African capital markets exist in silos, as varied exchanges throughout the continent are sometimes inaccessible to buyers outdoors their house 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 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 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 corresponding to Bamboo and Chaka provide U.S. and overseas shares to particular person customers, they’re as constrained as conventional brokers in the case of serving to customers 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 knowledge 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 asserting its launch to the general public at present. To bolster its efforts, it has additionally raised $1.6 million in pre-seed funding from personal buyers and enterprise capital companies, together with LoftyInc Capital and STEMeIn.
SecondSTAX co-founder and chief govt officer Eugene Tawiah brings immense expertise to run such an formidable undertaking. Along with spending greater than a decade at Goldman Sachs, he ran varied consulting and tech jobs for companies in monetary providers 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 regardless that one had a bunch of money to speculate, if you weren’t in Accra, there was no strategy 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 supplies entry to debt and fairness securities throughout a number of African bonds and inventory exchanges. Equally, the B2B capital markets infrastructure platform says it is going to 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 maintain belongings in varied 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 consider his firm’s platform as a layer in a collection of concentric circles. The primary and second circles encompass institutional buyers from developed markets and people in Africa, respectively, who’re concerned with 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, 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.”
In line with the chief govt, as soon as the fintech’s infrastructure is up and working, it is going to think about extending its capabilities to help B2C funding administration apps. Retail buyers inside and out of doors Africa will then be capable to entry and commerce cross-border shares and bonds by way of white-labeled apps launched by brick-and-mortar brokers and powered by SecondSTAX or third-party wealth tech apps corresponding to Bamboo, HashApp, Robinhood and Hisa.
“We aren’t distinguishing between brokers; they are often brick and mortar or startups. Our potential shopper 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 is 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 12 months and carry out the actions that include that, particularly relating to regulatory and licensing points. There are additionally plans to extend its employees dimension 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 when it comes to having the ability to shift us from startup mode to an precise working idea producing significant income,” added the chief govt.