African Tech Goes to the UK for Licences, the US for Paper

Delaware is where African tech companies sign their papers. London is where more of them actually do business. That is the main finding of Home and Away: Tracking African Tech's Global Footprints, the third annual tech ecosystem report from cross-border law firm TLP Advisory, launched in Lagos at the weekend.

The report maps the foreign ties of 100 technology companies from Nigeria, Ghana, Kenya, South Africa, Egypt and Morocco with three markets: the United States, the United Kingdom and the United Arab Emirates. TLP says the companies were chosen because they already had documented international affiliations, so the results describe Africa's most globally connected firms, not the whole sector.

Many US entities, few US operations

According to BusinessDay's account of the report, 67% of the companies had US affiliations, against 32% for the UK and 23% for the UAE. But 81% of the US-connected companies had incorporation as their only recorded tie. For most, a US entity is the structure investors ask for, not a sign of a business on the ground.

The UK ties run deeper. Of the companies linked to Britain, 84% were incorporated there, 47% had an operational presence and 19% held regulatory licences. Only 3% of US-linked companies and 4% of UAE-linked companies held licences in those markets.

"What is striking about the UK is how often it comes with more than only incorporation," Odunoluwa Longe, TLP Advisory's co-founder and partner, is quoted by BusinessDay as saying. "It comes with licences, teams on the ground and customers."

Part of the pull is the diaspora. The report cites research that 40% of UK residents born in sub-Saharan Africa send money abroad, against 27% of all UK residents born overseas, a ready market for remittance and payments companies. Flutterwave's co-founder and chief executive, Olugbenga Agboola, is quoted by BusinessDay saying that "Africa was always going to be home", but that building at Flutterwave's scale needed capital, talent and opportunities beyond the continent.

The UAE is the most operational of the three. BusinessDay reports that 87% of UAE-affiliated companies keep an operational presence there, and that 70% of the Egyptian companies studied have UAE ties, against 50% with US ties.

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The cost for Nigeria

At the launch, TLP's founding partner Funkola Odeleye tied the offshore structures to where the money comes from. "Investors will not put money in a Delaware entity and let your IP remain in Nigeria," she said, according to ThisDay. "Where the money comes from is where the assets go." She added that a startup that raises in dollars cannot rely on the naira to return value to its investors, and that the real fix is deep local capital pools so founders can raise at home.

The firm also pointed out that no homegrown Nigerian fintech is listed on the Nigerian Exchange (NGX), despite companies of the size of Flutterwave, Moniepoint and Paystack, while telecom operators MTN and Airtel are. Longe said the NGX has created a technology board, but that low awareness and the perceived complexity of listing keep tech companies away. "It's not an either-or choice," she said. "Startups can serve global markets and still list locally."

The report lands days after OPay called off its planned $304 million New York listing, a reminder of how much of the region's biggest tech value is now tied to foreign exchanges and entities. According to BusinessDay, the research was supported by the Collaborative Impact Fund, run by the UK-Nigeria Tech Hub under the UK government's Digital Access Programme.