By Conrad Onyango
Startups providing business payment solutions are preparing to capitalise on a large e-invoicing market opportunity as African governments move to eliminate traditional paper-based billing.
The expansion of Kenyan startup DigiTax, which deploys electronic Tax Invoice Management Systems, into the Zambian market is among the latest indicators of how payment solutions startups are angling for untapped markets.
The Kenyan startup, owned by Namiri Technology Limited, said the move would help Zambian businesses comply with new smart invoice requirements that became effective on July 1, 2024.
“We are excited to bring our expertise in e-invoicing and tax compliance to support Zambian businesses as they navigate these new regulatory requirements,” Namiri Technologies Chief Executive Officer, Caine Wanjau, said in a statement announcing the company’s expansion.
Currently, the company is running a series of webinars to market its solutions, which help users generate VAT and non-VAT invoices and become tax-compliant.
Zambia has been using electronic fiscal devices, but this has been effectively phased out following the introduction of the electronic invoicing system.
Nigerian business payment solutions startup BudPay has also joined the fray, affirming its commitment to catering to the constantly evolving needs of the African market with cutting-edge solutions that now enable over 20,000 corporates, SMEs, and startups to accept payments in 100-plus countries in just two years.
“These include Invoicing and Payment Links, which allow businesses to generate and share digital invoices and secure URLs for customers to make payments online without needing a dedicated e-commerce website,” said BudPay’s Chief Executive Officer, Wale Hassan.
“BudPay’s invoices come with auto-reminders, so you don’t have to send multiple follow-up emails. And the best part? Each invoice comes with a dedicated payment link that can be used to collect payments from 100+ countries,” the company said in an X post.
About four years ago, African countries began transitioning to electronic invoicing (e-invoicing) systems as governments moved to enhance tax compliance, combat fraud, and boost their revenue collection capabilities.
Tax authorities have also been shifting from post-audit regulations to embracing a Continuous Transaction Control (CTC) regime to support the digitalisation of tax enforcement.
Today, nearly half of African countries have embraced electronic invoicing regulations. They are all at different roll-out stages, some at introduction and others at implementation.
Audit firm PricewaterhouseCoopers (PWC), in its 2024 VAT Guide in Africa: Digital Services, shows that 21 African countries have already enacted rules requiring non-resident suppliers to account for value-added tax / goods and sales tax on electronically supplied services.
According to PWC, soaring rates of mobile phone penetration, the rapid adoption of mobile technologies, rising levels of internet access and the innovative spirit of Africa’s entrepreneurs are all contributing to this ongoing transformation.
“Digital transformation efforts have also fostered the emergence of local tech hubs and startups that are developing solutions for unique challenges and opportunities across Africa,” said PwC South Africa Indirect Tax Leader Matthew Besanko.
According to World Bank estimates, Africa’s digital economy is projected to contribute up to US $180 billion to GDP by 2025 and create millions of jobs and opportunities for entrepreneurs, particularly for youth and women.
In terms of technology adoption, while these countries are leveraging electronic fiscal devices ( Electronic Tax Registers) that produce paper receipts, most are shifting to a web or app-based e-invoicing system that is entirely paperless.
Kenya, Mauritius, Zambia, Burundi, Egypt, Ghana, and Cape Verde are among the countries that have already adopted electronic invoicing regulations.
Kenya began requiring e-invoicing using the electronic Tax Invoice Management System (IMS) in September 2023 and declared in January 2024 that business expenses not documented with electronic tax invoices are ineligible for a tax deduction. Electronic tax invoicing regulations in the country were introduced in 2020 and initially targeted Value Added Tax (VAT)-registered taxpayers using Tax Invoice Management System (TIMS)-compliant hardware devices.
In January 2024, Cape Verde introduced a self-invoicing Ordinance to regulate the issuance of invoices by purchasers on behalf of taxable suppliers.
Egypt started its e-invoicing journey in November 2021 with large companies and has been adopting a phased approach to the transition. The North African country is expected to enter a mandatory e-invoicing regime by the end of 2024.
Ghana (starting in 2022) and Mauritius (2023) have also been taking the phased approach to the e-invoicing regime, starting with large taxpayers and expect to reach all taxpayers by December 2024.
Nigeria, Malawi, Rwanda and Namibia are all busy paving the way for e-invoicing, while in South Africa, e-invoicing is not mandatory but enjoys a high adoption rate.
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Startups in Africa focused on business payment solutions are eyeing the burgeoning e-invoicing market as governments phase out traditional paper-based billing to improve tax compliance and revenue collection. Kenyan startup DigiTax has expanded into Zambia to help businesses comply with new e-invoicing regulations effective from July 2024. Nigerian startup BudPay is also making strides, offering digital invoicing and payment solutions to over 20,000 businesses in multiple countries.
Electronic invoicing regulations are being rapidly adopted across Africa, with nearly half of the countries implementing such systems to enhance tax compliance and reduce fraud. Countries like Kenya, Mauritius, Zambia, and Egypt are at different stages of this transition, with some already mandating e-invoicing for VAT taxpayers. The shift is supported by increased mobile and internet penetration and the innovative efforts of local tech startups, contributing to Africa’s projected $180 billion digital economy by 2025.
Globally recognized firms like PricewaterhouseCoopers (PwC) acknowledge that these digital transformations are spurring growth in local tech hubs. By adopting Continuous Transaction Control (CTC) regimes and moving towards paperless invoicing systems, African countries are streamlining tax procedures and creating significant growth opportunities, particularly for youth and women entrepreneurs.
