The Trajectory Africa Distilled #06: Digitalisation, Its Limits, and the Problem of Stuck Money
The real(est) African infrastructure gap is money that won't move.
Hello, Everyone!
With this instalment, we arrive at the destination this series has been building towards. The journey ran from what I've heard (summarising expert conversations from The Trajectory Africa podcast), through what I've learned (filling my knowledge gaps), to what I think.
Today's piece distils the opening argument of that final step: why digitalising African economies creates space to invest, where the limits of that process lie, and how fintech, as foundational infrastructure, works around them.
The digitalisation opportunity, and its limits
The anchor is a principle derived from the podcast's first series: the future of African venture opportunities is digitalising African economies. Technology is the key to reducing the cost of, and increasing access to, financial services, health, education, energy, food and transportation. Increasing the efficiency of supply chains boosts profitability and scalability.
For example, when technology providers use AI to determine what goods to deliver where, by what route, the cost of logistics can drop significantly, and the companies that adopt the technology improve their margins.
But as Abraham Augustine pointed out (and as readers of the first instalment in this series will recall), digitalisation has limits. You can't digitalise infrastructure that doesn't exist, and digitalising what does exist doesn't fully make up for the gaps.
An Uber app can't coordinate drivers and passengers if there are no cars and bikes. And even if you use technology to help vehicles navigate, that doesn't eliminate flooded roads (if there are roads at all). These limits can constrain the scale, profitability and growth of startups, because standard VC growth logic assumes fully digital solutions with a low to zero marginal cost of producing and distributing more products.
Tayo Akinyemi
Yet digital infrastructure can circumvent the limitations of physical infrastructure. Tayo Bamiduro, Co-founder and CEO of MAX, which built an asset-light platform connecting asset financiers, asset owners and drivers, explains how his company leverages what already exists:
"There is already roughly 99% coverage for 2G networks across the continent, which means wireless connectivity exists almost everywhere. By leveraging that telco infrastructure, you have line of sight to hardware wherever it is. The telcos have built out massive infrastructure, but depending on who you ask, most are utilising less than 5% of its potential and capabilities... For the most part, they rely on third parties, like MAX, to find compelling use cases for what they've built."
Here's where fintech enters the chat. A second principle, which emerged from a pivotal conversation with Barbara Iyayi of Liquid Credit and Unicorn Growth Capital, posits that fintech is an important enabler for digitalising African economies because it serves as foundational infrastructure.
Digitalising transactions in the real economy, with an eye towards core financing needs like payments and working capital, creates new business opportunities, pulls traditional industries into the digital economy, and spurs growth. What this boils down to is an opportunity to provide Africans with better ways to move money and transact.
Velocity, or the problem of stuck money
Toffene Kama, Principal Investor at Mercy Corps Ventures, offers a useful (if conceptual) pathway for thinking about what "better" means. It’s called the velocity of money. From a macroeconomic perspective, digitising cash reduces the friction that slows money movement. And when money moves faster, it can be directed to productive uses more rapidly.
To see the problem velocity solves, consider what Lori CEO Jean-Claude Homawoo calls the "financial story of logistics." Truckers pay the cost of moving cargo upfront, then wait 30–90+ days to be paid for doing so. These payment terms constrain truckers' profitability, hamper the flow of funds and goods through supply chains, and shift the unwieldy responsibility for providing working capital onto startups like Lori — many of which lack the balance sheets and financial expertise to manage it safely.
Arguably, this is a velocity problem caused by an infrastructure deficit. African supply chains are long and complex, which adds time and cost to transporting goods. The middlemen who lengthen the chain also bear the burden of it, in the form of payment terms that require them to prepay expenses and wait months to be compensated.
This reframes how we should think about credit. As Toffene argues, credit is often used to fix problems caused by money that is stuck or slow-moving due to sub-optimal norms (truckers pre-paying cargo expenses), processes (payment terms), and infrastructure (complex supply chains). Credit used to manage systemic friction doesn't necessarily result in increased growth and productivity. It could just be a way to keep businesses operating.
But if payments settled faster across the financial system, perhaps the need for survival credit would ease. Infrastructure such as stablecoins and instant payment systems, which "unstick" money, can direct it toward productive uses, and potentially recycle it faster. We already see this in how mobile money operates: agents exchange cash for float and float for cash. The faster that cycle runs, the more transactions the same pool of capital can fund.
The logic extends beyond the private sector. Merchants typically collect VAT, which governments have to recover from them later, leading to evasion, delays and penalties. With digital payments, VAT could be deducted automatically every time a customer pays a merchant from a digital wallet. In Senegal, where mobile money operators collect more than USD 250 million in VAT monthly, "just-in-time" VAT could mean governments fund meaningful projects like road construction sooner.
To be clear, thinking about velocity isn't an attempt to discredit credit as a tool. It does call into question, however, when and under what circumstances credit is put to productive use. My sense is that some types of credit deployed to facilitate trade can be complementary to friction-free, velocity-boosting digital cash flow — if the credit is extended on the basis of digital transaction data, and the funds are delivered digitally, the potential for productive credit is high.
Coming up next
This is an abridged version of the "why" of fintech: digitalisation creates the opportunity, physical gaps constrain it, and financial rails that keep money moving are the workaround with the widest reach. You can read the “full fat” version here.
Tayo Akinyemi
In the next instalment, I'll share more concretely about what a digitally-enabled financial system should actually deliver, and the market characteristics that shape (and constrain) the opportunity. If you've got comments or questions about today's article, reach me at tayo@queryinsights.co.
Till the next one...
Tayo