From empires built on steel to nations powered by silicon, history teaches us that technological prowess shapes the rise and fall of superpowers.
But beyond invention, as Paul Kennedy argued in The Rise and Fall of the Great Powers, the key to dominance lies in accessibility. Nations that effectively spread the benefits of cutting-edge technologies have seen explosive growth, leaving their mark on history.
This very dynamic is currently playing out in Africa's burgeoning payments revolution, fueled by mobile money and fintech. Because, while incredibly promising, Africa's financial future stands at a crossroads.
Chinese Investment
The intertwining of Chinese technological prowess with Africa's developmental aspirations is reshaping the continent across various sectors. Telecom infrastructure, a fundamental component for digital connectivity, has seen significant enhancements through initiatives like the PEACE submarine cable project. Spearheaded by China's Digital Silk Road initiative, this ambitious project promises to revolutionize Africa's digital landscape by providing fast and affordable connectivity across the continent.
From e-commerce ecosystems to logistics infrastructure, Chinese influence in undeniable. Africa is leveraging mobile payments and drawing from the success and best-practices of platforms like Alibaba. Notably, partnerships between Chinese fintech giants and African financial institutions are fostering financial inclusion and empowering indigenous fintech solutions.
Lastly, and perhaps more importantly, the entwined relationship between Chinese telecom companies and Africa's strategic development is deeply rooted and multifaceted. Reports highlight how Chinese vendors capitalize on opportunities in developing nations, leveraging their price advantage and long-term approach to build relationships that their Western counterparts often overlook. This strategic positioning allows Chinese companies to secure core network contracts, paving the way for subsequent upgrades and expansions.
But why telecom companies?
Enter Mobile Money
In what concerns Africa's payment infrastructure, telecom giants are undeniably the key players in the financial services sector. These telecom companies, including France's Orange, South Africa's MTN, Britain's Vodafone, and Airtel Africa, have leveraged their mobile money networks to provide basic banking services to millions of users across the continent.
The COVID-19 pandemic has underscored the importance of mobile money services, leading to a surge in transaction volumes and active users. It effectively accelerated the mainstream adoption of mobile money as a financial service in many countries, particularly in low- and middle-income countries. However, mobile money operators still had to face revenue challenges due to government pressure to reduce transaction fees to alleviate the economic impact of lockdowns.
But even as the pandemic's impact waned, mobile money services continued to experience rapid growth in 2022, outpacing pre-COVID levels, a feat which spurred a flurry of activity, with African banks launching mobile accounts, and telecom companies exploring IPOs for their mobile money units to facilitate strategic partnerships and expansion opportunities.
The State of the Industry Report on Mobile Money 2023 delves into this post-pandemic growth trajectory, emphasizing the evolving landscape for mobile money providers, agent networks, and the millions of customers who embraced mobile money in 2022.
Visa and Mastercard Step Into the Ring
As the battle for the African payments scene rages on, global fintech titans Visa and Mastercard seem to be engaged in a heated race to assert their dominance. With the continent witnessing a rapid shift towards digital transactions and the proliferation of fintech startups, both companies are aggressively expanding their footprint and investments to capture a significant share of this burgeoning market.
The competition intensified when Visa launched its Africa Fintech Accelerator program in 2023, swiftly followed by the Mastercard Foundation's announcement of a fund aimed at fueling early-stage companies through local investment channels. These initiatives marked the beginning of an era where the giants of global payments were vying for supremacy in Africa.
Mastercard's strategic move to acquire a 3.8% stake in MTN, Africa's largest telecom, for a staggering $200 million, sent shockwaves through the industry. This bold investment was preceded by a similar acquisition in Airtel Africa's mobile money operations, signaling Mastercard's unwavering commitment to securing a stronghold in Africa's mobile financial services sector.
Visa, not to be outdone, swiftly followed suit with investments in various African fintech startups, alongside integrating its global virtual card network with Kenya's M-Pesa platform, a dominant force in the country's mobile money landscape. These maneuvers underscored Visa's determination to capitalize on Africa's digital revolution.
Conclusion
As the race for dominance in Africa's payments industry intensifies, the implications of technological advancements and strategic investments are becoming increasingly apparent.
While China's involvement presents immense opportunities for Africa's digital growth, concerns linger regarding potential pitfalls, such as overreliance on external infrastructure and the risk of hollowing out local manufacturing. To harness the benefits of the digital revolution fully, Africa must not only embrace technological advancements but also build robust industrial capacity to ensure sustainable economic development.
The entry of global players like Visa and Mastercard also adds a new dimension to the competition as these companies aggressively expand their presence in Africa, leveraging their expertise and resources to capture a significant share of the market.
For African consumers and businesses, this competition translates into increased access to innovative financial products and services. With the proliferation of mobile money and digital transactions, the continent is poised for unprecedented growth in financial inclusion and economic development.
But only by concurrently navigating through multiple waves of industrial revolutions and fostering indigenous innovation, can Africa chart a path towards becoming not just economically prosperous but also self-reliant and resilient.
