Hi Quartz Africa members,
The rise of online businesses in Africa has been fascinating to watch over the past decade. Scroll through any social media platform, and you’ll come across dozens of posts selling a variety of goods and services—from fashion to food and electronics.
The number of businesses selling online has been rising in tandem with smartphone and internet penetration as well as the uptake of digital payment services. E-commerce revenues in Africa, which stood at nearly $28 billion in 2020, are projected to hit $46.1 billion by 2025.
African businesses that sell online are mostly small- and medium-sized enterprises (SMEs), but many of them also have an offline presence. There are around 44 million SMEs in sub-Saharan Africa, according to MasterCard’s 2021 MEA SME Confidence Index White Paper.
Digitalization presents several opportunities, as well as challenges, for SMEs in Africa. By adopting digital tools, businesses can reap benefits including more efficient transactions across multiple channels, more convenient ways of paying suppliers, less potential for fraud, and increased access to financing. Overall, a majority of SMEs in Africa believe e-commerce will have a positive impact on their businesses. The figure varies across countries, from as high as 89% of SMEs in Kenya to 81% in Nigeria, 73% in Côte d’Ivoire, 64% in South Africa, and 56% in Egypt.
Adopting e-commerce solutions comes with costs that can present an obstacle to SMEs looking to sell online. That’s why a rising number of startups are looking to tackle some of those challenges—whether it’s in logistics, supply chain, inventory management, distribution, sales, marketing, financing, or administration—and accelerate the adoption of digital tools by businesses on the continent.
Cheat Sheet
💡 The opportunity: Millions of African businesses, particularly MSMEs, stand to benefit and build more efficient operations by adopting digitalization across different facets of their businesses—including inventory management, distribution, payments, sales, and marketing.
🤔 The challenge: The cost of adopting e-commerce solutions remains high for many businesses. Transaction costs such as fees charged by e-commerce platforms also pose a challenge, as does the lack of relevant know-how and a preference for cash and traditional set-ups by many business owners.
🌍 The roadmap: Startups must build affordable, efficient e-commerce solutions that are tailor-made to suit the needs of African MSMEs.
đź’° The stakeholders: Startups, suppliers, and digital payment services all have roles to play to accelerate digitalization of African businesses.
By the digits
$46.1 billion: Projected e-commerce revenues in Africa in 2025, up from $27.97 billion in 2020.
44 million: The number of SMEs in sub-Saharan Africa.
9 out of 10: The share of SMEs in South Africa that have a social media presence and/or a website—the highest rate of any country in Africa.
88%: The share of SMEs in Kenya accepting mobile payments.
$331 billion: The financing gap for SMEs in sub-Saharan Africa.
The Case Study
Startup: Sendy
Sector: Logistics
Location: Kenya
Valuation: $80 million – $120 million (according to Dealroom.co estimates)
Sendy was co-founded in Kenya in 2014 by Meshack Alloys, Malaika Judd, Don Okoth, and Evanson Biwott. Its primary offering at the time was an on-demand delivery platform connecting riders and drivers to customers who included businesses and individuals.
The service quickly proved popular, especially among businesses selling goods online, as it offered transparent distance-based pricing, the ability to track deliveries in real-time, enhanced security, and analytics that helped break down logistics costs. Since its launch, Sendy has served over 10,000 merchants.
In November 2015, Sendy became the first recipient of an investment from Safaricom’s then newly launched Spark Fund. The telco-backed fund noted that Sendy had the potential to become “a number one or number two player in their chosen field.”
Sendy has grown significantly since then and expanded its product offering, supported by multi-million dollar investment rounds. In 2019, the startup raised $2 million from Dutch impact investor Goodwell Investments, and in 2020 Atlantica Ventures led a $20 million Series B investment round in the company. Toyota Tsusho Corporation, automaker Toyota’s investment arm, also participated in the Series B.
In the last quarter of 2021, Sendy pivoted from being an A to B delivery company to a provider of complete fulfilment infrastructure for e-commerce and consumer brands across the continent. Its platform now also allows retailers to purchase stock directly from suppliers and enjoy free next day delivery, as well as flexible stock financing.
Sendy is currently present in Kenya, Uganda, Nigeria, and Cote d’Ivoire where it expanded in 2021 through a strategic equity investment in Kamtar, a digital logistics startup with over 5,000 drivers in its network in Cote d’Ivoire and Senegal.
Sendy, one of 100 startups named as the World Economic Forum (WEF) 2022 Technology Pioneers, is currently seeking to raise $100 million in a Series C round. It plans to use the funds to scale its operations in Nigeria and Cote d’Ivoire, but it’s also looking to expand to other African markets, such as Egypt, South Africa, and Ghana.
In Conversation With
Malaika Judd is the CFO and co-founder of Sendy.
🧰 On pivoting from deliveries to complete fulfilment infrastructure:
The core of our offering is fulfilment (warehousing, inventory management, and last mile solution) combined with B2B commerce and financial services. We wanted to create a marketplace that enabled retailers to access the full range of products they need, cutting out the hassle and cost of having to buy from multiple suppliers by dealing directly with manufacturers and distributors. We have achieved more than 80% growth in the number of merchants using our platform quarter on quarter.
🛵 On Adding Electric Vehicles to Their Fleet:
By incorporating electric vehicles into our fleet, we’ve been able to shield our partners from rising fuel prices while reducing greenhouse gas emissions. We intend to double down on our green initiatives by introducing electric vans as part of our ESG mandate.
🗺️ On Entering west Africa through the investment in Kamtar:
Our investment into Kamtar has been highly rewarding as we have managed to capitalize on the synergies between our teams and maintain market dominance in Côte d’Ivoire. This has positioned us strategically as we look to expand into other countries in the Francophone region of West Africa in line with our broad expansion plan.
đź’° On introducing stock financing for retailers:
We have been offering trade finance to vendors to enable retailers to buy from us on credit. This service has helped accelerate the growth of our fulfilment product as it has attracted and retained merchants to the platform. With this realization, we are now in the process of formalizing the product by setting up an independent team with its own customer agreements, commercial targets, and independent credit scoring algorithms that will see a faster scaling of our fulfilment offering.
Deals to Watch
Wasoko (formerly Sokowatch) in March 2022 closed a $125 million Series B at a $625 million valuation. The platform targets informal retailers with supply chain solutions and was named Africa’s fastest growing company in 2022 by the Financial Times.
Kenya-based digital trucking logistics startup Amitruck secured $4 million in a seed funding round in February. The fundraising was led by Better Tomorrow Ventures (BTV), a San Francisco-based venture capital firm that targets early-stage startups.
In November 2020, Lori Systems secured funding and support from Imperial, an African and European-focused provider of integrated market access and logistics solutions, to expand its product across Africa after closing a $20 million Series A in 2019. The startup provides supply chain management solutions for cargo owners.
More from Quartz Africa
📹 African diplomats are livestreaming to China’s consumers
🇲🇦 Morocco’s e-commerce boom outlasted its lockdown
đź›’ Why central Africa is lagging behind in e-commerce
🤝🏽 Why B2B is key to unlocking Africa’s e-commerce potential
🚢 How logistics startups could make Africa’s largest free trade area work
đź‘🏽 Female entrepreneurs are tackling Africa’s logistics problems
This member brief was prepared while listening to Ndani ya Cockpit, an album by Wakadinali.
Have a fun, productive week!
—Martin Siele, Nairobi-based Quartz contributor
One 🤑 Thing
The $125 million Series B closed by logistics startup Wasoko in March at a $625 million valuation was the second-largest non-fintech round in Africa, after Andela, and largest in the B2B retail e-commerce space.