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African capital markets exist in silos, as numerous exchanges inside the continent are sometimes inaccessible to buyers outdoors their dwelling nations. As an illustration, a South African investor who desires to diversify their portfolio outdoors the Johannesburg Inventory Alternate might discover investing within the Nigerian Inventory Alternate troublesome.
Not solely does this restrict buyers’ entry to high-growth securities, nevertheless it additionally limits entry to capital that has grown in leaps and bounds over the previous couple of years. Per reports, main regional exchanges in Africa have raised over $80 billion in fairness capital markets and $240 billion in debt capital markets.
Whereas native retail apps similar to Bamboo and Chaka provide U.S. and overseas shares to particular person shoppers, they’re as constrained as conventional brokers on the subject of serving to shoppers purchase shares and bonds throughout completely different capital markets inside Africa. Nevertheless, there’s a startup taking a peek on the problem and aiming to sort out it with its cross-border, multi-asset order routing and market information portal: Ghanaian fintech SecondSTAX (Secondary Securities Buying and selling and Aggregation eXchange).
The platform, which is able to permit broker-dealers, asset managers, pension funds, and institutional buyers to entry markets outdoors their very own nation, is saying its launch to the general public at the moment. To bolster its efforts, it has additionally raised $1.6 million in pre-seed funding from non-public buyers and enterprise capital companies, together with LoftyInc Capital and STEMeIn.
SecondSTAX co-founder and chief government officer Eugene Tawiah brings immense expertise to run such an bold mission. Along with spending greater than a decade at Goldman Sachs, he ran numerous consulting and tech jobs for companies in monetary companies and capital markets.
In 2018, a landmark occasion tilted his journey into constructing SecondSTAX. That was the 12 months MTN Ghana, a neighborhood telecom operator, went public within the West African nation after raising about $237 million. “I used to be having conversations with heads of buying and selling desks and there was a way that in MTN’s IPO, that despite the fact that one had a bunch of money to speculate, if you weren’t in Accra, there was no technique to entry or purchase into that IPO,” Tawiah informed TechCrunch on a name. “And so the idea I had in thoughts was, if I stayed in Lagos, Nairobi, or another place outdoors of Accra, how do I get entry to those choices and be capable to commerce them?”
Tawiah co-founded the corporate with Duke Lartey. SecondSTAX offers entry to debt and fairness securities throughout a number of African bonds and inventory exchanges. Equally, the B2B capital markets infrastructure platform says it’ll help funding companies outdoors Africa that wish to put money into rising and frontier economies on the continent. Funding companies onboarded on its platform may also maintain property in numerous currencies, thereby lowering single foreign money threat and lowering the volatility of their returns, whether or not in Africa or elsewhere, the fintech mentioned.
Breaking down how SecondSTAX works, Tawiah says to think about his firm’s platform as a layer in a sequence of concentric circles. The primary and second circles include institutional buyers from developed markets and people in Africa, respectively, who’re fascinated with investing in numerous shares and bonds obtainable on African exchanges. SecondSTAX is the third circle and acts as a gateway to the fourth circle, the exchanges.
“You have got exchanges the place the securities are traded in every nation. Nigeria is a silo, similar with Ghana, Kenya and South Africa and so on. SecondSTAX is successfully the aggregation of those exchanges throughout the continent. It’s that one platform that hyperlinks all of them collectively. After which now as an institutional investor like Goldman Sachs in New York, Financial institution of America within the U.Okay., or a boutique agency out in Singapore, they’ve entry to this platform to the touch every of those exchanges.”
The SecondSTAX workforce
Based on the chief government, as soon as the fintech’s infrastructure is up and working, it’ll think about extending its capabilities to help B2C funding administration apps. Retail buyers inside and outdoors Africa will then be capable to entry and commerce cross-border shares and bonds through white-labeled apps launched by brick-and-mortar brokers and powered by SecondSTAX or third-party wealth tech apps similar to Bamboo, HashApp, Robinhood and Hisa.
“We’re not distinguishing between brokers; they are often brick and mortar or startups. Our potential consumer base is way broader than one kind of establishment; as long as the dealer has a digital play, they will use our infrastructure to entry African exchanges.”
The fintech, launched in 2020, is eyeing capital markets in Ghana, Kenya, Nigeria, South Africa, Morocco and Egypt. Nevertheless, at launch, it’ll launch within the first two, enabling routing of market orders for all shares throughout Ghanaian and Kenyan exchanges and permitting cross-border transactions inside each capital markets by way of its sponsoring dealer partnerships.
Tawiah says the funding will see SecondSTAX launch in further nations by the tip of the 12 months and carry out the actions that include that, particularly concerning regulatory and licensing points. There are additionally plans to extend its workers dimension and strengthen its tech by growing extra options that its shoppers demand. “We count on that within the subsequent 18 to 24 months, the income coming from these shoppers begins to turn into incrementally impactful when it comes to having the ability to shift us from startup mode to an precise working idea producing significant income,” added the chief government.