👨🏿‍🚀TechCabal Daily – $50 million for Cassava

19 JULY, 2022

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* Data as of 04:40 AM WAT, July 19, 2022.

UNION54’S CHARGEBACK ISSUES

In yesterday’s edition, we outlined how African fintechs are temporarily shutting down virtual dollar cards for users. 

Now, we know why. 

As we mentioned, Flutterwave, PayDay, GetEquity, Eversend, and the other African startups offering this service share the same card partner who has now been identified as Union54, a Zambia-based fintech that allows customers create debit cards without having commercial bank accounts. 

What’s special about Union54?

A few things. It’s the first Zambian startup to be backed by Y Combinator. 

It’s also the first African fintech to have a Mastercard Principal Membership, a card scheme that helps fintechs transfer information on payments from bank to bank. 

It’s with this card scheme that Union54 can offer dollar cards to its customers and help other fintechs do the same. Its partnership with Mastercard helps it transfer information between its wallets and other financial institutions. 

So, what went wrong?

One of the requirements of holding a card scheme with Mastercard is having a rigorous anti-money laundering (AML) scheme. 

It appears this is where Union54 is having some problems. According to TechCrunch, in May, the fintech experienced some issues with chargeback fraud which led international merchants like Google and Facebook to report Union54 to Mastercard. 

Sidebar: Chargeback fraud is where a customer contacts a bank for a refund for an item they claim they didn’t buy, or for a transaction the customer claims they didn’t make. 

Union54 has been experiencing a rise in chargeback fraud since May. The fintech received an ultimatum from Mastercard to keep chargeback fraud to less than 1.5% and improve its processes by July 18. 

Unfortunately, the fintech couldn’t meet the standards set by Mastercard by the given deadline. 

Big picture: It’s not the end for Union54 though, and they’re not going down without a fight. Yesterday, the startup announced that it’s going through compliance audits that may see its services back up in 6–8 weeks. CEO Perseus Mlambo, however, shared different news a few hours later stating that the audit should “take no more than two weeks”.

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MTN AND TELKOM SA IN ACQUISITION TALKS

MTN, the largest mobile network operator in Africa, is in talks to acquire South African telecommunications provider Telkom SA.

Tell me more

Both companies confirmed the acquisition talks and further added that the acquisition structure will see MTN acquiring the entire issued share capital of Telkom in return for shares or a combination of cash and shares in MTN.

The companies also advised investors that the discussions about the possible acquisition were still at an early stage and that there was no guarantee that they would be fruitful and that the acquisition would take place.

Is that fair, though?

Here is the possible issue that the proposed acquisition might run into when looking for approval from the country’s rather conservative Competition Competition which recently called out Google, Apple, UberEats, etc for anti-competitive practices.

The acquirer MTN is currently South Africa’s second-largest mobile network operator with over 34.5 million subscribers while the acquiree Telkom assumes third position with over 16.9 million subscribers.

This means the resulting entity of the acquisition will usurp the current leading mobile network operator Vodacom which has over 45.7 million subscribers and basically create a duopoly of mobile network operators in the country.

What now?

As both parties mentioned, the acquisition talks are still at a very rudimentary stage with no guarantee of success but if they somehow gain traction, it would be interesting to see how the Competition Commission and the market will react to the formation of the entity.

MUNICIPAL MANAGER CHARGED FOR UNLAWFUL $12 MILLION TENDER

Go by the rules or be brought to book.

The former manager of South Africa’s Moretele Municipality, Theletsi Ruger Nkhumise, didn’t choose the former. Now, he has been arrested for ignoring due processes when he awarded R215 million ($12 million) to the ICT firm, Flame IT Strategy in 2016. 

How it went down

Montreal’s municipality is in the northwest of South Africa. The popular Carousel Casino and Hotel is located there. However, it is a largely rural area.

Montreal inherited the said ICT contract from their neighbour, Madibeng Local Municipality. It appears that Monteral was to use the contract to get a result similar to contract Flame IT Strategy executed in Madibeng, but the eventual contract offered to Flame IT Strategy was far from similar to what Madibeng Municipality had with the IT firm. For instance, the prices were different. Madibeng paid Flame IT around R64 million ($3.7 million ), but Montreal, a more rural area, awarded a R215 million ($12 million) legal tender to Flame IT Strategy.

The work expected of Flame IT Strategy was not the same on both contracts either. The municipality made 2 additions that increased the scope of work in the original contract. In addition, the original contract, which was set to be wrapped up in 23 months, was extended by 3 years. All these changes might not have been criminal if they were made according to the rules governing the procurement of goods and services by municipalities.

What will happen now?

The former municipal manager has been charged with 4 counts of violating the Municipal Management Act together with Regulation 32 of the Municipal Supply Management Regulations. The hearing has been postponed to August 17 for disclosure of the docket and legal representation. The Special Tribunal will also review and set aside the contract made with Flame IT strategy.

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SHOPEX TV OPERATORS TO LAUNCH LIVESTREAM SHOPPING PLATFORM

We might be seeing fewer “what I ordered vs what I got” tweets with this new shopping platform that’s coming to Africa.

ShopEX TV operator Response Architects has made an exclusive agreement with Alibaba Cloud to launch a live stream shopping platform, Penda. It will be launched in major African markets like Nigeria, Ghana, and Kenya. Penda will provide an end-to-end payment and fulfilment solution for vendors’ live streaming across Africa. 

What is livestream shopping?

Livestream shopping involves retailers hosting livestream events online to launch products, demonstrate how a product works and interact with customers in real time. Think of it as an auction.

It has grown into a significantly profitable industry in many parts of the world. In China, Alibaba’s Taobao Livestream registered 300 million users in 2021 and generated over $323 billion in gross merchandise value. 

Due to the success of teleshopping service ShopEX in Nigeria, the two collaborators Response Architects and Alibaba Cloud think livestream shopping will be a big hit in the continent. In teleshopping, the seller displays a short advertising film demonstrating how the product works on a television channel, along with phone numbers you can call to place an order. ShopEX partners with Channels TV, TVC, EbonyLife TV, and SilverbirdTV. In livestream shopping, anyone with a mobile device is a potential customer.

How will the livestream shopping platform work?

The livestream shopping platform Penda will enable retailers to create and host their own livestream events to launch products, feature demos, and interact with customers in real time. It will also ensure that people can buy and pay for the goods or service without leaving the livestream or app.

According to the collaborators, Penda will help retailers with store set-up, payment, fulfilment, inventory management, and analytics. It will also give them access to finance to source and ship products from manufacturers and suppliers in China. 

CASSAVA LOCKS IN FRESH $50 MILLION INVESTMENT

$50 million investment in a tech company, and no, it’s not fintech!

Cassava Technologies, a leading pan-African technology company, has announced a $50 million investment from C5 Capital, a London-based venture capital firm that specialises in related fields like cybersecurity, energy security, and cloud computing infrastructure. 

Why Cassava?

In this case, the better question might be “Why not Cassava?” The technology company is led by Strive Masiyiwa, one of Africa’s most prominent businessmen and enterprise-tech leaders. Cassava is operational in 20 African countries, providing digital solutions like cybersecurity, cloud computing, and fibre networks for up to 500 million people across the continent.

It’s not every day we get to see a venture capital firm pump lump sums into a cybersecurity business in Africa. With this raise, Cassava is setting a precedent in Africa’s cybersecurity space, which is still considered to be scarcely tapped into. 

Cassava will now expand cybersecurity in Africa

Cassava will not stop at raising funds. It plans to raise the cyber security infrastructure on the continent. 

Through a partnership between Hayden Cyber—a company in C5’s portfolio—and Liquid Cloud & Cybersecurity, one of Cassava’s businesses, expertise in cybersecurity is set to be pushed forward by the launch of cutting-edge Cyber Security Operation Centres (CSOCs) across Africa. 

Zoom Out: Cybercrimes are rising in Africa and significantly affecting the continent’s GDP. Shoprite, Africa’s shopping conglomerate, was a recent target of RansomHouse, an infamous ransomware group. Also, 71% of Nigerian organisations were recently reported victims of ransomware demands. With 623 million Africans projected to be connected to the internet by 2025, the state of online security in the continent continues to be a matter of rising concern.

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IN OTHER NEWS FROM TECHCABAL

Nigerian mobility tech platform, MAX, recently passed the 100 million kilometre range for their total distance covered. Here’s how co-founder Adetayo Bamiduro believes they achieved it. 

Klasha’s new chief commercial officer, Nile Younis, speaks to TechCabal about his plans to bridge the e-commerce gap between Africa and the global economy.

Here’s how Microsoft’s Redmond campus inspired this Zambia agritech startup. 

The Next Wave: The promise and problem of Egypt’s remittance economy.

OPPORTUNITIES

• The GrowUp Incubator Programme is now open to applications from social business entrepreneurs who are providing sustainable solutions to tourism and mobility issues. Entrepreneurs in Kenya, Ethiopia, Rwanda, Tanzania, Uganda, and Burundi can apply for the chance to get 6-months training, networking opportunities, and support. Apply by August 28.

• Snapchat’s Snap 523 Accelerator Programme is now open to applications from black content creators. Twenty-five selected creators will receive $10,000 per month for 12 months and a Google Pixel 7 Pro. Apply by August 12.

• The Future Rural Africa’s Female Researchers Grant 2022 is now open to applications to female African researchers who want to gain more visibility and expand their network. Up to €5,000 ($5,300) will be awarded to select participants. Apply by July 31. 

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