The technology, media and telecommunications (TMT) sector has been a major driver of Africa’s dealmaking since the pandemic, posting the highest aggregate value across all sectors on the continent over the past three years.
Activity this year has been just as strong, with nine deals worth a combined US$2.9 billion posting the highest quarterly value in just over two years.
And it is investment in the region’s technology sector that looks set to propel regional M&A to new heights over the next few years. Africa boasts the fastest growing and youngest population of any continent, with pressure for digital services—particularly in the fintech and e-commerce spaces—ramping up. These industries are becoming major hotspots for growth, and the continent’s lack of digital infrastructure and large unbanked population leave a sizeable investment gap to fill.
Mobile money grabs investor interest
Investment in Africa’s burgeoning fintech space is on the increase as businesses scramble to reach the region’s mostly unbanked population. The issue is widespread, as only 43 percent of sub-Saharan Africa’s population has a traditional bank account, according to the International Monetary Fund.
Mobile money services are emerging to provide people without a traditional bank account access to financial services. Africa’s rapidly expanding digital population offers a huge opportunity for businesses and investors looking to enter this largely untapped market, with the region’s 4G adoption expected to more than double over the next five years.
This trend triggered the largest fintech deal of recent years: Mastercard’s acquisition of a minority stake in MTN Group Fintech, the digital payments division of Africa’s largest mobile network provider. The partnership, valued at US$200 million, will drive the roll-out of its mobile money payment system across 13 African markets.
Investors are also looking to gain a slice of the region’s fintech ecosystem. A recent KPMG survey found that nearly two thirds of financial sponsors, both domestic and international, expect their firm’s interest in fintech assets in sub-Saharan Africa to increase over the next two years, including 11 percent who anticipate a major uptick.
In a significant bet on fintech in North Africa, Egypt-based MNT-Halan secured US$200 million in funding from Abu Dhabi’s Chimera Investment in exchange for a 20 percent stake in the business. Founded in 2018, MNT-Halan offers microfinance lending and payment services to Egypt’s unbanked population through a digital platform. The investment, announced in February 2023, propelled the startup to unicorn status.
Mobility fintech tipped for growth
Fintech also carries enormous disruptive potential within the automotive industry. Mobility fintech is emerging as a fast-growing segment within the broader fintech market, using data to offer financing solutions to increase vehicle ownership among ride-hailing and delivery app drivers.
Nigerian startup Moove provides a digital vehicle-financing service aimed to boost vehicle ownership across emerging markets. Prized as Africa’s first mobility fintech, the company has recorded significant growth, with services that now reach over 20,000 customers across six markets.
In the largest TMT fundraising so far in 2024, Moove completed a US$100 million investment round in March. The investment, led by Uber and including Emirati sovereign wealth fund Mubadala, comes as the startup plans expansion into 16 markets across the globe.
Growing electric vehicle use is central to Moove’s strategy, which currently operates EV fleets in the United Arab Emirates and the UK. This is a major draw for Uber, which has committed to a zero-emission fleet by 2040.
The gap between vehicle ownership and population growth across Africa offers vast potential for investors. Nigeria alone has an estimated 40,000 vehicles to service 200 million people. As a relatively new, yet rapidly expanding fintech disruptor, the journey has only just begun for mobility fintech.
Retail disruptors position for expansion
Market players are pushing to solidify their position within Africa’s fast-growing B2B e-commerce sector. In December last year, Kenyan Wasoko and Egypt-based Max AB—two of Africa’s leading B2B e-commerce companies—announced their intention to merge in a deal that would create a dominant e-commerce platform serving multiple markets across the continent. Both Wasoko and Max-AB connect smaller, underserved merchants with wholesalers, enabling retailers to restock their inventory via a mobile app.
Wasoko founder and CEO Daniel Yu has said the new entity will look at further M&A opportunities to propel growth following their merger.
While the terms of the deal have not been announced, the merger-of-equals agreement highlights the growth potential of Africa’s informal retail sector, which, according to Boston Consulting Group, accounts for more than 70 percent of food, beverage and personal care products provided to consumers across the continent.
As such, the sector is ripe for digital disruption, with several tech-enabled startups geared toward offering solutions and empowering local SME retailers.
Outlook: Reaching the next level
As they gain in maturity and scale, Africa’s burgeoning fintech and e-commerce startups will become increasingly attractive to private equity players, both domestic and international, with activity set to grow in the continent over the next few years.
Dealmakers looking to capitalize on the region’s untapped potential should remember there are challenges to overcome. The continent is not homogenous, and each market presents its own specific tax, legal and regulatory frameworks. Intra-regional and international buyers will need to gain clarity surrounding such disparities to successfully push deals over the line.
As is often the case, though, market challenges can also present opportunities. Nigeria’s low vehicle-ownership figures, for example, highlight fintech’s enormous potential to disrupt the industry and drive economic growth. Rising consumer demand, coupled with insufficient digital infrastructure across the continent, provides a wealth of opportunities in burgeoning segments such as mobile money, mobility fintech, e-retail and artificial intelligence. These market drivers look set to provide a tremendous boost to Africa’s technology dealmaking over the coming months and years.
