At the onset of the COVID-19 pandemic, numerous Fortune 500 companies exited the African financial markets, citing concerns over illiquidity and uncertainty. however, one startup based in Ireland has developed an innovative solution, gaining recognition during the recent Money 20/20 ‘Startup Spotlight’ session.
Esca has emerged as a platform designed to provide stability and protect revenue in the face of volatility in emerging markets. The company focuses on addressing the challenges that institutions and banks encounter when growing and investing in African markets, which are often marked by significant fluctuations.
CEO and founder Shalom Osiadi highlighted the hurdles faced by businesses in this environment: “Many companies struggle to secure the hard currencies needed to realize their profits in local markets. For instance, GlaxoSmithKline has operated in Nigeria since 1955 and generates all its revenue in the local currency, the naira. They rely on forward contracts with the Central Bank of Nigeria. Unfortunately, the Central Bank often lacks sufficient foreign currency to meet the obligations owed to these multinationals. Consequently, businesses like GSK must turn to the parallel market, where liquidity is scarce and prices can be significantly higher than official rates, resulting in considerable loss of profit margins.”
Esca aims to transform this fragile, real-time environment into a predictable and stable framework that facilitates revenue protection and fosters renewed growth on the continent.
Osiadi elaborated: “We recognize that financial engineering is critical in these markets. By thoroughly understanding the macroeconomic landscape, we can effectively translate that knowledge into code. Our goal is to migrate our algorithms from Excel spreadsheets onto our platform.”
With a long-term ambition to boost foreign direct investment in Africa, Esca believes this can only be achieved through a safe, transparent, and predictable approach. Restructuring investment into the region presents several challenges, particularly in terms of education and user experience.
Olumide Olugbemiro, co-founder and CTO, emphasized the importance of a smooth user experience: “The more complex the process, the less users understand it, leading to more support calls. Our focus is on making the platform as intuitive and explanatory as possible.”
Regarding educational initiatives, Osiadi noted, “One of the major challenges we’ve dealt with at Esca is educating African finance managers, CEOs, and CFOs on the importance of currency hedging for their businesses. It’s essential to shift their mindset to recognize that long-term benefits outweigh short-term gains.”
Moreover, Esca’s strategy to encourage investment includes making cryptocurrency accessible to non-crypto companies. Simplifying complex elements while drawing from their own experiences enables users to convert fiat currency into cryptocurrency seamlessly.
Osiadi stated, “Leveraging this approach, we’ve seen our business grow over 300% in the last six months, with forecasts of reaching $6 million in revenue this year. This knowledge gained from existing products is now driving the development of more advanced offerings like derivatives.”