Hormuud Telecom Somalia Inc., its largest telco, rolled out faster internet speeds last month, signalling budding growth in the country’s digital services industry.

“As Somalia strides towards stability, the launch of 5G services by Hormuud Telecom emerges as a critical milestone. This initiative is more than just a technological advancement, it’s a symbol of our nation’s commitment to growth and constant improvement,” said Somalia’s Telecommunications Minister Jama Hassan Khalif.

The immediate benefit of this rollout, according to Hormuud, is the seamless upgrade for its 4G customers to 5G at no additional cost, ensuring that a broad base of users instantly enjoy improved internet speed and reliability. A 5G service promises to enhance connectivity and efficiency, aiding the country’s integration into the regional economy and stimulating trade and investment.

The network will initially be accessible in major cities, offering 81% coverage, indicating the extensive reach of the new technology nationwide, the service provider said.

“The network will initially be accessible in Mogadishu, Kismayo, Galkayo and Baidoa, as well as Dhusamareeb, Beledwayne, Afgoye, Merca and Dhobley,” Hormuud said in a statement.

After years of investor reticence and minimal foreign direct investment flows, Somalis themselves have taken significant steps to alter their economic destiny.

Hormuud Telecom, a domestically established firm since 2002, promotes itself as a company “built by Somalis for Somalis.”

Operating from Mogadishu, the company is Somalia’s leading telecom provider, the largest private-sector employer, and the first Somali private enterprise to attain international ISO certification.

With over 12,000 shareholders, all of whom are Somali nationals, Hormuud has grown from the 283 founders who initially started the company. 

Given the widespread reliance on mobile money services among the Somali population, particularly among those without access to traditional banking facilities, the introduction of 5G is also expected to significantly boost the efficiency and security of financial transactions.

Somalia’s formal integration into the EAC came after its Minister of Commerce and Industry, Jibril Abdirashid Haji Abdi, presented the instrument of ratification of the treaty of accession to EAC Secretary-General Peter Mathuki on March 4, 2023, in Arusha, Tanzania.

Its accession to the regional block comes after decades of hesitance due to factional political conflicts that had engulfed it in civil war. As active participation in EAC activities increases, robust digital infrastructure will be essential for further cross-border trade, investment, and collaboration. 

In a circular sent to banks seen by TechCabal, the apex bank increased the minimum capital requirement to $364.56 million or naira equivalent of ₦500 billion by March 31, 2026, to address rising macroeconomic challenges in Africa’s largest economy.

“The prevailing macroeconomic challenges and headwinds occasioned by external and domestic shocks have underscored the need for banks to raise and maintain adequate capital to enhance their resilience, solvency, and capacity to continue to support the growth of the Nigerian economy,” CBN said in a circular on Thursday.

Access Bank, Nigeria’s third most capitalised bank with $190.6 million (₦251.8 billion), would need to raise an additional $187.8 million (₦248.1 billion) to meet the new recapitalisation requirements of the central bank. 

On Thursday, the Holdco, Africa’s largest consumer bank, said that it will ask its shareholders to authorise the plans at an annual general meeting set for April 19.

Access’ wants to raise part of the funds by increasing its issued shares from ₦17.7 billion to ₦26.6 billion. The company has asked for regulatory authorisation to raise capital of up to ₦365 billion by way of a rights issue on such terms and conditions and on such dates as may be determined by the directors.

Access’ decision to recapitalise comes amid a rapid expansion in Africa, including a recent acquisition of Kenya’s National Bank of Kenya (NBK) from KCB Group in a deal estimated at $100 million.

Paul Russo, KCB Group CEO, revealed that keeping NBK would have required the bank to inject up to $60.7 million, despite sinking $106.3 million since buying it in 2019. The war chest will allow Access to expand its footprint in East Africa’s largest economy with the NBK acquisition.

Already, the bank has operations in 15 African countries with a keen interest in revving up its presence and becoming the largest bank on the continent by 2027.

The two-year-old payments company closed December 2023 with an operating income of ₦2.08 billion. This “reflects the culmination of our strategic investments and diligent efforts in building a sustainable and resilient business model,” a company spokesperson from Hydrogen told TechCabal via email. 

Launched in 2022, the company fully commenced operations in 2023. 

Hydrogen has big ambitions: it wants to build Africa’s most powerful payment business network. It competes with other fintech players such as GTCO’s Squad, Flutterwave, Moniepoint, Stanbic IBTC’s Zest, and Paystack. While it acknowledges the saturated payments market, Hydrogen believes that its approach is different, relying on “a combination of strategic partnerships, technological prowess, and a deep understanding of the market dynamics”.

Hydrogen offers products and services that include InstantPay, Payment Gateway, POS, Card, and Switch services. The fintech hopes to serve a clientele that cuts across the private and public sectors. 

The company claims to have processed approximately ₦15 trillion in transactions across its different channels in 2023. It also launched eight payments products in the same year. 

These startups have gone on to amass over $1 billion in market value. The sector-agnostic fund has a focus on fintech, software-as-a-service, digital commerce, and healthtech startups. 

Following the deployment of its $10 million fund within three years, Oui Capital raised its second $30 million fund. With a focus on early-stage startups, the fund says it helps its portfolio companies with fundraising, go-to-market support and acquiring talent. 

In a YouTube video, Tosin Eniolorunda, the CEO of Moniepoint, shared that the fund helped with seeking product-market fit, traction and introductions to potential investors. “They have also been helpful in hiring, especially with some of our key hires,” he added. 

Oui Capital, which funds approximately 2% of the companies that apply to it, invests between $250,000 and $500,000 and looks to own between 5% and 10% of its portfolio companies. 

TechCabal spoke with Olu Oyinsan, the fund’s managing partner, and Oke Ekpagha, a senior analyst, as they shared the fund’s investment thesis and some of its biggest learnings.

Oui Capital has been investing in early-stage startups since 2019. Based on your experience, what would you say are the biggest challenges that these startups face? 

Oyinsan: There are two most important challenges: the first is finding product market fit (PMF). There are a lot of theoretical definitions of PMF, but it’s like trying to run a race and getting on the track that’s going to take you to what the product should do for customers, the type of customers that actually should be using the product, and if they’re paying for it. PMF is everything you need to put in place to start growing. 

The other one, which is very common, is getting the money you need to build the company. Money is scarce everywhere in the world, and for early-stage companies that don’t have traction, it’s very difficult to raise money. Founders have to lean on their other skills to serve as a proxy for the attractiveness of that company.

Does Oui Capital accept startups that do not have product market fit? 

Oyinsan: The short answer is yes. A majority of the companies we have backed did not have product market fit, and that’s why we are early-stage investors. We have invested in a company with zero revenue and very little customer traction. If you look at our portfolio, what the [companies in it] do today is not what we invested in them for. What made Moniepoint, Maad, Duplo and Akiba Digital successful wasn’t what they were doing when we invested. 

As early-stage investors, it’s our job and responsibility to invest in places where we can be helpful. It’s like having a co-founder who does not stay in your office because if we own the company together, we have to do everything we can to make sure that this company is successful. It’s what also generates financial returns. You’re more likely to make better financial returns if you invest in a company that doesn’t look successful yet than in one that has it all figured out. Eighty percent of the companies we invest in don’t have PMF. 

What’s the evaluation procedure like for your portfolio companies? How do you assess which companies you back?

Ekpagha: You don’t get what you’d expect to see, you get what the market has in store. Off the bat, there are certain things I’m looking out for. Firstly, how strong is the founder or founding team? Do they have domain expertise that can directly translate into the new venture that they’re trying to build?

I also look at the business model: is it a scalable business model? Is it fast-growing in terms of businesses that have been in that space? How big is the market and how fast is it growing? Of course, the companies that we tend to invest in are doing something new and are going to be market leaders, but they could be growing quickly in terms of traction and not be able to grow beyond what the market is going to allow. 

I also look for any traction that I can use to benchmark the rest of their success against. Typically, the startups we back don’t have major traction for their users or revenue, but we need to approximate and have an idea of how fast they’re growing already and what that could look like in the future.

What type of founder does Oui Capital back?

Oyinsan: We don’t care where you went to school, what you look like, or what nationality you are. That doesn’t build great companies. Entrepreneurial ingenuity is what builds great companies. I don’t care if you went to Stanford or the Federal University of Technology, Akure.

As you can tell, some of the bigger companies, especially in Nigeria, don’t match the pattern [of studying in Ivy League schools], but the ones who match the pattern are often the ones you are writing about that defraud investors! 

We care about the problem you’re solving, and if you look like you have the grit, guts and expertise to go after it, we will back you. 

Also, some things, like the market and product, don’t depend on the founders. I was talking to a brilliant founder this morning and I told him that he’s probably pursuing the wrong thing. He’s trying to build another payment company and I told him to take a step back and figure out something else because he probably will not be able to get money from us.

Does Oui Capital participate in follow-on investments?

Oyinsan: Yes, we do. In our old fund, we had a ratio of about 20% of the fund for follow-on investments. The new fund has a smaller allocation because we noticed that our first cheques have been more successful than our follow-on cheques.

It’s common knowledge in venture capital that follow-on cheques protect your position, but there are some follow-on investments that we made in our first fund, even though the fund was hugely successful, that we might not have done, following introspection. 

There are many reasons VCs follow on besides financial benefits; sometimes VCs follow on an investment for optics and to catalyse the new round. We could invest in a company in the pre-seed round and it’s doing very well and now they’re raising a new round. New investors want to talk to you about the company, and their next question always is, “Are you investing in the new round if you believe in the company as much as you say you do?” So, sometimes, it’s not even a financial decision. It’s a show of good faith and support for the founders.

Sometimes investors follow on to ease the funding stress and bridge the gap because the company is in a place where they don’t want to spend a lot of time fundraising. Remember, if a company fails or runs out of money, as an investor, you lose your original investment. 

Sometimes investors follow on because they didn’t get the desired percentage or as an anti-dilution tactic. 

What are the ways Oui Capital supports its founders and startups besides funding?

Oyinsan: What usually happens is that we reach out to founders to feel the pulse and ask what keeps them up at night and see how we can solve that. For example, I’m talking to the founder of one of our portfolio companies and he’s very straightforward. He says that he is looking to acquire one or two companies making at least a million dollars in revenue in Ivory Coast and South Africa. Someone on our team has to find the best companies that are making a million dollars a year because that’s what we have to do. We are one of the highest shareholders and we are going to do that at no extra cost.

We also help portfolio companies look for board members or senior staff, we turn out our Rolodex and look for founders whose companies failed or people we have worked with for help. 

If our portfolio companies want to raise a new round, we can also help. For example, with Moniepoint, I took Tosin with me to Rwanda for a conference because other investors were going to be there. The rest is history. If you care about the company, you do everything you need to do to make sure the company succeeds.

Oui Capital has been backing startups for five years now, starting from the time when there was a bubble to the post-bubble reality. What’s your biggest lesson? 

Oyinsan: Coming from the bubble, first of all, we were never the type to FOMO into deals. Look at our portfolio. We never participated in deals where the hype around the deal was greater than the fundamentals of the company. What you call a bubble, I don’t see it as that. But I understand that there was a time when there was valuation inflation and a lot of cash. 

Our biggest lesson is that you have to stay true to your thesis. It pays you over cycles. For example, we don’t have a single portfolio company that was caught in this bubble, and we have over 20 portfolio companies. It’s about just staying true to your thesis. You have to stick to your investment strategy and you just have to stay there. Don’t let the market move you left or right, because if we had invested based on the climate, we would probably not be around by now. 

What problem did you want to address with Oui Capital?

Oyinsan: We said we’re going to democratise access to venture capital. Five years ago, some founders could not get in front of investors. I remember when we introduced Moniepoint to a firm, the first thing they asked was what school the founder went to. What does that have to do with anything? These people were one of the most entrepreneurial teams that you could find at the time. 

Our thesis was to break away from this thinking. I felt I could not do that in any other arrangement. We stick to real entrepreneurs and we have a very strict valuation strategy. We don’t need a large number of companies. We just think it’s not a strategy for Africa; we are more concentrated than most early-stage firms. In our new fund, we’re only going to back 15 portfolio companies. Our thesis is to have a significant portion of equity and significantly support these companies. 

Are you still very hands-on with the companies in your first fund following your new fund? 

Oyinsan: Investing success is not really about investing, it is about returns. You have to build successful companies and you have to take money out. Today, we only take money out of our first fund because these are the companies that have developed enough. You have to keep an eye there because that’s where your interest is going to come from. 

Besides, there’s a magic word called monthly updates. We don’t look at it as fund 1 or 2 because once you’ve made that investment, they are a portfolio company so you support them as a whole. 

It seems that we are now in an era of market correction. How are you thinking about future investments? 

Oyinsan: We never change. What has changed is that easy money has left so it has enhanced opportunities for hard-working money or money that knows what it is doing.  That has presented us with an opportunity to pick up Series A-type companies for seed round prices. 

We are seeing fewer companies with no PMF trying to raise a $7-$10 million pre-seed round. There was a company on the phone with us last week that was trying to do that; I had to laugh. 

We’re now able to spend more time getting to know founders, performing due diligence and sticking to our guns on pricing. I think that’s the only thing that changed. The reason why I said there was no bubble is because the few investors who have stuck to their fundamentals did not suffer the damage of a bubble. It’s the investors who are not versed in doing VC or doing Africa who lost money. 

How are you thinking about exits? 

Oyinsan: There are different ways, but for early-stage funds, the most attractive one is secondaries when portfolio companies raise Series A–C. It’s a very significant opportunity because it usually takes startups 10 years to get to the IPO stage, and the average age of a fund is probably 7–10 years.  

Sometimes there might be a need to pass on the baton to other investors who are in the first year or so of their fund. For example, Reddit, an 18-year-old company just looking to IPO—it probably wouldn’t make sense for an investor from their pre-seed round to still hold shares in the company; their limited partners would probably sue them. 

A spokesperson for the telco confirmed the sale of the business segments but declined to comment on how much the sale would cost. 

Further, in the aforementioned report, MTN shared that its Guinea-Bissau and Guinea-Conakry businesses have been classified as held for sale as of December 31, 2023. 

“Telecel, an established telecoms operator with a significant presence in Africa, is well positioned to drive the growth and further development of these operations and contribute to technological and economic progress in these markets,” a note in its financials said.

This move will allow MTN to focus on Ghana, Cameroon, and Cote d’Ivoire, stronger markets in the West and Central Africa region which collectively contribute 18.6% to the group’s revenue, over other West and Central African (WECA) countries that contribute 7.3% to the firm.

MTN Guinea-Bissau recorded some poor performances after it breached a loan covenant as result of its negative EBITDA performance. (EBITDA means Earnings Before Interest, Taxes, Depreciation, and Amortisation.)

The process of converting MTN Guinea-Bissau’s financial results into its primary currency resulted in a loss of R1.69 billion ($89,392,809), per its annual report.

Access Holdings recently made its biggest play in East Africa with the acquisition of the entire issued share capital of National Bank of Kenya Limited. 

“This partnership encompasses more than a convergence of capabilities; it signifies the fusion of collective expertise, resources, and an unwavering commitment to drive financial inclusion, empowering millions throughout Africa,” Aig-Imoukhuede said.

Nigeria and Kenya are the first and third largest recipients of diaspora remittances in sub-Saharan Africa, data from the World Bank’s Migration and Development Brief report shows. In 2023, remittances to Nigeria accounted for 38% of the total $58 billion remittance flows to the region, growing by 2%, while Ghana and Kenya, posted estimated gains of 5.6% and 3.8%, respectively. 

As the largest consumer bank in Africa with over 60 million customers in 21 countries, Access Bank will significantly boost its remittance business by tackling the challenges customers face in making remittances within and outside the continent.

The collaboration, which is subject to approval from the Kenyan financial authorities, will see the players connect more than 60 million customers and 5 million businesses across 8 countries and process more than $1 billion a day in transaction value. Access Holdings which has a presence in 14 African countries and is the largest consumer banking institution, is expected to provide technology-infused financial services and Coronation Group will bring its technology expertise to the deal. 

M-Pesa, the mobile money platform of Safaricom, currently dominates the mobile money market in Kenya with a 96.5% share of the market. Another report has shown that 32% of remittances in Kenya are through mobile money operators. But M-Pesa is facing a future separate from Safaricom. In December 2023, Kamau Thugge, governor of the Central Bank of Kenya, said plans to split M-Pesa from Safaricom were ongoing to minimize shocks.

“African countries trade more with nations outside the continent than within themselves. Initiatives such as the African Continental Free Trade Area (AfCFTA) seek to address the lack of intra-continental trade. This partnership with Safaricom, Coronation Group and Access Holdings seeks to explore remittance corridors between East and West Africa, bringing alive the AfCFTA spirit,” said Sitoyo Lopokoyit, managing director, M-Pesa Africa. 

The first phase of the collaboration will concentrate on the biggest markets along the East and West African corridor, including Nigeria, Kenya, Ghana, and Tanzania.