Nigerian startups are facing new tax regulations introduced by the Federal Government following strict changes quietly unveiled this month. The rules, which will take effect on January 1, 2025, promise to simplify tax compliance but could create fresh challenges for the country’s burgeoning tech ecosystem.

At the heart of the regulations is a requirement for businesses, including startups, to have taxes deducted at the point of payment. Entities like corporations, government agencies, and public authorities must withhold taxes before transferring payments to businesses. This method is designed to reduce tax evasion and ensure compliance but could add new layers of complexity for startups already navigating Nigeria’s tough business environment.

Startups Not Spared from the Tax Burden

The scope of the regulation, known as the “Deduction of Tax at Source (Withholding) Regulations, 2024”, extends across various types of income—capital gains, corporate income, and personal income—and applies broadly to businesses, regardless of size or sector.

Nigerian startups, which often operate on slim margins, are not exempt. However, companies with less than NGN 2 M (USD 1,197) in monthly transactions may sigh a little relief. These businesses are exempt from withholding tax deductions, but only if they can prove their Tax Identification Number (TIN) is valid.

For startups without a valid TIN, the penalty is steep: double the normal withholding tax rate. This puts even greater pressure on smaller businesses to maintain up-to-date tax records.

Remitting the deducted taxes is another significant element of the new regulations. Businesses are expected to remit these deductions to either the Federal Inland Revenue Service (FIRS) or the relevant State Internal Revenue Service. The deadlines are tight: FIRS requires remittance by the 21st of the following month, while state authorities expect remittances as early as the 10th.

Failure to remit on time carries its own set of penalties, including fines and administrative charges, which could further erode startup cash flow.

New Rules, New Headaches

Though framed as a means to streamline tax compliance, the new withholding tax regulations add an extra administrative burden on startups. Businesses are required to submit detailed returns for each deduction, including the name, address, and TIN of the payer. Receipts for deducted taxes must also be issued, and any misstep in this meticulous process could invite penalties.

These regulations arrive at a time when Nigerian startups are already navigating a complex environment. While some companies have scaled rapidly, others face a tougher road ahead contending with funding woes, layoffs, and valuation cuts.

The government has included some exemptions to soften the blow. Payments related to Real Estate Investment Trusts, securities lending, and compensation payments are all exempt from withholding taxes. Even so, the exemptions may be too narrow to provide substantial relief for many tech companies.

Startups that rely on payments from across borders will also need to consider double taxation treaties. While these treaties are meant to prevent being taxed twice on the same income, navigating them can be tricky for smaller firms with limited resources.

The upcoming tax regime follows closely on the heels of a broader trend in Africa, where governments are tightening regulations and enforcement in the tech startup space. Cryptocurrency platforms like OKX have already felt the pinch, announcing plans to exit Nigeria’s market due to “unfavourable regulatory conditions.”

For Nigerian startups, the 2024 withholding tax regulations present a new set of challenges, adding to the existing struggles of scaling in a competitive and often unpredictable market. The government’s promise of simplicity and ease may fall short for those tasked with complying with these new requirements, especially if their resources are stretched thin by the need to keep up with their tax obligations.

As the January 2025 implementation deadline looms, startups will need to quickly adapt to these new regulations, or risk facing penalties that could stifle their growth. While the intent behind the law is to foster better compliance and align with global standards, it remains to be seen whether this will truly ease the burden on Nigeria’s tech ecosystem—or create more tax headaches for its most innovative players.

Featured Image Credits: Alexander Oamen/Medium

GSMA MWC Kigali will return to the Kigali Convention Center from 29-31 October 2024. 

MWC Kigali, Africa’s largest and most influential connectivity event, will convene powerful innovators and political leaders from across the continent. It is geared towards driving the digital economy forward and enabling socio-economic growth. 

MWC Kigali will deliver a range of keynotes and panel sessions hosted by industry thought leaders and leading enterprises, focussed around the four event themes: Connected Continent, The AI Future, FinTech, and Africa’s Digital DNA. Recently confirmed speakers include  Airtel Africa’s CEO, Sunil Taldar; Amini’s Founder & CEO, Kate Kallot;  the GSMA’s Director General, Mats Granryd; the ITU’s Secretary-General, Doreen Bogdan-Martin; Lelapa AI’s CEO and Co-founder, Pelonomi Moiloa; MTN Group’s FinTech CEO, Serigne Dioum; Republic of Rwanda’s Minister of ICT and Innovation, Hon. Paula Ingabire; Take Back the Mic’s CEO & Founder, Derrick Ashong and, Wi-Flix’s CEO, Louis Manu.

For the first time in Africa, the GSMA Ministerial Programme will be hosted at MWC Kigali, marking a new chapter in the commitment to advancing the digital agenda in Africa. The programme will convene the most influential telecommunications leaders from across Africa to discuss policy and regulatory topics key to the region.

The Mobile for Development (M4D) team will again play a central role at the event, driving innovation in digital technology to reduce global inequalities. M4D will host the ‘Mobile for Development Theatre’, a dedicated space for keynote sessions, panels, and discussions. Themes will range from AI for impact and humanitarian innovation, agriculture and climate, to digital inclusion and gender. Also returning this year is the Mobile Money Leadership Forum, which will explore key trends and innovations in mobile financial services.

The MWC Kigali keynotes will cover Africa’s most pressing digital connectivity issues. Keynote 1 will discuss how digital technologies drive socio-economic development in Africa to address the continent’s unique challenges. Keynote 2 will focus on the transformative potential of AI, including how it can drive sustainable and inclusive growth across Africa. Keynote 3 will see speakers explore the rapid evolution of Africa’s Fintech landscape and the technologies impacting investment opportunities. Keynote 4 will explore how the evolving content landscape allows African content creators to be heard and celebrated globally. 

An agenda of GSMA Summits will be hosted during the event, inviting industry leaders and policymakers to discover the issues affecting enterprises in areas from network security to diversity in tech: 

• The Security Summit will tackle the most pressing security challenges mobile network operators face today in the rapidly evolving cyber risk landscape. 
• The Digital Summit will explore the digital economy’s potential in Africa, exploring how digital technologies and policy reform can drive significant socio-economic growth. 
• The AI Summit will cover both the vast potential and the associated risks of AI technologies in Africa as the technology’s prevalence grows in the global economy. 
• The 5G Summit will address the barriers preventing the technology’s widespread adoption and ways to unlock its potential for both enterprises and consumers. 
• The Diversity for Tech Summit will focus on the urgent need for greater disability inclusion in Africa’s tech sector, ensuring that people with disabilities can access the tools and opportunities they need to succeed. 

MWC Kigali is held alongside the Africa Health Tech Summit and FEWA (Future of Education and Work in Africa), offering an in-depth exploration of connectivity challenges and opportunities in the health and education sectors. We are proud to have the support of our stellar line-up of sponsors, exhibitors, and event partners, including Africa CDC, Africa Union, Huawei, inABLE, MTN, the Republic of Rwanda, Smart Africa, and ZTE.

Register today to attend MWC Kigali, 29-31 October 2024
For more information, follow our updates on the MWC Kigali Press Zone or visit www.mwckigali.com. Accredited media are invited to register here for a complimentary pass, which is required for access to the press centre.

South Africa’s tech startup ecosystem, once a leader in Africa, is now facing significant challenges. Industry stakeholders are increasingly vocal about the need for a dedicated Startup Act, which they argue is long overdue and critical to reversing the country’s slow decline in venture capital funding and startup growth.

Recent data paints a bleak picture. South Africa experienced a 41% year-on-year drop in venture funding in 2022, our comprehensive database, WT Elite, shows, and it recorded another decline last year.

Once a mainstay in the top two of Africa’s prominent “Big 4” tech ecosystems, South Africa has slipped down the pecking order in the last two years in terms of funding, coming 3rd and 4th in 2023 and 2022 respectively. These days, it risks losing its position to emerging ecosystems like Ghana and Tunisia, both of which are aggressively building more startup-friendly environments.

AfricArena, a Cape Town-based accelerator, has warned that South Africa is falling behind. “South Africa is now way below Nigeria in terms of growth in startups and funds raised. Egypt is now second in total startups and funds raised, and Kenya third,” the report states. Tunisia, which passed its Startup Act in 2018, has seen venture capital inflows swell significantly.

This decline isn’t going unnoticed. In a recent engagement with Parliament, the Startup Act Movement—a coalition of South African entrepreneurs—urged lawmakers to prioritise reforms that could ease exchange controls and improve the ease of doing business. These stakeholders argue that the restrictive regulatory environment is choking innovation and deterring both local and foreign investment.

Why a Startup Act?

Countries like Tunisia, Senegal, and Nigeria have already passed Startup Acts, and the results are clear. Tunisia’s Startup Act is credited with sparking a startup ecosystem boom, attracting international investors and dramatically increasing funding for tech startups. InstaDeep, a Tunisian AI startup, raised USD 100 M in a Series B round and was acquired for USD 685 M by Germany’s BioNTech in January 2023.

The success of these countries has prompted South Africa’s Startup Act Movement to push for similar legislation. Launched in 2014 and led by SiMODiSA; an industry-led initiative supporting startups, the movement has been instrumental in identifying barriers to growth for small and medium enterprises (SMEs).

Matsi Modise, a member of the steering committee, highlighted two major hurdles for startups in South Africa: restrictive visa requirements for foreign talent and exchange controls that limit financial flexibility. “We are not making it easy for talent to come into South Africa because we don’t have a very clear, straightforward, and easy-to-follow startup visa regime,” Modise said in a conversation with techCabal.

The introduction of a dedicated South African Startup Act could streamline visa processes, open up more funding opportunities, and create a clearer legal framework to protect intellectual property. Such reforms, stakeholders argue, would help reinvigorate the country’s tech sector and attract much-needed capital and talent.

Slow Government Response

Despite clear signs of stagnation, South Africa’s government has been slow to act. As AfricArena noted, the country has shown the slowest progress in drafting and implementing a Startup Act compared to its peers in the “Big 4.” This lack of urgency has allowed countries like Ghana to close the gap. Ghana, currently finalising its own Startup Bill, is increasingly seen as an attractive destination for venture capital due to its political stability and liberal business environment.

South African stakeholders have been engaging with the government for several years, with some positive developments. In October 2021, the Startup Act Movement met with the President, receiving what committee member Modise called a “positive response.” Since then, discussions have been ongoing with the Deputy Minister of Finance and the Minister of Science and Technology. However, no legislation has been finalised.

The lack of a dedicated framework is contributing to South Africa’s declining global competitiveness, observers believe, with the country now ranked 84th out of 190 economies in the World Bank’s Ease of Doing Business report, a drop from 82nd in 2018. Entrepreneurs say this is further evidence that the country needs swift and decisive regulatory reforms.

A Boost from International Partners

Despite the slow pace of governmental action, the Startup Act Movement has received international support. The UK-SA Tech Hub, a British High Commission initiative, recently provided a third round of undisclosed funding to help drive local policy reform. So far, the Tech Hub has invested ~USD 116 M into South Africa’s tech ecosystem, with a focus on enabling high-growth startups.

Milisa Mabinza, director of the UK-SA Tech Hub, believes that provincial governments could play a critical role in implementing reforms faster. “We believe the Government of National Unity can effect policy changes more efficiently at the provincial level,” Mabinza said.

The call for a Startup Act in South Africa is becoming increasingly urgent as the country faces the possibility of being overshadowed by more agile competitors. Without bold reforms, South Africa risks losing its position in Africa’s Big 4, and with it, much of the venture capital and talent that has historically fueled its tech sector.

As Mzwandile Masina, chairperson of the Portfolio Committee on Trade, Industry, and Competition, noted during recent parliamentary discussions: “In South Africa, obtaining loans for consumption is far easier than securing financing for productive ventures.” The Startup Act Movement hopes to change that by advocating for a legislative framework that can provide the support and clarity startups need to thrive.

While progress has been slow, the combination of mounting pressure from the Startup Act Movement, international support, and growing competition from other African countries may finally push the South African government to act. Whether it’s too late to reverse the decline remains to be seen, but for now, stakeholders are holding out hope for much-needed reform.

For the past few years, Africa’s most promising fintech startups jumped headfirst into the world of debit cards. It seemed like a no-brainer. Partner with global payment giants like Visa and Mastercard, issue virtual and physical cards, and empower a new wave of African consumers to transact seamlessly online.

But things have taken a sharp turn lately. One after another, these fintechs are rethinking or outright quitting the very card services once heralded as a plus to their business models.

The latest fintech to make this strategic shift is Rise, a Nigerian investment startup notably in the news of late for completing a couple of acquisitions. However, Rise announced it would discontinue its virtual card services by September 30, 2024.

The reasons? The same challenges plaguing other fintechs: fluctuating exchange rates, unreliable card providers, and the rising costs of maintaining these services. In a message to its users, Rise highlighted that the pressures of exchange rate volatility and delays in issue resolution made it hard to continue offering the service.

This isn’t the first time a Nigerian fintech has stepped back from debit cards. Earlier this year, Carbon, one of the country’s leading neobanks, pulled the plug on its debit card operations, raising eyebrows across the ecosystem.

Addressing the nixing of the card product in a witty Substack post, co-founder Ngozi Dozie explained the move as part of a strategic reflection, hinting that the high operational costs, largely denominated in US dollars, were unsustainable. “With the benefit of hindsight,” Dozie mused, “I question why practically all neobanks are pushing cards or even getting into it.”

***

For many of these fintechs, debit cards initially seemed like a logical extension of their mission to broaden financial access and strengthen appeal. Carbon, for example, launched its debit card service in June 2021 through a five-year partnership with Visa, aiming to provide customers with virtual and physical cards for seamless transactions across Africa.

The initiative was well-received, but the reality of running card services soon clashed with financial sustainability. In his commentary, Dozie questioned whether issuing debit cards was the right strategy for fintechs like Carbon. “If I had done the analysis… I don’t think I would have been that gung-ho about pushing a strategy to provide consumers with their fifth debit card,” he reflected, alluding to a lack of real differentiation in an oversupplied environment.

The economics of running card services in Africa are increasingly being scrutinised. Tunde Adewole, co-founder of Y Combinator-backed Bridgecard, told TechPoint last year that chargeback rates—where users dispute transactions—are a significant challenge.

Mastercard and Visa impose a 1% chargeback rate, but many African fintechs experience higher rates, resulting in extra costs. Adewole noted that these schemes also charge fees for declined transactions, which can range from USD 20 to USD 100. When coupled with the challenges of currency volatility and the heavy reliance on foreign exchange, the economics start to look less appealing.

On his part, Dozie reflected on the unsustainability of Carbon’s card business, citing the high fixed costs of card operations, which were exacerbated by dollar-denominated expenses. He also speculated that low disposable income and infrequent card use compared to Western markets may have made the economics less favourable. The fintech exec suggested that if one were to calculate the unit economics of running card services and compare fintechs like Carbon to traditional banks, the income potential for fintechs would likely fall short, raising questions about the long-term viability of offering cards.

***

Some fintechs, like Payday, have responded to these challenges by tweaking how they offer card services. In 2023, Payday, which Bitmama later acquired, warned users that their cards would be terminated if transactions were declined due to insufficient funds. Similarly, Chipper Cash announced that it would begin charging a NGN 500 non-refundable fee for transactions declined due to insufficient funds—a clear indicator that fintechs are shifting from a “growth-at-all-costs” mindset to one focused on sustainability.

Union54, a Zambian fintech, also ended its virtual card services in 2022, citing chargeback fraud as a major factor. The startup found itself facing unsustainable losses due to fraudulent chargebacks, forcing it to halt operations and plot another path with its new product ChitChat. In a recent interview, Union54 CEO Perseus Mlambo told WT that ChitChat eschews the pitfalls that plagued the previous card business.

For fintechs still offering cards, such as Kuda, Moniepoint, and others, they’ve had to strike a balance between cost management and customer satisfaction. Some have opted for local alternatives like Verve, which helps sidestep the dollar-denominated costs of global card schemes like Visa and Mastercard.

While the discontinuation of card services has prompted speculation about these companies scaling down, fintech founders like Dozie argue that such moves should be viewed through a different lens. “The paucity of failure stories is actually a sign of a lack of experimentation,” Dozie remarked, urging observers to resist framing every service shutdown as a sign of distress. Instead, he suggested, this shift reflects a broader strategic realignment as fintechs reassess which products offer the most sustainable value in a challenging economic environment.

***

The operational costs tied to debit cards—particularly those denominated in foreign currencies—have made fintechs rethink their priorities. The Nigerian naira’s depreciation has only exacerbated the issue, making it increasingly expensive to maintain services tied to the US dollar. In his post, Dozie revealed that Carbon’s card operation bill was denominated in USD, a major factor behind the decision to exit.

In the face of these challenges, some fintechs are pivoting. While cards may have initially helped attract users, they’re now seen as costly and inefficient for businesses with smaller margins or a more localised user base. For fintechs like Carbon, the decision to halt cards is part of a broader move to focus on products that align with long-term sustainability. Rise, too, is likely to focus on its core investment products as it navigates the shifting terrain.

The honeymoon period for African fintechs offering debit cards seems to be over. The strategy that once appeared obvious now seems fraught with challenges, from high operational costs to chargeback fraud and currency volatility. As these startups reassess their approach, it appears they are pivoting away from costly services in favour of more viable long-term offerings.

Africa’s telecommunications giants are gearing up for an unprecedented challenge as Starlink, the satellite internet upstart owned by famous tech billionaire Elon Musk, continues its aggressive expansion across the continent. Starlink’s promise of fast, reliable internet access, especially in remote areas, has sparked both excitement and concern, leaving traditional telcos scrambling to safeguard their turf.

Safaricom, Kenya’s largest mobile operator, is one of the most vocal players, recently stepping up its game in response to Starlink’s entry. In July 2023, Starlink began offering internet services in Kenya, rapidly signing up over 4,000 customers within a year.

To counter this, Safaricom has doubled the speeds of its fibre internet packages, with offerings such as 15 Mbps for KES 3 K (USD 23.00), up from 10 Mbps, and a massive increase of its 100 Mbps package to 500 Mbps, priced at KES 12.5 K (USD 97.00). Furthermore, Safaricom became the first ISP in Kenya to offer gigabit speeds, at KES 20 K (USD 155.00).

“We have enhanced our Home Internet speeds to meet the increasing demand and usage, providing reliable connectivity and enhanced value for our customers,” Safaricom CEO Peter Ndegwa noted in a statement. The move is being perceived as a response to Starlink’s market disruption, with its affordable and faster satellite services posing a significant threat to traditional ISPs and telcos.

Starlink offers speeds up to 200 Mbps in Kenya for KES 6.5 K (USD 50.00), a rate that undercuts many local providers. Additionally, its 50 GB package at KES 1.3 K (USD 10.00) and hardware rental option for those who cannot afford to purchase the KES 45 K equipment outright has further boosted its appeal. These offerings have made Starlink particularly attractive to underserved rural areas, where existing infrastructure is limited or non-existent.

Most recently, Starlink introduced a cheaper kit and a USD 30.87 monthly residential plan in Kenya, just days after Safaricom upped its speeds, taking the battle with the telecom heavyweight even further.

However, Safaricom’s response to Starlink is not limited to upgrading internet speeds. The company has petitioned Kenya’s Communications Authority to introduce stricter regulations for satellite providers like Starlink. Safaricom has argued that satellite operators should be required to partner with local mobile network operators instead of operating independently.

The telco, which has invested heavily in local infrastructure, raised concerns about the accountability and compliance of satellite services that lack a physical presence in the country. “We believe the regulator should ensure a level playing field,” a Safaricom spokesperson implied in its communication to the government.

These sentiments are echoed beyond Kenya. Telecom companies in Zimbabwe, Nigeria, and Cameroon have expressed similar frustrations over Starlink’s free rein, accusing it of unfair competition.

Starlink’s ability to enter markets without building out the expensive physical infrastructure required for traditional networks has stirred unrest among operators who have invested millions of dollars in laying cables and building mobile towers. In Zimbabwe, Starlink’s arrival led ISPs like Liquid Home, the largest fixed ISP, to slash prices, while state-owned TelOne partnered with Eutelsat’s OneWeb to offer satellite internet in a bid to fend off competition.

The broader African market is seeing a similar shake-up. In Nigeria, within two years of launching, Starlink became the country’s third-largest dedicated internet provider. It has built new ground stations across three Nigerian states and partnered with Africa Mobile Networks to provide satellite backhaul to over 100 rural base stations. Meanwhile, Starlink’s monthly pricing and flexible hardware rental options continue to attract customers from both rural and urban regions.

Yet, telcos are not backing down without a fight. In Zimbabwe, TelOne and other providers are racing to deploy competing satellite internet services, while in Kenya, Safaricom is offering new bundled family plans, combining mobile data, SMS, voice, and home internet at a discount. These packages, which can be shared among five family members, are aimed at adding value in ways that Starlink’s satellite-only service cannot replicate.

Analysts predict that the competitive pressure from Starlink and other Low Earth Orbit (LEO) satellite providers like OneWeb and Telesat will only grow. Starlink’s appeal lies not only in its speed but also in its ability to offer services to areas where traditional networks have struggled. However, while Starlink’s model of bypassing the need for physical offices and large-scale infrastructure may seem ideal, it does present a challenge for governments, particularly regarding tax revenues and regulatory oversight.

In spite of that, with interest in Starlink’s potential to bridge the digital divide, it appears that its footprint in Africa will only grow. South Africa, for instance, is in talks with Musk to introduce Starlink after holding out initially, with Communications Minister Solly Malatsi stating, “They can fill in the gap that the mobile network operators are unable to currently fill through the limitations of their broadband infrastructure.”

Starlink’s future success on the continent will depend on how effectively it can scale and maintain affordable pricing in remote areas while navigating regulatory challenges from local authorities keen on protecting their domestic telecom providers.

For Africa’s major telcos, the arrival of Starlink and similar LEO providers marks a new era of competition that requires innovation and adaptability. Whether through boosting fibre speeds, offering bundled services, or lobbying for stricter regulations, Africa’s telcos are gearing up to cover their flanks as Starlink muscles in.

Safaricom, Kenya’s leading mobile operator, has introduced a significant upgrade in its internet speeds for home and business customers in a move to stay ahead of intensifying competition.

With an eye on the evolving competition of the market, this marks the second time the telecommunications giant has enhanced its data speeds in less than 2 months, a strategy likely driven by the rising competition from international players such as Starlink.

Since its launch in June 2023, Starlink’s satellite technology has introduced a fresh dynamic to Kenya’s internet market. As a global satellite provider, Starlink has offered a new and highly competitive option for internet users, pushing Safaricom to up its game.

In response to this new competition, Safaricom has upgraded its internet packages significantly, an effort aimed at staying ahead in the market.

One of Safaricom’s most recent moves is the introduction of a new ultra-fast 1000Mbps (Gigabit per second) Platinum plan, priced at KSH 20 K (USD 155) per month. This ultra-fast plan is designed for heavy users such as gamers, content creators, and virtual reality enthusiasts, offering a compelling alternative to Starlink’s offerings. For instance, while Starlink provides speeds of up to 200Mbps, Safaricom’s new Platinum plan sets a higher bar, making it the first local provider to deliver gigabit speeds for home use.

To further solidify its position, Safaricom has made across-the-board upgrades to its existing plans. Customers who previously subscribed to a 10Mbps connection can now enjoy speeds of 15Mbps for the same price of KSH 3000 (USD 23). Similarly, the 40Mbps package has been doubled to 80Mbps at KSH 6300 (USD 49), and the premium 100Mbps package has been increased fivefold to 500Mbps at KSH 12.5 K (USD 97) per month. These enhancements are part of Safaricom’s broader strategy to offer more value without increasing the cost, ensuring its customers can perform demanding online activities such as high-definition streaming, gaming, and large data transfers with ease.

Complementing these changes is the introduction of the Family Share plan, an integrated solution that combines mobile voice, data, SMS, and home internet into one package. This plan, which can be shared among up to five family members, promises to offer convenience and cost savings, particularly through a 20% discount on the Bronze plan compared to purchasing the services separately.

Peter Ndegwa, Safaricom’s CEO, emphasized that these changes are part of the company’s efforts to deliver both a superior experience and enhanced value to its customers. “We have enhanced our home internet speeds to cater to increased demand and usage, ensuring reliable connectivity for our users,” Ndegwa stated. He highlighted that the company’s new offerings were designed to handle even the most demanding internet activities, including cloud computing and virtual reality, further cementing Safaricom’s commitment to its customer base.

The company’s focus extends beyond residential clients. Safaricom has also revamped its Business Fibre plans, offering new speeds of up to 1Gbps for medium and large enterprises, ensuring that businesses enjoy the flexibility and reliability they need. For instance, the 15Mbps shared option, tailored for micro-businesses, comes with 5GB of mobile backup data, while larger enterprises can take advantage of backup options over fibre, 5G, or wireless connectivity. The introduction of features like 24/7 proactive monitoring and 99.99% uptime makes these plans even more attractive to enterprise customers looking for a seamless experience.

Safaricom noted that it continues to expand its fibre network, adding over 3,000 kilometres in the last financial year, and bringing its total coverage to over 17,000 kilometres. The telco also claims it has its network extension has seen an influx of new customers, with over 370,000 homes and 32,000 businesses now connected to Safaricom’s fast and reliable internet services.

However, despite these improvements, Starlink continues to present a formidable challenge. Priced at KSH 6,500 (USD 50) per month with the option of a 50GB package for KES 1,300 (USD 11), and offering flexible rental options for its equipment, Starlink’s satellite service is especially appealing in remote areas where fibre expansion remains costly or impractical. Starlink’s rapid growth in the country, with over 4,000 customers by mid-2024, is a clear indicator of the competition ahead.

Recognizing the growing threat posed by Starlink, Safaricom’s response to this challenge has not only been technological but also regulatory. In July 2023, the company successfully lobbied the Communications Authority of Kenya to regulate satellite internet providers, arguing for a level playing field to protect local operators. The regulator backed Safaricom, highlighting the need to safeguard local operators and ensure a balanced playing field.

As this battle between terrestrial and satellite internet services intensifies, the ultimate beneficiaries are likely to be Kenyan consumers. With Safaricom and Starlink pushing each other to offer faster speeds, more reliable connections, and competitive pricing, the landscape for internet access in Kenya is set for a transformative shift, bringing better service to homes and businesses across the country.

Nigeria’s on-demand services companies, including ride-hailing, last-mile delivery, and food delivery services, are straining under the weight of a crippling fuel price hike. The rise in fuel costs, triggered by the Nigerian National Petroleum Company’s (NNPC) decision to increase the price of Premium Motor Spirit (PMS) by 40%, has sent shockwaves across the economy.

The pump price has surged to between NGN 855.00 and NGN 897.00 per litre at NNPC stations (and well over NGN 1 K in most other outlets), significantly driving up operational costs for businesses dependent on road transport. Broadly, the retail price of petrol has surged more than five-fold in Nigeria since May 2023 when President Bola Tinubu took office and pronounced controversial reforms that have spiked energy costs in general and triggered biting hardship.

The fallout is now apparent across the economy, not least in the on-demand service industry, where maintaining competitive pricing while managing escalating fuel costs has become a delicate balancing act.

Ride-hailing Apps Struggle to Cope

Among the hardest hit are drivers for ride-hailing apps like Uber, Bolt, and InDrive, battling shrinking margins due to rising fuel costs. For many, the algorithms determining ride fares are simply no longer viable.

“It got to a stage when any ride that comes in for 1,500 naira or 2,000 naira, I don’t attend to them because I know what I go through to get fuel,” a driver told TechCabal. Drivers are increasingly opting for longer trips and requesting that customers pay more than the app-suggested fares, or face ride cancellations. One driver mentioned that customers must now pay up to NGN 5 K for trips that previously cost NGN 3 K.

While Bolt and Uber have responded with 13-15% increases in base fares, many drivers argue that these adjustments are insufficient, lamenting that the fare increment does not match the extra they now have to pay for fuel.

Despite the fare adjustments, drivers continue to ask for more, demanding that ride-hailing companies reduce their 25% commission on earnings to help mitigate their losses. The tension between drivers and platforms has led to friction, with some drivers going as far as imposing their own prices on customers, threatening to cancel trips if their demands aren’t met.

This rising cost is also impacting customer behaviour. Many are now switching to public transport or using ride-hailing services sparingly.

Food Delivery Startups Caught in a Bind

The fuel price hike has also put significant pressure on food delivery platforms such as Mano, Glovo, and Chowdeck, which are finding it difficult to maintain the affordability of delivery fees while motivating riders. Delivery companies are scrambling to devise new ways to offset the rising costs without passing the full burden onto customers.

Mano has responded by offering riders a NGN 2 K weekly bonus on top of their delivery fees and a monthly salary of NGN 4 K. To ensure sustainability, the platform is moving towards a dynamic pricing model.

Similarly, Glovo has introduced performance-based incentives, offering riders a NGN 23.4 K bonus if they complete 550 orders in two months, and NGN 39 K for completing 800 orders. Yet, despite these efforts, riders report that delivery fees have remained unchanged, leaving them dissatisfied. One rider noted that NGN 4 K used to be enough to fill their fuel tank, but now it takes NGN 6 K.

Startups like Chowdeck have been slower to respond, making only small adjustments, such as increasing long-distance delivery fees from NGN 1.5 K to NGN 1.8 K. However, riders are asking for at least NGN 2 K to keep up with rising fuel costs. Chowdeck has hesitated to implement broader changes, wary of pushing additional costs onto customers.

HeyFood, an Ibadan-based delivery startup, is exploring a more sustainable long-term solution by considering a switch to electric bikes. According to HeyFood CEO Akinropo Taiwo, riders are spending more time securing fuel in endless queues amid scarcity, which has affected their availability for deliveries. However, transitioning to electric bikes is challenging, as many riders are still paying off their petrol-powered bikes, which cost between USD 1.2 K and USD 1.7 K.

Last-Mile Delivery Faces the Toughest Dilemma

For last-mile delivery companies, raising prices has become inevitable. Fez Delivery, for instance, increased its base price for small packages from NGN 2.5 K to NGN 3.075 K, a 23% hike. CEO Seun Alley acknowledged the difficulty, saying, “Our prices definitely have to change. But what we want to do is to ease our clients into that phase. So, at the moment, we are taking serious blows to keep operations running.”

Unlike ride-hailing and food delivery services, last-mile delivery companies do not operate two-sided platforms where drivers and customers are matched. This gives them more control over their pricing but also leaves them vulnerable to losing customers in a price-sensitive market. As Seun Omotosho, COO of Gokada, observed, “Depending on the urgency required, some customers don’t mind going for the least priced service when items to be sent are not needed urgently.”

Some consumers are even switching to public transport to send goods, resorting to relying on mass transit buses for deliveries because of the rising cost of courier services. DHL, for example, increased its prices from NGN 12 K to NGN 14 K for phones, and NGN 21 K for laptops, up from NGN 13 K.

The Nigerian fuel hike is squeezing on-demand services at both ends, with startups facing the twin tasks of raising prices to cover costs while retaining customers. E-hailing apps, last-mile delivery operators, and food delivery platforms are each testing different methods, from performance-based incentives to potential shifts to electric vehicles.

Despite the creative strategies, these sectors are caught in a tough spot. If they raise prices too sharply, they risk alienating customers. If they don’t, they face severe financial strain. As Glovo riders continue to push for delivery fee increases and ride-hailing drivers demand lower commissions, the industry is in a period of high tension.

The integration of artificial intelligence (AI) into financial services is not a new phenomenon. For years, traditional AI has been used by banks and fintechs globally to enhance fraud detection, improve customer experience, and personalise services.

Now, with the rise of generative AI (GenAI), the landscape is shifting further. African financial institutions are beginning to explore how this technology can revolutionise their operations, yet many remain cautious of its potential risks.

In a recent interview with WT, Andrew Mori, co-founder and CEO of Deimos, a fast-growing African cloud engineering and DevOps consultancy, provided insights into how African banks and fintechs can both harness and safeguard against the risks of GenAI. His company, Deimos, has built its reputation by helping organisations, largely in financial services, apply technology optimally, and he sees the rise of GenAI as a critical moment for the financial sector.

However, GenAI adoption in Africa and elsewhere faces challenges such as data poisoning, reverse engineering, and deep fakes. Data poisoning can corrupt AI systems, leading to biased outcomes and increased fraud risks. In Africa, nearly one-third of online verification documents are fake or stolen.

Also, AI-generated synthetic media, are becoming more sophisticated and are being used by criminals to defraud businesses. In a recent Hong Kong case, an employee was tricked into transferring USD 26 M after deepfakes of colleagues, including the CFO, were used in a video call. Recently, a notable crypto firm, Luno, was put on high alert after a deepfake scam targeted an employee, highlighting the rising threat of AI-powered fraud and the need to tread with caution.

The Appeal of GenAI in Financial Services

GenAI transforms fintech by using data to personalise customer experiences and automate tasks. The Nigeria Fintech Marketing Outlook 2024 reveals 29% of fintechs used GenAI for content creation and 14% for workflow automation in 2023. In addition, a recent Gartner report forecasts that over 80% of banks will adopt GenAI by 2026, a significant rise from 5% today, while McKinsey notes its potential to revolutionise banking’s risk and compliance functions.

One of the most exciting applications of GenAI is its ability to significantly improve customer experience. Mori explains that Deimos has already begun implementing GenAI internally to streamline workflows and provide better support for developers. For banks, a similar approach could dramatically improve client services.

“Instead of Googling how to perform an EFT for Kuda Bank or any of the wonderful banks in Nigeria, you can query an AI assistant directly, and they can explain it immediately without asking support,” Mori noted. This kind of instant, AI-driven assistance could transform how customers interact with their financial institutions, making services more accessible and reducing the burden on human customer support teams.

Furthermore, AI assistants could perform actions directly on behalf of users, simplifying complex processes. “For a certain request, it can retrieve information, present creative solutions, and you should be able to ask this assistant to execute something for you,” Mori told WT. Such capabilities would be a game-changer for fintechs looking to provide seamless, intuitive user experiences.

Traditional AI and GenAI: Complementary Forces

Although GenAI holds great promise, it is important to remember that traditional AI is already deeply entrenched in financial systems. Technologies like fraud detection algorithms, credit risk scoring, and personalised recommendations have become standard tools for many African banks and fintechs.

Mori points out that “traditional AI is still very good at things like recommending stuff, personalisation, guessing things… there’s some very strong AI that’s now considered traditional, and that’s very good at fraud detection, for example.” Rather than replacing these systems, GenAI is poised to complement them, Mori figures, by offering more dynamic, creative capabilities, while traditional AI continues to handle structured, data-driven tasks with precision.

This hybrid model—where traditional AI takes care of routine tasks and GenAI enhances user interaction—could provide fintechs with a more robust AI ecosystem, allowing them to address both operational efficiency and customer satisfaction.

Barriers to Adoption

Despite its potential, the adoption of GenAI in African financial services is still in its infancy. According to Mori, one of the main barriers is the complexity of securely implementing GenAI at scale. “The benefit we will bring is deploying GenAI securely at scale,” he says. Security, scalability, and cost control are critical concerns for banks and fintechs considering the adoption of this technology.

There is also an underlying challenge in terms of human capital. Mori worries that the rapid rise of AI, particularly GenAI, could displace junior talent. “I feel like the junior engineer is drying up as a role because I would rather pay 50 cents a day to use an AI assistant… that gives me the same code, even better code than a junior,” he says. The fear that GenAI could reduce entry-level job opportunities in tech is real, particularly in Africa, where youth unemployment is a pressing issue.

Mitigating the Risks

To successfully integrate GenAI while managing its risks, financial institutions must take a thoughtful, incremental approach, Mori advises. One way is to focus initially on low-risk, high-reward use cases such as customer service automation and internal workflow optimisation, areas where Deimos has already seen early success.

Mori also stresses the importance of using AI securely, particularly in sectors as sensitive as financial services. “How to do this securely at scale… that’s probably where the most benefit from our company will come from,” he notes.

Ensuring that AI systems comply with regulatory frameworks, especially around data privacy and financial security, will be essential. The Deimos boss also recommends banks and fintechs invest in ongoing AI audits and monitoring to identify and rectify vulnerabilities before they lead to significant issues.

In addition, Mori emphasises that African fintechs and banks must upskill their workforce to coexist with AI systems. As automation becomes more pervasive, companies must provide training and development opportunities that equip employees with new skills in AI management, data analysis, and strategic decision-making, he explains. By doing so, they can avoid the displacement of workers while benefiting from the enhanced productivity that AI promises.

The Role of African Fintech in Leading the Charge

Africa’s fintech industry has a history of embracing innovation to solve the continent’s unique challenges, from mobile money to crypto exchanges. Chipper Cash, one of Africa’s leading fintech platforms, has deepened the use of technology to enhance cross-border payments and identity verification through its Chipper ID product. With nearly 5 million users, Chipper Cash demonstrates how fintechs can thrive by leveraging cutting-edge technology.

NALA, another thriving African fintech, has developed its own B2B payment platform, Rafiki, to ensure payment reliability, a critical issue in a region where payment infrastructure is often unreliable. These examples show that African fintechs are no strangers to technological innovation, and their success with traditional AI bodes well for their ability to integrate GenAI in meaningful, secure, and scalable ways.

The adoption of GenAI in African banks and fintechs offers immense possibilities, from improving customer experiences to streamlining backend operations. However, it is essential to move cautiously, focusing on secure, scalable deployments and the upskilling of the workforce. With the right strategies in place, GenAI could become an invaluable tool in the continued growth and transformation of Africa’s financial services sector.

As Mori succinctly puts it, “It’s very easy to implement technology in the wrong way… but we really want to help companies use technology in the right way.” African banks and fintechs have the opportunity to lead the way in harnessing the power of GenAI, especially if they do so thoughtfully and responsibly.

A recent survey across Africa by security awareness platform KnowBe4 reveals that 84% of respondents rely on social media as their primary news source, with 80% favouring Facebook; This heavy dependence on social platforms for information is concerning, particularly as disinformation continues to rise.

With 19 African countries set to hold elections in 2024 and numerous political campaigns underway, worries about misinformation (unintentionally shared false information) and disinformation (deliberately spread fake news) are mounting. The Africa Centre for Strategic Studies reports that disinformation campaigns in Africa have quadrupled since 2022, often backed by foreign states like Russia and China, leading to social instability.

In response to these issues, KnowBe4 conducted a survey in June 2024 on political disinformation and misinformation across five African countries: Botswana, Kenya, Mauritius, Nigeria, and South Africa.

The survey, which included 500 respondents, found that the vast majority of users (84%) prefer social media for news consumption over traditional channels like radio, TV, and news websites. Anna Collard, SVP Content Strategy and Evangelist at KnowBe4 Africa, notes, “80% of respondents are consuming news on Facebook and over 50% use TikTok. This is alarming as neither of these channels is very reliable in terms of news.”

The ability to discern fake news may be exaggerated

Another concerning finding is that 82% of respondents feel confident in their ability to distinguish between true and false information online, despite a generally low level of formal education on the topic. Collard comments, “While most respondents reported being able to tell the difference between real and fake news, I doubt this is the case. Other research has shown that most people overestimate their ability to detect deepfakes, and ironically, more people trust AI-generated images than actual photographs.”

The survey also revealed that disinformation is becoming a significant concern for many. 80% of respondents expressed high levels of worry about the negative impact of fake news and its potential to cause social division. “In Kenya, many respondents said they had seen firsthand how disinformation can lead to tribal conflict,” Collard notes.

She further explains that social media influencers using inorganic hashtags fuelled similar political discord during Nigeria’s election last year. “Social media’s rapid spread of false information and the increasing accessibility of AI tools allow for the quick and cheap creation of sophisticated disinformation campaigns.”

Collard adds, “As we saw when entities disputed the outcome of South Africa’s 2024 election, there are individuals motivated to disrupt democracies and act maliciously to create chaos because it serves their own agenda.” Another historic example is the #whiteminoritycapital disinformation campaign run by the British PR company Bell Pottinger in 2017 to obfuscate state capture by former SA president Jacob Zuma.

Need for more training and tighter controls

The survey underscores the need for increased education and awareness surrounding misinformation and disinformation. A significant 58% of respondents report having received no training on the topic, while a concerning 32% admit to simply ignoring fake news, highlighting the need for a more proactive and engaged response.

“We need a multi-faceted strategy to combat disinformation,” says Collard. This approach should encompass enhanced awareness and critical thinking among users; coordinated government action to prevent the spread of fake news (including stronger legislation), and increased vigilance from social media platforms in detecting and removing disinformation campaigns.

“Fake news is an ongoing challenge that requires continuous attention,” Collard concludes. “To fight it effectively, we need a combination of new technology, better ways to prevent it, and most importantly, teaching people to consume media while thinking critically, particularly if it is emotionally laden or potentially polarising content. As the digital landscape develops, so too must our strategies for maintaining the integrity of information.”

Featured Image Credits: News Central