Mergers and acquisitions worth US$52B were completed in South Africa during the first half of 2021, with the value of deals growing by 958% from 2020 with the tech sector in the lead according to Refinitiv Data that provides financial markets and infrastructure data1.
According to Digest Africa, the value of mergers and acquisitions in the African tech ecosystem in 2018 was US$504M with 24 out of the 39 deals taking place in South Africa making it the country with the most mergers, acquisitions and exits among the KINGS countries. Which is why am focusing this oped about the 5th KINGS (Kenya, Ivory Coast, Nigeria, Ghana and South Africa) on mergers, acquisitions and exits.
On the 1st of September 2021, ZipCo announced plans to fully acquire South African buy-now-pay-later (BNPL) fintech, Payflex2. On the 17th of the same month, Tech company Advannotech Pty Ltd, acquired IT-TEC MN Pty Ltd a Western Cape-based information technology company specializing in ICT support, security, networking and infrastructure3. In March, First National Bank (FNB) acquired local fintech firm Selpal4.
South Africa and Nigeria, the two leading economies in Africa, have always been in fierce competition with each other. South Africa’s leading fintech, MFS Africa founded by Dare Okoudjou in 2010, announced on 20th October 2021 their acquisition of one of Nigeria’s leading super-agent networks, Baxi, subject to approval from the Central Bank of Nigeria5 making it the biggest intra-Africa acquisition and the second highest acquisition in Nigeria to date after the Stripe acquisition of Paystack last year6. This seems like a response to Nigeria’s Jiji acquisition of South Africa’s Naspers’ OLX operations in 20197. Baxi’s 90,000 agent network processed over US$1B in transactions in 2021 to date. MFS Africa is the largest fintech interoperability hub in Africa connecting telecoms companies, banks and mobile money (Momo) operators across over 35 countries via a single Application Protocol Interface (API) with an estimated 320M Momo customers in 35 countries in Africa. At the height of the pandemic in 2020, MFS Africa acquired Beyonic in Uganda8 – another strategic acquisition that increased their footprint in East Africa in the same way the Baxi one increased their footprint in West Africa9. In 2016, the company took a majority position in Sochitel, a leading airtime top-up provider based in London with operations in Joburg, Douala and Accra which they exited in 2020 at 3.5x book value10.
Also read: Mergers and Acquisitions in African Fintech
MFS Africa has also been making some strategic early-stage investments to build a base of companies it can acquire later such as the investments in Maviance in May 202111 and Numida in April 202112. MSF Africa had earlier made investments in EzyAgric and Inclusivity in 2019 as they started their frontier investments program lead by their corporate development team. In a strategic move to enter the Chinese market, MFS Africa allowed China based VC firm LUN Partners Group to lead their B series funding round in which they raised a total of US$14M in 201813. Part of that capital is what they have used for their strategic investments and acquisitions to consolidate the market giving them an edge over their competitors. According to CB Insights the company has raised US$17.7M to date with which they have made all these strategic moves14 – including the partnership with Xoom – a Paypal service to bring new international Momo transfers to Africa15.
These mergers, acquisitions and exits started in December 1999 when Mark Shuttleworth sold his leading digital certificate authority provision company Thawte founded in 1995 to VeriSign for US$575M16. This was before mobile took hold on the continent making Mark the first African dot com millionaire at the prime age of 26 in the middle of the dot com bubble17. This placed Africa on the global technology map for developing a global technology company that was at the time number two to VeriSign the acquirer. Mark used his acquired wealth in September 2000 to form HBD Venture Capital (Here Be Dragons), the first venture capital firm in Africa from Cape Town. Along with the fund, he started the Shuttleworth Foundation in 2001, a non-profit that aimed to improve access to and quality of South African education. In 2002, he became the first African to go to space as a tourist paying $20M for an eight-day trip to the International Space Station where he participated in experiments related to AIDS and GENOME. In 2004, he funded the development of Ubuntu, a Linux distribution based on Debian, through his company, Canonical Ltd. In 2005, he founded the Ubuntu Foundation with an initial investment of $10M.
Keet van Zyl who initially worked for Mark’s HBD later launched Knife Capital with Andrea Bohmert and Eben van Heerden in 2010. Knife Capital took over the management of seven HBD portfolio companies some of which they exited including CSense to GE, Fundamo to VISA18 and orderTalk to Uber Eats19. Knife also exited iKubu a radar system for cyclists to Garmin in 201520 and disposed of their stake in a management buyout in FlightScope in 201721.
In 2009, the South Africa government introduced a unique tax incentive, Section 12J which allowed the wealthy to write off some of their taxes against investing in risking early-stage ventures. This led to investments in real estate but also in early-stage startup tech ventures through firms like Grovest, Karlon Ventures, Knife Capital etc who had section 12J dedicated funds22. Even though the 12J is been phased out in 2021, it has generated significant momentum for investment and could later return in a different/better form23. Some of these investments are going to find their initial public offering (IPO) on the new Cape Town Stock Exchange that started operations at the beginning of October 2021, the South African Stock Exchange (A2X) that currently offers 56 securities or the Johannesburg Stock Exchange (JSE). And so would the entrepreneurs who are pitching to raise at our 9th www.angelfairafrica.com on 25th November 2021 in Mauritius.