Rethinking Licensing and Permitting for Startup Growth in Africa

Licensing and permitting in Africa often feel like a labyrinth - complex, unclear, and frustratingly slow. Startups frequently face delays, unclear requirements, and inconsistent rules across different countries. For instance, obtaining a payment license in one country can take 1–2 years. By the time the license is issued, the technology or product it was meant for could already be obsolete. This lag between innovation and regulation stifles progress and puts startups at a disadvantage.

If a startup operates across multiple countries, these challenges multiply. Each country demands separate compliance processes, meaning additional teams, increased costs, and slower scaling efforts. In Europe, frameworks like the Payment Services Directive (PSD) allow startups to operate across multiple countries with just one license - a streamlined approach Africa sorely needs.

There are a few promising signs of change. The 2023 Nigeria-Egypt FinTech Bridge, a bilateral agreement between the Central Banks of Nigeria and Egypt, is a great example of reducing regulatory hurdles for cross-border expansions. However, I believe we need a multilateral solution to tackle Africa’s cross-border payment challenges. The Pan-African Payment and Settlement System (PAPSS) aims to simplify payments across the continent but is still hindered by inconsistent regulations and infrastructure gaps.

One potential model is Project Nexus in Asia, which is linking domestic instant payment systems in over 20 countries under an interoperable platform. Once live, this system could revolutionize cross-border payments and serve as a blueprint for Africa. Another game-changer could be a startup rating system recognized across countries. If a startup complies with regulations in one country, why shouldn’t that compliance be valid in others? This would eliminate repetitive compliance processes and free startups to focus on innovation rather than red tape.

Emerging Policy Shifts: A Step in the Right Direction

Regulatory landscapes in Africa are evolving, and some recent developments are worth noting. Nigeria’s 2023 Startup Act offers much-needed clarity and incentives - tax breaks, better funding access, and streamlined licensing processes. While implementation is key, the act sets the stage for a more startup-friendly environment.

The 2024 Virtual Asset Service Provider (VASP) framework by Nigeria’s Securities and Exchange Commission (SEC) is another forward-thinking move. It grants crypto startups an “approval in principle,” enabling them to operate while under regulatory observation. Startups like Busha and Quidax are already benefiting, demonstrating how collaboration between regulators and startups can drive impactful change.

South Africa is also making progress. The Financial Sector Conduct Authority (FSCA) has issued over 75 licenses for crypto companies, signaling trust in the blockchain and crypto sectors. Additionally, initiatives like PayShap are fostering collaboration among banks, FinTechs, and non-banks under an interoperable framework, breaking away from the historically bank-led model that stifled innovation.

Kenya’s regulatory sandbox program led by the Capital Markets Authority (CMA) is another bright spot. By allowing startups to test solutions in a controlled environment, the program promotes innovation while maintaining regulatory oversight.

The Impact on Startups and Innovation

These reforms are creating a more enabling environment for startups, but there’s still room for improvement. Sandboxes and simplified licensing processes in countries like Nigeria and Kenya allow startups to bring products to market faster and with less risk. Consumers, in turn, benefit from access to innovative services that drive financial inclusion and economic growth.

Consider Nigeria’s NIBSS payment system. By integrating banks, FinTechs, and the Central Bank of Nigeria into an interoperable payments platform, it transformed the financial ecosystem. Between 2019 and 2023, instant payment volumes skyrocketed from 1.2 billion to over 11 billion transactions. This demonstrates how collaborative efforts can have a transformative impact.

However, to truly unlock Africa’s potential, we need to go further. A one-stop shop for licensing—where startups can apply, track, and renew permits through a centralized platform—could revolutionize the process. Education is equally important. Regulators should host forums where startups can better understand compliance requirements while sharing insights with policymakers to improve regulations.

A Vision for the Future

Licensing in Africa needs to become faster, simpler, and more transparent. Imagine a scenario where startups can handle all their regulatory needs through a single platform, saving time and resources. A robust startup rating system, recognized across countries, would further streamline the process and foster trust.

By fostering collaboration, simplifying processes, and building trust, we can create an environment where startups thrive, innovation flourishes, and consumers feel safe and confident in adopting new technologies. Africa has the potential to become a global leader in startups and innovation—but only if we address the barriers holding us back.

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