Now that Kenya’s Supreme Court has confirmed William Ruto’s victory in the country’s recent, close-run presidential race and the new President has just taken office, the ball can start rolling again on important intra-African trade talks.
At the top of the agenda is fully integrating the 90-million-strong Democratic Republic of the Congo (DRC) into the East African Community (EAC), which it joined in late March.
The DRC is the largest country in sub-Saharan Africa and possesses huge mineral wealth, yet its population remains among the world’s poorest. It is therefore hoped that the DRC’s EAC membership will not only establish new trading routes between the East African bloc’s member nations but also unlock opportunities for foreign investment and sustainable development in the DRC and across the region.
To deliver on these ambitions, Kenya and the DRC will need to deepen their already-strong ties. A robust DRC-Kenya partnership could rapidly accelerate the digital revolution, which would supercharge economic growth in both countries and improve the quality of life for their citizens.
Challenges to digital transformation
Kenya’s innovation in fintech, especially, seems like a natural fit for the DRC, where a large unbanked population is holding back the economy. In fact, it’s estimated that less than a quarter of the DRC’s population has a bank account – well below the regional average – in part due to the collapse of the formal banking sector in the 1980s and 1990s amid a period of profound political instability.
Although the DRC has enjoyed greater stability following its first peaceful transfer of power to President Félix Tshisekedi, the country’s relative paucity of bank branches and underdeveloped transport infrastructure continue to cut off most citizens from branch-based banking in a culture where over-the-counter transactions are the norm.
And with internet usage languishing at circa 17 per cent of the country’s population, the barriers to digital transformation are significant.
Over two-thirds of Congolese people live on less than $2 a day, and most have no obvious incentive to secure a bank account. What’s more, fintech disrupters face a high cost of entry to an ecosystem dominated by big players like Ecobank and UBA as well as established telco operators like Vodacom Congo and Orange RDC.
Technology is driving change
Yet innovation is changing established practices. An improving telecoms picture facilitates fresh fintech developments that deliver financial services closer to where people live and work.
For instance, Flash International has positioned itself as the largest fintech and payments aggregator in the country by enabling access to banking services to over two million customers via its mobile platform, FlashApp.
Similarly, Swedish startup Okapi Finance started rolling out services in the DRC last year and aims to reach up to 25 million Congolese people by the end of the decade. Okapi has particularly invested in onboarding more women in the DRC’s financial services ecosystem, underpinning the proliferation of female-led businesses.
These major investments have been facilitated by the good governance reforms implemented by President Tshisekedi’s administration, which have boosted investor confidence.
Crucially, these reforms have led the World Bank to resume its budget funding support to the DRC after a 17-year gap, which includes a new $250 million operation to support the government’s reforms in areas such as market liberalisation, public finance and sustainable forestry, as well as $500 million to expand transport and the digital infrastructure which will be key to turbocharging the Congolese economy.
Kenyan investment is accelerating digital progress
Capitalising on the DRC’s opportunities for growth requires significant investment: it’s estimated that up to $100 billion will be required to achieve universal and affordable access to good quality broadband in Africa by 2030.
The Congolese capital, Kinshasa, is already attracting investment from Nairobi’s financiers – a trend that should further catalyse digital innovation in the region. Kenya’s top banks – including Equity Bank – have rapidly acquired financial interests in some of the DRC’s largest lenders, while dozens of Kenyan companies have already made trade investments in the country amounting to $1.6 billion. What’s more, Kenya’s KCB Group will likely acquire Trust Merchant Bank (TMB), which operates DRC’s largest bank branch network.
The strengthened cooperation between the DRC and Kenya in recent years has set the stage for this investment boom. In April 2021, the countries signed a series of agreements to boost cooperation in a wide range of areas, including infrastructure development, SMEs and cyber security, which prompted Kenya’s commitment to expanding its diplomatic presence in the DRC to accelerate economic cooperation.
The recent $1.6 billion investment by a group of Kenyan firms in the DRC was facilitated by a trade mission organised by the DRC and Kenyan governments.
Fintechs in Kenya is thriving, making it an ideal partner to drive development in the DRC. Telco giant Safaricom accounts for 5 per cent of the country’s GDP, thanks to its M-Pesa money transfer service that runs on technology similar to text messaging, meaning it does not rely on an internet connection.
Fellow virtual mobile network operator/bank hybrid Equitel is also furthering financial inclusion through agents who venture into even the remotest areas to demonstrate usage. Equitel’s approach has helped the company to capture a fifth of Kenya’s mobile money market in just five years.
It’s hoped that Kenya’s fintech companies can apply the strategies they have used to help increase financial inclusion at home – namely expanding access to basic financial services from 26% to 83% since 2006 – in the DRC, bringing the benefits of easier financial services access to marginalised groups, such as women, the rural poor and those displaced by conflict.
The opportunity for digital disruption in DRC is significant, particularly given the country’s recent governance reforms and accession to the EAC, which have greatly enhanced its investment climate. Kenyan tech companies expanding into the country may well be the catalyst the nation’s tech space needs to catapult it into a new digital era that will drive inclusive and green development at home and in the wider region.
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