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1 Events, Trends, and Innovations in Africa Max Peddie, Jett Smith, Thomas Tecle, Soukaina Assakhiri, Youssef Bachari, Chaymae Chaabani Virtual Exchange Project Dr. De Farias, Dr. Abba March 19, 2023

2 Events, Trends, and Innovations in Africa Staying relevant is one of the toughest challenges that many of the top businesses face in a day-to-day business. As many new start-ups continually attempt to disrupt the norm that has been long established by legacy companies, in order to find their own way into a lucrative market segment. To maintain previous consumers, businesses must consider how events are impacting consumer bases, which trends are growing, and which are falling, and how innovations are revolutionizing the market’s landscape. Although there are other strategies to stay relevant, such as advertising or corporate social responsibility, finding the overall long-term trends of an industry or region, they will naturally fall into a market space due to filling a role that is in high demand by correctly predicting how the markets change and revolutionize naturally. One perfect example of how an event can cause long-term issues for large players that have a footing in an already established long-running industry is Nigeria’s move to cashless payment. Nigeria, Africa’s most populous nation declared in 2022, that it would be phasing out higher denomination bills to change society to a more cashless one with a cash redesign. While it may seem beneficial to companies like Visa, MasterCard, and Verve that a large economy is switching to a more cashless-focused economy, the announcement came with two prongs: cash replacement policy and the launch of AfriGo. For new and emerging businesses, the new cash replacement is beneficial, as the government is attacking their counterfeit market so that the naira can become more stable and trustworthy. Furthermore, due to lack-luster support of the cash replacement policy that was enacted by Central Bank of Nigeria governor Godwin Emefiele caused a strong surge in online payments for Nigeria. However, the wrench thrown in for previous players in the financial services market is the launch of AfriGo. AfriGo, owned by the Central Bank of Nigeria is aiming to reduce foreign transaction fees and become a highly accepted form of payment and promote financial inclusion for the population of one of Africa’s largest economies by being a large, government-backed, domestic card scheme. This affects the current largest players, Visa, MasterCard, and Verve by introducing a government-backed fourth player. For the foreseeable future, those big three companies will be allowed to stay in Nigeria, but there are currently no promises made by Nigeria’s government or central bank. Obviously, adding another competitor is not beneficial to any of the previously established companies, but the outcome fully depends on the support of the population. The smaller players have not been

3 left out in the introduction of AfriGo either. As AfriGo and the government pushes for digitized payments, digital supply chains, lending platforms, and credit solutions will be more needed than ever. TradeLenda is a fresh FinTech start-up that is based in Nigeria with a focus on optimizing change and increasing the efficiency of the digital supply chain. Adeshina Adewumi and Oluwatosin Ayodele, co-founders of TradeLenda, foresaw the impacts of the mass cashless shift and created a company that can slot in perfectly to ride the wave off the implementation of AfriGo. While global events can prove too lucrative for many involved, one of the most difficult challenges involved is being able to forecast them and act promptly. For companies that already exist, they need to be able to adapt and evolve accordingly or be left behind by more flexible start-ups. From 2020 to 2021, the number of technology-based start-ups boomed up to 5,200 companies, which was up over triple the previous year. And around half of those, were FinTech- based companies that were and still are attempting to disrupt and innovate upon legacy financial services. But why are so many of those firms FinTechs? A study conducted by World Bank showed that around two-thirds of the sub-Saharan African population was un- or under-banked. Especially as the population of that region was trending upward, many of the new FinTechs saw this as a great opportunity to ride the growing trend of FinTech in these underrepresented populations. As a result of this study and many others pointed to the same conclusion, FinTechs could inject themselves into many different sectors including financial services, mobile payments, and financial inclusion/literacy, among others. Sub-Saharan Africa has firmly planted itself as leaders in mobile money transfer services with large companies such as M-Pesa, the market share leader of this specific sector. M-Pesa made its grand appearance in 2007 in Kenya, being launched by Safaricom, the largest established mobile phone operator, meaning they already had the infrastructure in place to deal with this growing trend. Since its launch, it rode the wave to expand into many other countries such as Mozambique, the Democratic Republic of the Congo, and South Africa creating an immense amount of profit due to having proper research done on the trend. Other sectors such as the financial inclusion sector were also able to benefit from the FinTech trend too. Financial inclusion is defined as the broad access for individuals and businesses to get affordable, useful, financial products and services. This sector is highly important to the growth of the overall economy and works similarly to how interest rates are manipulated to create expansionary and contractionary periods. When individuals and businesses

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4 have access to money at a lower rate, they are more willing to spend and expand, propping the economy. A study conducted by Cogent Economics & Finance showed clear relationships between better financial services and inclusion led directly to a better economy, less poverty, and rising income. This benefits not only the large key players in this economy, but more importantly, it helps small to medium-sized enterprises much more. One of the main issues that they often run into is breaking out of the funding and seeding phases so that they can properly develop their products. By having better financial inclusion, companies will have access to more funds at lower rates allowing cheaper funding for their projects. Trends can provide a great amount of information for any industry, but similar to events a proper amount of research and analysis should be conducted. Stronger trends lead to competitive markets, but first-movers yet again can find great profit by being established by the time that competitors find their way into the market space. Large enterprises are able to switch their organizational capacity with existing infrastructure, while smaller ones can be built from the ground up with less waste and more flexibility to act faster. As technology grows at an exponential rate, innovations are seemingly becoming more and more common. E-Commerce in Africa is growing alongside the population to help allow goods to reach the far corners of the continent. The impact of e-commerce innovation on various stakeholders has been significant. One of the primary consequences has been the democratization of access to markets, as e-commerce has allowed small and medium-sized enterprises (SMEs) to compete with larger businesses. This has led to increased economic growth and job creation, particularly in sectors such as logistics and delivery, which have benefited from the rise of e- commerce. For consumers, e-commerce has provided greater convenience and access to a wider range of products and services. This has been particularly important in areas where physical retail infrastructure is limited or non-existent. Additionally, e-commerce has been credited with helping to reduce the cost of living, as it allows consumers to compare prices and make informed decisions about their purchases. While the population grows, demand does as well, causing the need for innovation. However, the rise of e-commerce has not been without its challenges. One of the primary concerns has been the issue of trust, as consumers have been hesitant to share sensitive information online, such as their payment details. There have also been concerns about the impact of e-commerce on traditional retail sectors and the displacement of jobs.

5 Jumia, dubbed “the Amazon of Africa” has been happily creating new services and products as their operations which started in only Kenya expand to many other countries including Nigeria, Egypt, and South Africa to name just a few. Jumia is leading the forefront of mass e-commerce adding features such as Jumia Express, which is similar to same-day delivery, Jumia Travel to replace the standard hotel booking process, and other services. While Jumia was originally targeted as solely e-commerce for products, they were successful enough to become a payment processor as well launching Jumia Pay for mobile money transfer and Jumia One for paying bills. Their innovation expands further than new features and services, however, improving upon logistics for delivery and better payment services. Established companies that are e-commerce platforms are aiding in the creation of these newer innovations, such as Shopify, are also benefiting massively. They are a common platform used to help smaller start-ups launch their platform cheaply and easily. Smaller to medium enterprises are also hoping to innovate in this market space as well, not just launch their product, such as Copia Global, which was founded in Kenya. Their mission was to target rural Kenyans who had little access to shopping and were underbanked by creating community-based, commission-paid agents to place an order on behalf of consumers and deliver their products. Through their proprietary Copia Logistics, they claim to be able to reach markets that traditional retail and e-commerce could not mimic, and as the industry grows to an estimated $2 trillion in the new few years, they plan on expanding and rolling out more innovative features. Copia Logistics not only benefits from its newer innovations but also its previous ones. Since they have been firmly planted into the market space, they have an existing positive brand image and previously created infrastructure that will make every new innovation easier to implement efficiently along with higher rates of adoption since many people use their platform day to day. While the events, trends, and innovations will guide you towards which industries are growing or declining, their risk level, integration and entry are other aspects that should be considered no matter what size company you are. For international business, you would have to analyze how to get there in the first place, whether it is exporting to test the markets with little risk, or jumping into a joint venture with someone local who has cultural knowledge. Further, depending on the size of your company, do you just want to be acquired as soon as possible and start working on another project in the same or a different market space? Or do you want to just set up a booth with some sort of licensing agreement at an already established physical location

6 of another company so that you can get market exposure at less cost? There are other methods of entering foreign markets as well, but this was to just name a few that can be used. They all have different levels of exposure to new and existing market space and also hold differing amounts of risk so an extensive list of the varying pros and cons should be considered with a high amount of importance. These are factors that should certainly be looked at with great detail, but again, if your product is not relevant, you would be spending money on a failing product or service with little chance of relevance. As our societies conform to this new digital age that we are facing, businesses will always be battling to stay on top of current events, trends, and innovations. Whether you are a large, medium, or small-sized enterprise, your company’s viability will remain the utmost concern no matter how you look at it. Through proper market analysis and research and development, anyone would be able to come up with the next hit product or service, it is just a matter of knowing your audience and predicting where the market will head. While it is easy, it is one of the most important decisions you will have to make when running a business. Together, analyzing these three main topics for an industry will help paint a full picture, hopefully helping guide you towards the correct business decisions.

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7 Works Cited Bernard Sarpong & Edward Nketiah-Amponsah (2022) Financial inclusion and inclusive growth in sub-Saharan Africa, Cogent Economics & Finance, 10:1, 2058734, DOI: 10.1080/23322039.2022.2058734 Cabal, T. (2023, February 14). The future of ecommerce in Africa . TechCabal. Retrieved February 18, 2023, from https://techcabal.com/2023/02/06/the-third-wave-of-ecommerce- in-africa/. “Demirguc-Kunt, Asli; Klapper, Leora; Singer, Dorothe; Van Oudheusden, Peter. 2015. The Global Findex Database 2014 : Measuring Financial Inclusion around the World . Policy Research Working Paper;No. 7255. World Bank, Washington, DC. © World Bank. https://openknowledge.worldbank.org/handle/10986/21865 License: CC BY 3.0 IGO.” Dzirutwe, M. D. (2023, January 27). Nigeria launches domestic card scheme in cashless bid . Reuters. Retrieved March 5, 2023, from https://www.reuters.com/technology/nigeria- launches-domestic-card-scheme-cashless-bid-2023-01-26/ Maclean, R. (2023, February 22). Nigeria's cash crunch causes chaos and suffering before crucial election . The New York Times. Retrieved March 5, 2023, from https://www.nytimes.com/2023/02/22/world/africa/nigeria-cash-shortage-election.html

Grroup ETI

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