Kobus Ehlers. Picture: JOHAN WILKE
Kobus Ehlers, co-founder of Snapscan, says the firm is pursuing the large number of traders in SA who do not have access to the formal payment infrastructure. Picture: FREDDY MAVUNDA

THE race to develop mobile payment systems across Africa is spawning a new generation of technology entrepreneurs, searching for innovative ways to reach their customers.

From finance and farming to education and healthcare, dozens of apps are being created to overcome the continent’s infrastructure deficits and help meet the aspirations of an increasingly tech-savvy, urbanising population.

"The conventional thing to say about Africa is it’s cursed by a lack of infrastructure," says Jesse Moore, CE of M-Kopa, a four-year-old Nairobi-based company that uses cellphone technology to lease off-grid, solar-powered lighting and power systems in Kenya, Uganda and Tanzania.

On the contrary, Moore argues, the continent’s old infrastructure deficit is spurring innovation. He points to M-Pesa, the mobile money transfer system pioneered by Kenya’s main telecoms company, Safaricom, which is 40%-owned by the UK’s Vodafone. M-Pesa is now used by 22-million Kenyans — or more than 70% of the adult population.

Safaricom is backing Sendy, a Nairobi-based package delivery start-up offering a marketplace for last-mile package delivery and logistics services, allowing customers to send packages and documents in the Nairobi area using a mobile application that connects them to motorcycle riders and drivers of vans and bakkies.

Much of this innovation has arisen from commercial necessity. Across Africa, telecoms companies have been forced to look for ways to boost revenues and retain subscribers as competition from rivals has driven airtime prices down.

Monthly M-Pesa transactions now total about $150m. While this accounts for a growing proportion of Safaricom’s business, it still represents only 20% of the group’s total sales. The platform earned Safaricom 19.4-billion Kenyan shillings ($18m) in the six months to September 2015.

But it has inspired dozens of copycats, such as SA’s SnapScan, a mobile payments system backed by Standard Bank. "The problem that we tried to tackle was that there is an enormous amount of businesses — about 400,000 of them in SA — who are trading today, but who don’t have access to the formal payment infrastructure," says Kobus Ehlers, one of SnapScan’s founders.

"So we tried to ask, well, how can we use technology to address that? Because that’s incredibly local, it’s a real problem — we’ve quantified the size of it — and now it’s a case of can we do something to address that?"

Joe Mucheru, who resigned in December as head of Google Kenya to become the country’s technology minister, says that despite myriad problems — from opaque regulatory systems to the shortage of skills — the success stories are likely to continue.

"Today we’ve got tens of incubators; there’s a lot of start-ups in place that are coming up with very innovative products," he says. "But they’re at their infancy. When they get to the seven-, eight-year space, they hopefully will be larger and be able to absorb a lot more capital. Then we’ll see real growth."

One of the best-known incubators is iHub in Nairobi, which has spawned 150 companies, including Weza Tele, a financial services tech company that was sold to SA’s AFB last year for $1.7m.

"There’s more to be done, but Rome was not built in a day," says Juliana Rotich, one of iHub’s founders. "Yes, in terms of listings on the Nairobi stock exchange we’re not there yet, but there are a lot of companies coming up."

The level of ambition among African technology companies is demonstrated by the fact that some are extending their horizons beyond the continent.

JourneyApps, a South African firm that started in 2009 by designing apps to support community health workers, last year opened an office in the US in a bid to transfer African technology to the US market.

Conrad Hofmeyr, one of JourneyApps’ co-founders, says the demands in the world’s most developed economy are not always so different from those in Africa. "The kinds of attributes that we had to build into the product, like the fact that it works offline, that it’s very simple to use … it turns out that’s actually very useful for the US market as well, because now we’ve learnt things not in this theoretical bubble, but in this practical real-world challenge of operating in Africa," he says. "And we can go and take that valuable thing that we’ve built and use it in the US as well."

But with intra-African trade accounting for only 12% of trade on the continent, those involved in the technology sector are optimistic about the future.

"A lot of the solutions that are made in one country can be customised and provided to another country," says Rotich. "So, I still think there’s a lot of possibility … all over Africa, if we can be a bit more open."

(c) The Financial Times Limited 2016