Companies based in English-speaking Africa are investing in their Francophone neighbors, with tech companies leading the way.
Foreign direct investment (FDI) may be down the world over, but intra-continental cross-border investment outlays are increasingly prominent in Africa. Morocco and South Africa have long led the way. Now a new trend is emerging in which companies from Anglophone nations other than South Africa move into Francophone markets.
The highest profile activity involves technology firms, including fintechs. Examples include Kobo360, a digital platform for the trucking industry (Cotê d’Ivoire); Jumbopay, a Kenyan online payment gateway for mobile phones; Flutterwave, a Nigerian online payments company; and South Africa’s Jumo World, which builds platforms for financial services.
“I had no idea about this until I came to Lagos,” says Johanna Monthe, partner at Epena Law, a firm with offices in London, Lagos and Douala. “Every company is either expanding or talking about expanding into Francophone Africa.”
Africa’s intra-continental FDI stock rose from US$39.9 billion in 2000 to US$365 billion in 2017, according to the United Nations Conference on Trade and Development (UNCTAD). The World Bank estimates that net intra-continental cross-border investment as a share of all FDI in Africa jumped from an average 4% a year in 2002 to 2011 to 7% for 2012 to 2018, says Brody Viney, a World Bank consultant. That excludes Mauritius, which skews numbers as an off-shore banking hub.
The burst of intra-African activity is part of a more general trend toward “South-South FDI,” says Peter Kusek, senior economist at the World Bank. It started with China, India, the United Arab Emirates and Turkey–lately, we have also seen a rise within Africa.”
The African Continental Free Trade Area Agreement (AFCFTA), concluded last year, is expected to further fuel the trend.
The current round of activity follows the lead of banks and financial services firms, especially from Nigeria and Ghana, that began moving into many of Africa’s 21 Francophone countries about 15 years ago. “Now with the boom in fintech, we are seeing smaller players” making their moves, Monthe says.
Not all Francophone countries are equal. Populations vary from 77 million in the Democratic Republic of the Congo (DRC) to less than 100,000 in Seychelles. Ease of doing business runs from Mauritius, number 13 in the World Bank`s index, to the DRC, which trails at 183 out of 190 countries. “Cotê d’Ivoire and Benin are easier,” Monthe says; “Cameroon and the DRC are more difficult.”
Despite language and other barriers, including red tape, some expansions appear to be doing well. “Kobo started in Cotê d’Ivoire and its numbers are astounding,” Monthe says. “They are making more there than in Nigeria.” Kobo360 has raised US$30 million, backed by Goldman Sachs, in an effort viewed as a bet on cross-border transportation and logistics under AFCFTA.
And the numbers are growing. In January, Flutterwave announced a takedown of US$35 million to boost its expansion into sub-Saharan Francophone markets and North Africa. A month later, Jumo pushed its cumulative fundraising since 2015 to nearly US$150 million with a successful plea for cash to back its initiatives in Côte D’Ivoire, Nigeria and elsewhere on the continent. Le Douala Grande Mall, a new shopping center in Cameroon, is “a replica of malls in Nigeria,” says Monthe.
Agribusiness is another target for cross-border investment, according to Monthe, while Kusek points to finance, telecommunications, media, construction, retail and consumer products. Investment in hotels and accommodations were booming, at least pre-pandemic, syas François de Senneville, head of the Africa group at the law firm, Fieldfisher.
Figures for intra-continental FDI in Africa can be unreliable, officials at some multilaterals admit, but some close observers believe that the real numbers are much higher. The “widely recognized under-reporting of intra-African cross-border investments … suggests that Africa’s actual OFDI [outbound FDI] stock could be much higher,” Kevin Ibeh, a professor in the Department of Management, Birkbeck, University of London, says in a co-authored paper.