One way to remember 2019 is as the year when Chinese investors pulled the stops to hand over Nigeria’s payment and tech space to their homegrown startups. It is a development that has experts worried and asking whether the local startups would need a policy to protect them from the deep pocket Chinese firms grown in Africa.
First, OPay secured another record $120 million in Series B from Chinese investors including Meituan-Dianping, Source Code Capital, IDG Capital, Sequoia China and GSR Ventures who funded the company’s $50 million raise in July. The July funding was the highest seed round raised by a fintech company operating in Nigeria.
OPay’s total investment now stands at $200 million (data from Crunchbase) barely one year since kicking off operations in Nigeria. It only needed less than 6 months to raise $170 million.
Second, PalmPay, another Chinese company owned by Transsion the parent of mobile phone brands Techno, Infinix and iTel, raised $40m to build a super app housing different digital services such as logistics, ridehailing and payments.
Apart from Transsion, other investors who participated in the seed round include NetEase investments, a Chinese Internet technology company and Mediatek, a Taiwanese fabless semiconductor company.
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Third, Jack Ma, founder of Alibaba Group was in Nigeria on a visit to the Vice President, Professor Yemi Osinbajo. After the visit, his African NetPreneur Foundation was handing out a $250,000 grant to LifeBank as the winner of its maiden edition of the award. The Africa Netprenuer Prize Venture was founded by Jack Ma. 10 entrepreneurs across Africa were competing for an opportunity to win prize monies totaling USD 1 million.
“The prize is an entry strategy for the ecommerce company Alibaba founded by Jack Ma and its payment platform AliPay which is already in Nigeria and has a physical office,” said a source knowledgeable about the matter. “Recently, they poached an executive of one of the local payment companies in Nigeria, Korapay.”
Jack Ma is a long admirer of African entrepreneurs, however, experts say he is looking to leverage Africa’s largely untapped ecommerce space to displace Amazon dominance in the global market. Hence, an announcement by Alibaba is expected very soon. But when Alibaba decides to make its intentions known, it would likely have competitions from Transsion which already has the advantage of being the leader of Africa’s mobile phone market.
Today the company that revolutionised the dual-SIM in Africa is a clear leader of the phone market on the continent controlling 37.4 percent as of the second quarter of 2019 according to International Data Corporation (IDC). Transsion’s company data showed that it sold 124 million phones globally in 2018 alone.
Experts also say it is a signal that the Nigerian fintech market is up for grabs and Chinese companies backed by big funding are strategically positioning themselves to lead.
“The decade of application utility is around the corner in Africa. The Chinese are not buying local startups – they prefer to start from scratch. What does that tell me? Simply, the market is still at infancy; no one has it yet,” said Ndubuisi Ekekwe, chairman of Fasmicro and a technology expert.
The increased Chinese attention may not be unconnected to significant milestones startups in the segment has made since the turn of the century.
A report by the World Economic Foundation (WEF) notes that given China’s position as a leading and rapidly accelerating technological superpower in the world, it is not surprising that they see technology as the industry for the next stage of Sino-Africa collaboration.
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However, there are fears that the Chinese interest poses an existential threat to local startups who have no access to big funding. Hence, some tech professionals say maybe a protection policy could go a long way to ensure local startups are not pushed out by the big money Chinese firms.
But there may be a way for local startups to survive.
“To compete, Nigerian Fintechs will have to offer a different value proposition entirely, capture a different market and spread from there or probably work together and create other markets, seeing that they all are in loans, agents, payments,” said Abel Achi, a software designer.
While local fintech firms have a serious battle ahead, Some experts see the competition benefitting the consumers. Aside from OPay and PalmPay, JumiaPay, Visa and other foreign payment platforms are beginning to expand their visibility in the Nigerian market. Visa was behind the $200 million stake in pre-IPO Nigerian payment companies, Interswitch.
“Lots of Chinese microcredit coming to the Nigerian market; combined with CBN policies, you should see loan interest rates come down in the next few years,” Mark Essien, founder of Hotelsng said in a tweet.
Following its funding, OPay released an OCar flier indicating that it is starting an Uber-like ridehailing unit. From the flier, the first rides will cost only N200. The service is already available in Lagos, Owerri, Port Harcourt, Abuja, Benin, Kaduna, Abeokuta, and Ibadan. OPay’s micro lending platform, OKash is also reported to have provided approximately 5 million loans valued at $250 million in Kenya, India and Nigeria.
