African capital markets exist in silos, as varied exchanges throughout the continent are sometimes inaccessible to buyers exterior their house nations. As an example, a South African investor who needs to diversify their portfolio exterior the Johannesburg Inventory Change could discover investing within the Nigerian Inventory Change tough.
Not solely does this restrict buyers’ entry to high-growth securities, however it additionally limits entry to capital that has grown in leaps and bounds over the previous couple of years. Per studies, 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 equivalent 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 totally different capital markets inside Africa. Nevertheless, there’s a startup taking a peek on the problem and aiming to deal with 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 can enable broker-dealers, asset managers, pension funds, and institutional buyers to entry markets exterior their very own nation, is saying its launch to the general public right this moment. To bolster its efforts, it has additionally raised $1.6 million in pre-seed funding from personal buyers and enterprise capital corporations, together with LoftyInc Capital and STEMeIn.
SecondSTAX co-founder and chief government officer Eugene Tawiah brings immense expertise to run such an formidable venture. Along with spending greater than a decade at Goldman Sachs, he ran varied consulting and tech jobs for corporations in monetary providers and capital markets.
In 2018, a landmark occasion tilted his journey into constructing SecondSTAX. That was the yr MTN Ghana, an area telecom operator, went public within the West African nation after elevating 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 regardless that one had a bunch of money to take a position, if you weren’t in Accra, there was no method to entry or purchase into that IPO,” Tawiah advised TechCrunch on a name. “And so the idea I had in thoughts was, if I stayed in Lagos, Nairobi, or another place exterior of Accra, how do I get entry to those choices and be capable of 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’s going to help funding corporations exterior Africa that need to spend money on rising and frontier economies on the continent. Funding corporations onboarded on its platform may also maintain belongings in varied currencies, thereby lowering single forex threat and lowering the volatility of their returns, whether or not in Africa or elsewhere, the fintech stated.
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 encompass institutional buyers from developed markets and people in Africa, respectively, who’re concerned about investing in varied shares and bonds obtainable on African exchanges. SecondSTAX is the third circle and acts as a gateway to the fourth circle, the exchanges.
“You will have exchanges the place the securities are traded in every nation. Nigeria is a silo, identical with Ghana, Kenya and South Africa and many others. 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.Ok., or a boutique agency out in Singapore, they’ve entry to this platform to the touch every of those exchanges.”
Based on the chief government, as soon as the fintech’s infrastructure is up and working, it’s going to think about extending its capabilities to assist B2C funding administration apps. Retail buyers inside and out of doors Africa will then be capable of 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 equivalent 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 far broader than one kind of establishment; as long as the dealer has a digital play, they’ll 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’s going to 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 extra nations by the top of the yr and carry out the actions that include that, particularly relating to regulatory and licensing points. There are additionally plans to extend its employees measurement and strengthen its tech by creating extra options that its purchasers demand. “We count on that within the subsequent 18 to 24 months, the income coming from these purchasers begins to change into incrementally impactful by way of with the ability to shift us from startup mode to an precise working idea producing significant income,” added the chief government.