The Federation of German Industries (BDI) has recommended that the German government throw its weight behind the African Continental Free Trade ... Area (AfCFTA) Agreement, arguing the continent is pivotal in efforts to diversify markets.
Every revolution has its own quarrel between old and new. And West African tech is no exception. Well established in its kingdom, Sonatel, one of Orange’s subsidiaries, saw the start-up Wave arrive on its land in 2018. Initially discreet, the financial services platform created by Americans Drew Durbin and Lincoln Quirk has – over the past two years – completely reshuffled the cards in a market where Orange Money had reigned supreme since 2010. This success was rewarded last year with a $200m fundraising campaign that boosted the young start-up’s valuation ($1.7bn) and enabled it to become the first unicorn focused on French-speaking Africa.
To shake up the leader, the new entrant slashed prices, made withdrawals free and charged only 1% on transfers. After some procrastination, the operator came to terms with the fact that it had to make a major revision. At the end of November, the teams of Sékou Dramé, Sonatel’s boss, aligned their tariffs. But the momentum had shifted.
For the first time since launching its mobile money offer, Sonatel saw its revenues from this activity fall last year (-4.1%). And according to an internal source, the drop accelerated during the first quarter. In Paris, the wave of concern caused by the company with the penguin on a blue background has reached the French group’s executive committee. Africa has been the engine of its growth for several years and financial services are one of its pillars.
The latest interviews, which were given by Dramé in March and early April by Alioune Ndiaye, head of Orange Middle East and Africa, reflect the importance of the Wave threat, which, along with Senegal, has been deployed in Côte d’Ivoire and is targeting other countries such as Benin and Guinea. Interviewed by us and RFI on the programme “Eco d’Ici, Eco d’Ailleurs“, Ndiaye, who is usually discreet and measured, was on the offensive.
“Wave’s model is disruptive because it is financed by venture capitalists who are not very interested in short-term profitability. They invest money in the hope that the start-up will take over the whole market and then they can sell their share and get back 10-15 times their initial investment. It’s like the Amazon model: you burn cash – the e-commerce site has been doing this for over a decade – in the hopes of eliminating the competition,” said the executive.
Then the former Sonatel boss, who also ran Orange Mali, denounced the damage caused by his competitor’s strategy: “With Orange Money, Orange has created tens of thousands of jobs thanks to the network of distributors that we have developed to bring our services closer to our customers. Half of the turnover went to them. Wave cost them 50% of their revenue. Some 20,000 jobs have been destroyed in Senegal, and perhaps as many will be lost elsewhere,” he said. His statements were widely reported in the West African press.
A few days later, Carine Coura Sene, Wave’s director for the West African Economic and Monetary Union (WAEMU) region, gave the answer of the shepherd to the shepherdess on the Ivorian media platform Sika Finance, without even mentioning her rival. “You have noticed that our competitors who felt that our rates were very low have aligned theirs with ours. This means that they have just seen what we had before them in terms of business model,” she replied.
Orange has demonstrated too much conviction, according to a connoisseur of the French giant. “It milked the cash cow, by remaining too expensive for part of the population, rather than extending its services, signing partnerships with only the largest companies when Wave has widely opened its platform, and by refusing, for a long time, to offer a real application to meet the expectations of its customers equipped with smartphones,” says our source.
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Speaking to RFI and us, Ndiaye acknowledged the operator’s difficulty in changing its approach: “Companies do not self-disrupt. When you have a solid, profitable business model, you are not going to cut 30,000 jobs in a country because you can lower distributor costs.”
“This illustrates the gap between a very established company and entrepreneurs who want to make their idea a continental success,” says our contact, who is familiar with the Orange group. With Sene, Wave has found the right soldier to lead this mission. A computer engineer trained in France, the Senegalese is one of West Africa’s best mobile money specialists. Formerly a consultant for the Dakar-based firm Aviso, she helped launch the start-up Wizall and worked for Orange Money on certain projects. She then managed the payment solutions aggregator InTouch for nine months.
An “obsolete” success story
By lowering its tariffs not only in Senegal but also in Côte d’Ivoire and Mali as well as integrating new services such as access to microcredits, the operator should be able to slow down its young competitor’s progress. Its staff has also decided to fight on the regulatory front. For more than a year, Sonatel has prevented Wave from selling Orange credits, even though the start-up can do so for Free and Expresso and is authorised to do so by law.
According to a source within the start-up, this arm-wrestling match should soon turn in Sene’s favour. “At first, they didn’t want us to be able to send SMS to their customers, even though they can’t object to it. We got around them by going through the interconnection that the regulator manages,” she told us.
This duel with Wave is a sign that should push Orange to question its strategy, concludes an expert: “The French group has difficulty thinking of itself outside of telecom licences. With its over-the-top model (OTT, which uses operators’ networks), its competitor can capture customers in all African markets. What if Google or Facebook decides to buy Wave for $5bn and invest heavily to further accelerate its expansion? What will the success of Orange Money, which today has 70 million accounts but only in the 17 countries where the French group has a licence, be worth? It will be obsolete.”
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