South African fintechs look to Hong Kong for funding

Tax perks and access to Africa await foreign investors.

South African financial technology (fintech) companies are courting investors in Hong Kong and China amidst a global funding slowdown. 

“Hong Kong, for South African fintechs, is a place where we can come and show our goods and services,” Philip Meyer, CEO at Vaultavo, Inc., told Asian Banking & Finance in an interview. “It gives us a place where we can actually find investments.” 

Brand South Africa, the country’s marketing agency, is promoting startups including Vaultavo, which develops a crypto card that has a fingerprint biometric feature for security.

Hong Kong serves as a gateway to the Greater Bay Area and a springboard to China — a position that Meyer stressed amidst a dearth in global fintech funding in the past couple of years.

Global fintech investments were probably halved in 2024, according to estimates by FinTech Global. Deal volumes likely dropped 49% to 3,794 transactions, whilst funding declined by 53% to $140.2b.

“If [funding] is difficult in a place like Asia, imagine how difficult it is in Africa,” Meyer said.

Startup events, programs, and awards, including the Hong Kong Fintech Festival, opens doors to startups like South African fintechs, he said. They can have direct sessions with large companies and banks such as HSBC and Bank of America, helping them elevate their profile, he pointed out.

In turn, South Africa can serve as a jumping point for Hong Kong companies to expand in Africa.

“The people [in South Africa] are skilled from a technology point of view,” he said. “If a Hong Kong company wants a good place for development, South Africa is the place where they can have extremely good talent at an affordable price.”

Meyer, who is South African, said Vaultavo develops products in South Africa, whilst keeping an office in Hong Kong and London where it could tap investment opportunities.

South Africa offers tax incentives to foreign investors, including reduced corporate tax for some industries, one of which is in the area of renewable energy, according to New York-based Generis Global Legal Services. 

An expanded tax incentive is in effect until 28 February 2025 in the form of a 125% deduction in the first year for renewable energy generation projects. The government also cut the corporate income tax to 27% in 2023, according to PwC.

Tax allowances are also offered to support the automotive sector, and there are rebates for film and television production. Foreign investors may also apply for tax credits for research and development and infrastructure improvements. 

Digital payments and energy are two sectors in South Africa that hold promise for investors, Meyer said.

He noted that during the COVID pandemic, a fintech company called Yoco started offering payment devices that could be connected to a mobile phone, which became a credit card terminal. 

“It is still very much a cash society. With 60 million people, not a lot of them have access to credit cards and debit cards,” he said.

There are also opportunities in energy, agritech and logistics. He noted that some houses in South Africa only enjoy four hours of electricity daily, increasing the demand for solar panels.

South African lands are underfarmed, he pointed out. “There’s a lot of South African produce being exported already,” including oranges and wine, he said. “But you don’t find a lot of South African meat. The agritech sector should be an opportunity."