Entrepreneurs in Lagos, Nairobi, and Johannesburg have caught a bug. It’s not exactly a pandemic.
But for several years now, they have been chasing the fintech bandwagon. A new digital money start-up is popping up most weeks.
And that’s a welcome development, even if many of them will fail (because not every idea finds a market).
The throng of founders committing themselves to big ambitions in a quest to knit together African finances is a sign of economic vitality.
But they could do better, achieve more for Africa, and fill their own pockets more successfully. The problem is the size of their ambitions.
The word on the street is that the bigger one’s dreams the better. It’s a spirit to be applauded in general.
Market of 1.5 Billion people
But within it also lies an almighty pitfall. When every entrepreneur is chasing a market of 1.5 billion customers and promises investors a chance of seizing a trillion-dollar opportunity.
Many good but slightly smaller chances are overlooked, and many fine entrepreneurs will fail unnecessarily.
In fintech, seemingly every start-up currently wants to do international money transfers between African countries. Undoubtedly, the need for such services is great.
The continent’s borders
Financial flows across the continent’s borders are growing every year and the options for consumers are still limited.
But this is unlikely to be a market with more than a few bundled service providers. Network effects are strong and many of the players getting in the race. Now are following a fad more than an actual opportunity open to them.
This phenomenon is far from limited to fintech. In health, media, and logistics, the same story is told by entrepreneurs about building vast and complex machines. With continental scale.
The African Amazon
Undoubtedly, some such companies will be built successfully. They may become the African Amazon – and shower incredible and well-deserved wealth. On founders and investors. But that is not the solution to everything. It misunderstands the lessons of the global tech and start-up boom.
There will always be a few high-profile entrepreneurs serving extremely large and varied markets. Everyone knows and rightly admires, say, Jeff Bezos, who famously set out to build the “everything store”.
which also became the title of the best book on Amazon’s rise. But it is an exception. Most successful tech founders in Europe and America serve niches, catering to ever more specialist customers.