Tefo: "In your view are we gonna see more of that happening? Banks like RMB or FNB taking that up?"

Dominique: “We know for a fact that Standard Bank has got teams actively working on bitcoin and blockchain. ABSA and Barclays in particular have got masses of people working on blockchain and bitcoin. And FNB and RMB are starting to actively explore it.”

Dominique continued to point out that South African banks are a little bit behind the trend compared to banks globally. From the conferences she’s been attending in London, she realised that most global investment banks understand blockchain and are fully behind bitcoin.

Dominique: "So South African banks are a little behind but they’re coming on board. So in 2016 we’re going to see aggressive moves into bitcoin and blockchain.”

Tefo then asked her if she sees any issues around regulation on this topic.

Dominique:“I’m actually seeing that regulators are starting to get their heads around it.”

Dominique believes that blockchain and bitcoin are going to stop being anonymous.

Dominique:“There are only 2 countries in the world where it’s banned. That’s Russia and North Korea. In Kenya it’s not recognised. So it’s not outlawed but it’s not recognised. The South African Reserve Bank has been engaging on it for 3 years.”

Dominique thinks that the successful players in this industry are going to be those that identify the users of their wallets. These players would, for example, 'FICA register' their users in the South African case. She further continued to explain how bitcoin and blockchain is going to increase the efficiency of the financial industry.

Brandon then joined the discussion by highlighting that there is further interesting innovation using blockchain outside of cryptocurrency or banking security.

Brandon:“Just last week we were at AfricaCom. Innovus which is the accelerator affiliated to Stellenbosch University, introduced us to a group of young guys who’ve created a blockchain tech that sits in the digital rights management world. And I think blockchain as a security layer, we’re gonna see increasing use of it across all sectors frankly…”

He further explained the technical aspects of this technology and significance of such players. In doing that, he also highlighted the problems of IP theft in Africa and the global conversation around Internet Governance.

Internet Trends and Challenges in Africa

Asked about the state of data pricing in the continent, Brandon felt that it’s important to first acknowledge that the continent is now well served in terms of infrastructure when it comes to international bandwidth.

Brandon:“Those prices are coming down rapidly. When we first launched SEACOM, STM-64 product which is a 10Gig wavelength was 99 million dollars. That product today is 2 million dollars.”

However, there has been a lag-effect in introducing lower prices on the back of international price declines.

Brandon:“You’ve got about a 30% year-on-year price decline in dollar terms of international bandwidth. But you’ve got about a 70% year-on-year uptake in terms of demand for bandwidth. Really demonstrating this latent demand that sits in the African continent.”

Following on Jo Crawshaw's keynote address references to internet infrastructure challenges in Africa, Brandon highlighted where the bottlenecks are.

Brandon:“There is infrastructure out there but it was architected for a 2G voice experience. Which isn’t great architecture frankly for a true data experience”

Brandon:“I think you’re gonna see more and more of these terrestrial fibre deployments that started happening. In the last 5 years, the number of kilometres of terrestrial fibre across Africa has more than doubled.”

Brandon:“The easy stuff has been built: the long-haul city to city stuff; the Metro Rings. .. The challenge is getting the last access fibre going. Which is where it’s really gonna ultimately drive prices down. Once you can shake the deadlock of the former monopolistic owners of that last connectivity into a home and that easy money starts falling out of the system, that’s when the consumers are really gonna start benefiting.

Brandon further shared trends and challenges that will be faced by Telecommunications companies (more so Mobile Network Operators) across the continent.

Brandon:“The next decade is really gonna be the time for the consumer. Pricing will go down; Much more friendly regulation; You’ve seen whats’ happening with regulators across the board in Africa: How they’re frankly beating up the Mobile Operators when they’re not compliant; You'll see Much more options around entertainment and OTT services…”

Brandon:“The consumer in the Telco world who since 1890 has been suffering under this monopolistic behaviour of a few, is finally going to wrestle back a little bit of control...“

The above is only the beginning of the panel discussion. I strongly recommend that you listen (podcast coming out next Monday via ATRU) to Brandon explaining how the recent Over The Top (OTT) platform complaints by Mobile Network Operator CEOs is essentially fighting against the inevitable. He does, however, acknowledge that there’s an inherent level of unfairness.

He believes that the big content owners (for example Google, Netflix) will start participating in the ownership of infrastructure or start finding ways to contribute back to network owners. We can see this already happening in the form of Google’s Project Loon for instance.

The Q&A session allowed Dominique and Brandon to reveal a lot more of their knowledge and experience in FinTech, OTT, Video on Demand, Financial Inclusion Startups and more. You can listen to the full Enterprise Panel discussion on Episode 35 of the ATRU podcast.

If you haven't done so already, be sure to catch up on my notes covering the opening keynote address (Towards The Next Billion Online Trends and Challenges):

Towards The Next Billion Online Trends and Challenges - Notes from The Annual Round-Up 2015