BD Insider: Investors are ignoring AI startups in Africa

In today’s midweek update, we look at:

• Africa lags behind in Q2 2024 global AI funding
• NCC wants to end tariff and data consumption complaints in Nigeria
• MTN Nigeria takes the reins on MoMo PSB

Africa lags behind in Q2 2024 global AI funding

AI companies have become a hotbed for investors globally, but this enthusiasm hasn't yet extended to African AI startups.

In the second quarter of 2024, AI startups worldwide raised up to $23.2 billion, with African AI startups contributing only $4 million across five deals, accounting for less than 1% of the total investment.

While Africa has shown interest in AI adoption, with countries like South Africa, Nigeria, Kenya, and Ghana leading the charge, the continent faces substantial challenges. These include a shortage of accessible data, inadequate cloud infrastructure, limited funding, inadequate regulations, and a shortage of skilled AI talent. These factors have deterred investors from backing African AI ventures.

Context: Africa is home to over 2,400 AI companies, more than 50% of which are in seven countries. South Africa leads with 63 startups, while Kenya and Nigeria make up the top three with 59 and 57 AI startups, respectively.

Most of these companies are still in the early and intermediate stages of growth, suggesting that investments in African AI startups may take some time before they start bearing fruits.

Compared to other continents, Africa has a low average AI readiness score of 26.9 for its countries. Mauritius, the first African country to develop an AI strategy, leads the continent with a score of 53.27. Rwanda, Benin, and Senegal have also adopted their own AI strategies.

NCC wants to end tariff and data consumption complaints in Nigeria

Ever looked at your airtime or data balance and wondered how you burned through it so quickly?

The Nigerian Communications Commission (NCC) is tired of Nigerians feeling this way. They've just introduced new rules to make tariff rates and data consumption more transparent. The move comes in response to mounting consumer complaints about data depletion and rapidly dwindling airtime balances.

How would NCC do this? In its "Guidance for the Simplification of Tariffs", the regulator has mandated telecom operators in Nigeria to provide clear and detailed information about their tariff plans, including call charges, data rates, and SMS costs. This information must be easily accessible to subscribers through a dedicated section on the operators' websites.

The NCC has also directed operators to eliminate complex promotional offers and bundle plans, opting for standalone promotions with clear terms and conditions. This is intended to prevent consumers from being locked into unfavourable plans. The regulator has given telecoms until December 3 to discontinue existing bonus-led tariff plans.

The guideline further mandates operators to fully disclose a subscriber's tariff plan via Unstructured Supplementary Service Data (USSD). This means that whenever a subscriber requests their account balance through USSD, their response must contain information such as the plan name, validity period, rate per second/minute, rate per megabyte/kilobyte/gigabyte, and rate per SMS.

Context: Despite online reports that it approved new tariffs for mobile network operators, the NCC has categorically denied approving any tariff hikes.

Operators have expressed the need for tariff adjustments to address rising operational costs due to the country’s economic downturn. MTN, for instance, has reported substantial forex losses and is actively seeking regulatory approval for tariff increases. Airtel Africa also reported a $89 million net loss in FY 2023/2024 due to currency devaluation.

The NCC's stance on tariff hikes appears to balance protecting consumers' interests and supporting the telecommunications industry. By simplifying tariffs and increasing transparency, the regulator aims to encourage a more competitive and consumer-friendly telecommunications market in Nigeria.

Sidebar: The International Telecommunications Union has recommended that the Nigerian government streamline the regulatory functions of the NCC.

MTN Nigeria takes the reins on MoMo PSB

MTN Nigeria has made a move in the African fintech world by buying out the last piece of the pie in its mobile money business, MoMo Payment Service Bank (MoMo PSB). They have acquired the remaining 7.17% stake held by Acxani Capital for ₦6.95 billion ($4.36 million).

This move effectively makes MoMo PSB a wholly-owned subsidiary of MTN Nigeria. Previously, the telco had an 80% stake in the company, while Acxani Capital held a 20% stake. But in May, Acxani decided to offload its 20% stake, which ended up being reduced to 7.17%.

Why the acquisition: The acquisition is seen as a strategic move to boost its growth in the fintech sector. MoMo PSB has shown promising results since receiving its operating licence from the Central Bank of Nigeria in 2022. By the end of Q2 2024, MoMo had 5.5 million active wallets, with a 33.4% year-on-year increase in transaction volume.

But this growth has not come without some challenges. MoMo is losing agents and seeing a decrease in customer deposits. At the end of 2023, cash held on behalf of its customers had dropped by 72%.

Context: This acquisition comes on the heels of Mastercard’s $200 million investment in MTN’s group fintech arm.

While full ownership offers MTN Nigeria greater autonomy in decision-making, it also places a heavier responsibility on the telecommunication giant to drive MoMo PSB's success.

By the Numbers

402 Tb/s

The fastest internet speed in the world is 402 terabits per second. This was achieved by a group of Japanese researchers, and it allows you to download as many as 12,500 films on Netflix within a second.