For several weeks now, the clatter of Russian guns in Ukraine has brought up a very bad memory for Europe. That of war. European countries were ... prepared for it. Since 2014, when Crimea was annexed by Russia, Europe has once again become one of the hotspots of the global arms trade. In Africa, the acquisition of military equipment has clearly diminished – by 13% from 2015 to 2020. However, faced with numerous security threats – terrorism, transnational crime, piracy – the continent remains particularly affected.
DPO “definitely” wants to make more purchases in the long term, says Feinstein, who is based in Nairobi. “We always consider buying when we enter new markets to get market share.”
DPO, which operates in 19 African countries, has made a string of payment services acquisitions in South Africa, Namibia and Botswana since 2016. Network, based in Dubai and listed in London, agreed to buy DPO for $288m in July.
DPO is keeping existing management and will continue to operate under the same brand. Feinstein hopes that all the required regulatory approvals will be in place at the start of 2021.
Once’s that’s done, DPO will look first for new acquisitions in Africa, says Feinstein. It’s possible that new financing will be needed to make fresh purchases. “All options are open.”
The company is planning to expand into Network’s markets in the Middle East, with Dubai and Saudi Arabia top of the list, says Feinstein. The process of entering these markets – once the purchase by Network closes – and the product offered in those countries are now being discussed. Kuwait and Bahrain will be in the second phase of expansion, he adds.
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According to McKinsey, Africa’s electronics payments industry had revenue of about $19.3b in 2019, of which about $10b was from in-country, domestic payments. McKinsey says that COVID-19 may lead to a drop in fees for in fees for payment services as governments and providers limit or halt the amounts that can be charged. This may in the long term increase the size of Africa’s payments market, says McKinsey.
That prospect has underpinned continued M&A activity in African payments even as COVID-19 grinds other sectors to a halt. In June, MFS Africa in Mauritius bought Beyonic, which provides digital payment services in east Africa and Ghana.
DPO’s system allows businesses to accept payments made in about 50 African and global currencies. The business still gets the amount in local currency. Small African merchants often struggle to establish a web presence, Feinstein says, and DPO will launch a free web site for them when they join the platform. The company also has a division that helps global corporates gain access to African markets.
Accelerating demand for fintech skills could be a constraint on expansion. The COVID-19 pandemic has prompted a focus on digital channels to reach and transact with customers.
- The fintech sector has been stretched to capacity, meaning limited access to development time, Nedbank Zimbabwe managing director Sibongile Moyo told The Africa Report in August.
- Getting enough people with right skills has been a problem for DPO in South Africa, says Feinstein.
- Overall, he remains optimistic, pointing to Nairobi and Lagos as high-tech skill hubs.
- The youth of Africa’s workforce will also favour the search, he says. “There will be more competition, but we will find the experts.”
Cost pressures may increase as African payments providers seek to hire and retain from a finite pool of people with fintech skills.
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