Category: The Most Interesting Thing About Investing in Africa

The Most Interesting Thing About Investing in Africa: Mobile Banking in Nigeria

The following post is from the e-book, The Most Interesting Thing About Investing in Africa, which features a series of conversations with entrepreneurs, community leaders, students, executives, and doers both home and abroad driving economic empowerment in several parts of my beloved continent of Africa.

Amara Udokporo, MHA and Kenny Udokporo, MCE, MCO
***
Amara and Kenny are investors in Net Gold Business Consulting.

Amara-Kenny

Investment: Banking of the People, By the People, and For the People in Nigeria
SITUATION
The Central Bank of Nigeria (CBN) spends approximately 34 billion Naira (N34bn) a year to print new paper money due to currency mutilation.  To address this critical issue of “cash waste” in Nigeria, CBN introduced the “cashless” initiative as part of an overall policy framework in 2011.  The framework identified a number of cashless methods (including checks, ATM cards, online banking, and POS terminal); but the most promising solution, both from the standpoint of dealing with cash waste and pulling the unbanked out of the shadows, has been mobile money.  Mobile money consists of a number of money transfer processes but it’s basically an electronic payment system that enables one individual or entity to transfer a specified financial value through a mobile phone to another individual or entity without using a bank account.

Unbanked

ACTION
NETGOLD MOBILE worked with the CBN to register as an aggregator and set up partnerships with CBN-licensed mobile money operators such as eTranzact International, First Bank, and Pagatech.  Here’s how the work flows:

  • Central Bank of Nigeria (CBN): Provides general oversight and issues licenses to the Operators.
  • Mobile Money Operators: Manage the technology platform needed for the financial transaction (eTranzact, First Bank etc.).
  • Aggregators: Act as the middle man between the Operators and the Agents.  An aggregator is a company that is registered with a specific Operator.  An aggregator recruits, trains, and manages agents within the platform.  NETGOLD MOBILE is an aggregator.
  • Agents: Sign up users and make a commission on the active users that they sign up. Agents are individuals recruited by an aggregator, and they can also conduct transactions on behalf of their users.
  • Users: Use the mobile money service to send and receive payments. Registration is usually free.

The daily mission for NETGOLD MOBILE is to break down the banking barriers for the unbanked (many of whom are located in rural areas) while providing job opportunities for agents (many of whom were previously unemployed).

Unemployment Word Cloud

RESULT
NETGOLD MOBILE is making progress in breaking down the following mobile money barriers:

  • Too Few Agents – By partnering with investors like Amara and Kenny, who have sophisticated professional and family networks that they can tap into, a concerted effort has been put in place to continue to attract more local agents.
  • Lack of User Awareness – The steady increase in local agents will lead to a steady increase in user awareness. In a survey last year, it was estimated that only 57% of available users knew about the service; but that number is now on the rise.
  • Agent Income and Business Model – As user awareness goes up, the earning potential for each agent goes up as well. Looking ahead…the good news is that the service continues to improve on key performance metrics and tools to help all the stakeholders involved manage the workflow.

Investment: Mobile Money Banking and “Banking On” the Unbanked in Nigeria
L = 10
I = 20
C = 10
Business Idea Metric: 40

To learn more about this service and get more information on how you can participate, please contact: Amara Udokporo | Kenny Udokporo

The Most Interesting Thing About Investing in Africa

by Chuki Obiyo and Ozii ObiyoMostInterestAfrica-624x415

 

INTRODUCTION

What is the most interesting thing that you have done, seen, or heard about investing in Africa? Think about it. Better yet, this e-book gives unique insight into how others have thought about it. From executives at some of the largest companies in the world to young professionals just starting out in their new careers, the topic of investing in Africa makes for a good debate and an even better conversation.

In the course of human history, Africa has gone from the cradle of civilization to the last frontier of the global economy. Ah…Ah…Africa, the protagonist of the first and next chapter in the story of human success? To read about Africa is to learn about our shared origin, and more importantly, to decide on how we get to our shared future. Reading is an investment in time, thought, and action. This book gives you an opportunity to invest in Africa by experiencing the most interesting things others have done, seen, or heard about investing in Africa.

There are so many things to learn about investing in Africa. This book explores some of the most interesting things contributed by people from different backgrounds. Each contributor was asked to answer a series of questions about an African investment project broken down into three sections: Situation, Action, and Result. In turn, we developed our proprietary methodology to analyze each project and we refer to this methodology as the Business Idea Metric (BIM). The BIM uses a weighting scale to evaluate the labor, infrastructure, and capital requirements for an investment idea or project.

Biz-Idea-Metric-2

For the labor requirement, we look at factors such as low, medium, or high skill and assign a value of 10, 30, or 50 accordingly.

For the infrastructure requirement, we examine factors such as electricity/utilities, construction permits, property registration, transportation, and technology, and attach a value of 10 for each factor accordingly.

For the capital requirements, we consider the amount of capital needed to get the project off the ground from $0-100, $101-1000, $1001-10,000, $10,001-100,000, and over $100,000 and assign values of 10, 20, 30, 40, 50 based on the given spend levels.

We have received very positive feedback on our BIM methodology and its LIC (labor, infrastructure, capital) ingredients as a unique way to not only evaluate current projects but to also help prioritize future project ideas for viability. Please see below for one of the investment projects that we profiled from our work. In this write-up, we classify each profile by the contributor’s name (so please continue to watch this space for more project profiles).

We now welcome you to enjoy the reading experience of exploring the most interesting things about investing in Africa.

★★★★★

Wasili Mfungwe, MBA
***
Wasili Mfungwe, MBA is an international market analyst and consultant with expertise in economic research, ALM, stress testing, equity research, and business intelligence.  He obtained a Bachelor’s of Social Science Degree in Economics and Sociology (Bsoc Eco) from the University of Malawi, Chancellor College and his MBA from Edinburgh Business School (Heriot-Watt University).  He has particular interest in African business development, research, and econometrics.

Investment: Restructuring a corporate loan to promote a public good
SITUATION
Electricity Supply Corporation of Malawi (ESCOM)– the main electricity generator and distributer in Malawi had a loan with Development Bank of South Africa (DBSA) to the tune of MK3 billion (R79 million). The repayment of the loan was hampering the implementation of a program to revamp Malawi’s energy sector in order to provide more reliable electricity, create better non-outsourceable jobs, and improve the lives of everyday Malawians.

ACTION
Standard Bank Malawi Limited stepped in to restructure the loan which ESCOM owed to DBSA. The DBSA loan was secured by a zero coupon note issued by Investec in favor of ESCOM with a maturity value equal to the loan principal. Standard Bank ensured that ESCOM was able to get the highest discounted value for the note which, as part of the restructuring, was being sold before its maturity in June 2019. Standard Bank also advised ESCOM on the various structuring options and negotiated with DBSA and Investec on behalf of ESCOM, discounting the promissory note through its structured sales team and using the proceeds to partially repay the loan. Through its global markets team, Standard Bank built and remitted a total of R37.5 million on behalf of ESCOM to repay the outstanding amount of the loan. Standard Bank’s Investment Banking team structured and negotiated the prepayment with DBSA without any break costs being applied.

“Public-private partnerships should become the rule, not the exception, in delivering services.”
– Bill Clinton, 42nd President of the United States from 1993 to 2001

Public-Private

RESULT
The transaction has helped to engineer a smooth implementation of the energy sector revamp program. In addition, Standard Bank ensured that ESCOM saved R1.5 million in interest payments per month, leading to improvements in its free cash flow position. The transaction has also helped eliminate forex and interest rate risk for ESCOM.

Investment: Restructuring a loan to a corporation to promote a public good
L = 50
I = 50
C = 50
Business Idea Metric: 150

 

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