Source: Benjamindada.com
Recently, one of the primary setbacks for the African tech ecosystem has been the economic downturn, resulting in widespread layoffs and business closures.
Beyond the mentioned challenges, some of the headlines that dominated the news this year, 2023, also delved into issues not directly tied to the economic downturn, including internal conflicts, financial misappropriation, fraud, and cyber hacks.
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In this article, we curated some of the low moments that rocked the ecosystem this year.
Cyber hacks
At Flutterwave
In March, there were reports of a cyber hack at Flutterwave, a Nigerian fintech company. According to Techpoint Africa, who first shared the news, over ₦2.9 billion ($6.3 million) was allegedly transferred illegally from Flutterwave’s account. Flutterwave, however, denied the hack.
Shortly after this report emerged, Semafor Africa reported that certain Nigerian fintech companies, including Flutterwave, commenced a dialogue to formulate a unified strategy to address fraudulent transactions a unified strategy to address fraudulent transactions within their networks. An anonymous source familiar with the matter recently told Bendada.com that a platform MVP has been developed and forming a board of trustees is underway.
Then Patricia and others, including Interswitch
Two months after Flutterwave’s hack was reported, Nigerian digital asset marketplace Patricia disclosed that it was affected by a security breach. An investigation by TechCabal says that the security breach happened last year and that the company lost about $2 million. The hack disrupted withdrawal operations at Patricia, leading to additional controversies between the company and its users.
Recently, a Nigerian politician Wilfred Bonse was arrested by Nigerian Police concerning ₦607 million cyber hack at Patricia.
Other startups that were affected this year include Fawry, Glade and Interswitch.
Internal conflicts
Pivo co-founders’ conflict
Earlier this month, Pivo, a YC-backed female-led Nigerian digital bank for trade, shut down operations, due to a co-founder conflict, according to a Bendada.com report.
The conflict between the founders, Nkiru Amadi-Emina (CEO) and Ijeoma Akwiwu (COO), was said to have led to the company’s deteriorating reputation, business relationships, culture, and team dynamics; thereby significantly affecting Pivo’s chances of raising capital in the future.
The efforts of the startup’s board to resolve the conflict were futile.
Chaos at 54gene
In September, the genomics startup 54gene closed down. Before the closure, Abasi Ene-Obong, the former co-founder and CEO, resigned, and Teresia Bost, the company’s general counsel, became the interim CEO.
Before the shutdown, Bost alleged mistreatment by one of the firm’s investors, Tobi Oke, during meetings. She filed a lawsuit against the company, citing “discriminatory behaviour and a hostile work environment,” with Ron Chiarello, her successor as CEO, named as one of the defendants. Chiarello left 54gene in March this year.
The resolution of the issues by the New Jersey-based court remains unclear.
In the Kloud
In September 2022, Kloud Commerce, an African startup, closed down due to internal conflicts. Unlike Pivo’s case, this closure resulted from an unresolved dispute between the founder, Olumide ‘D.O.” Olusanya, and the investors of the e-commerce startup.
Months after raising its $765,000 pre-seed round, an internal account audit revealed that Olusanya had diverted various sums of money invested into Kloud Commerce for personal ventures, mostly for recreational activities. However, in a September interview with Techpoint Africa, Olusanya dismissed these claims, deeming them “wild and misleading”.
Before the interview, he was detained by the Economic and Financial Crimes Commission (EFCC) following a petition by the investors.
At least 12 African startups shuttered in 2023, according to BD African Startups Graveyard.
Fraud and financial misappropriation
At Tingo
On Monday, the U.S. Securities and Exchange Commission (SEC) filed fraud charges against Odogwu ‘Dozy’ Mmobuosi, the founder and CEO of the embattled, Nigerian and Nasdaq-listed agritech startup Tingo.
Dozy faced charges for creating fraudulent financial statements and other documents related to three entities within the Tingo Group and its subsidiaries—Tingo Mobile and Tingo Foods PLC. This has been going on since 2019, according to SEC.
At the close of the 2022 fiscal year, Tingo’s bank account reflected a balance of just $50, despite the reported figure of $461.7 million in cash and cash equivalents.
The agritech company, which has also exaggerated its user numbers, has been embroiled in multiple controversies this year. This includes a critical investigation by Hindenburg Group, a well-known American short seller, labelling it as a fraudulent scheme with entirely falsified financials.
Dash
Dozy isn’t the only one facing accusations of inflating numbers this year. In February, media reports uncovered that the Ghanaian fintech Dash was reporting false user numbers and other metrics. An internal audit confirmed these reports, leading to the suspension of co-founder Prince Boakye Boampong by the board.
Dash also faced allegations of being a toxic workplace. In October, we exclusively reported that the Ghanaian fintech was letting go of 50% of its workforce due to difficulties in securing additional funding. Shortly after our report, WeeTracker announced the company’s closure. Bendada.com couldn’t verify this information, as the interim CEO, Kenneth Kinyua, didn’t respond to our request for comment.
Despite the reports, Dash’s official website is still active.
Float’s downfall: A deal gone wrong?
YC-backed Ghanaian startup, Float faced a financial setback due to “deliberate acts of betrayal”. What does this mean? According to a TechCabal report published in September, Float entered into a deal with a trading firm and experienced fraud while trying to acquire $2.5 million worth of USDT. Tether (USDT) is a cryptocurrency designed to mimic the value of the US dollar.
The fintech company also allegedly suffered a loss of approximately ₦5 billion due to the devaluation of the naira.
However, according to a WeeTracker report, a complaint has been filed against founder and CEO Jesse Ghansah with the EFCC and Interpol, accusing him of misappropriating funds.
The shutdown of Naspers Foundry
In March, South Africa’s largest VC fund, Naspers Foundry discontinued its early-stage fund citing tightened economic conditions.
Since its first South Africa-focused investment in Sweep South, the $77 million fund invested in at least eight other companies in the country—Aerobotics, Planet42, LifeCheq, Nile.ag, FloatPays, Naked Insurance, Ctrl and WhereIsMyTransport—according to the company’s website.
In addition to the mentioned events, layoffs took center stage in numerous headlines this year. Approximately 1,500 employees were laid off across various African startups, including Gokada, Bolt, Onepipe, the now-defunct Lazerpay, Eyowo, Big Cabal Media, Medsaf, Bundle Africa, Paystack, Mara, Copia, Twiga, Sendy, Cellulant, mPharma, and Alerzo.
Another noteworthy news headline that characterised challenging moments on the continent was the internet shutdown in Sudan during the conflict between its armed forces and the Rapid Support Forces, a paramilitary group led by a Sudanese army general.
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Source: Benjamindada.com
