Fintech will contribute $150 billion to sub-Saharan Africa’s GDP by 2022, according to Financial Sector Deepening Africa, a development-finance organization. According to IMF, sub-Saharan Africa has a total GDP of $1.6 trillion with Nigeria contributing nearly 30% of that number.
The contribution of the financial-technology industry to sub-Saharan Africa’s economic output will increase by at least $40 billion to $150 billion by 2022, according to Financial Sector Deepening Africa, a development-finance organization.
The industry currently employs about 3 million people directly and indirectly in the region, FSD Africa Financial Markets Director Evans Osano said in an interview on Thursday. Sub-Saharan Africa’s gross domestic product is about $1.6 trillion, according to data compiled by the International Monetary Fund.
Personally, I do think this estimate is low. Yes, $150 billion is small by 2022. Nonetheless, I understand that technology has a way of “destroying value” where new services dissipate broad industrial revenue which cannot be captured in traditional models used in GDP calculation. For example, when you use WhatsApp for a three-hour call from Lagos to London, after loading a $1-equivalent airtime, you have destroyed value for telcos [you might have paid more than $50 to call London direct with MTN sim card).
However, the differential of $49 does not go to WhatsApp since WhatsApp is free. Simply, that money is saved by you, but GDP may not capture it. To most economic models, revenue has dropped in the telecoms sector because MTN made $1 instead of the $50 which might have been possible without WhatsApp. Of course, without WhatsApp, you would not have tried making a three-hour from Lagos to London! The dissipation of value and creation of new values would be huge as new technologies penetrate into industrial sectors.
According to MasterCard and The Fletcher School, “of the $301 billion of funds flows from consumers to businesses in Nigeria, 98 percent is still based on cash.” Fintech will not merely have to move those $295 billion-worth cash transactions online/digital; it must create new value in the process. MPESA did not just digitize payment in Kenya; it added value upon the payment layer. For the whole of Africa, we should be hitting excess of additional $150 billion on economic growth by 2022. That is why investors are pumping money into African fintech startups: lots of money to be made.