By Aderemi Ojekunle
It can seem so natural to pop a credit card number into an e-commerce field, order a product and have it shipped to your door in a day or two — easy-peasy. But across the African continent, this isn’t typical. Just three percent of the adult population own credit cards, shipping ports and trucks are constantly snarled due to archaic systems, persistent operational inefficiencies, and corruption. These problems severely impede Africa’s ability to compete on a global scale, and inhibits trade across borders.
But recently Africa is digitizing, piecing together the fundamental elements of online commerce. The African Continental Free Trade Area (AfCFTA) regional trade agreement is opening up borders and smoothing out commerce hiccups. Innovation hubs in Nigeria, South Africa and Kenya are radically modernizing digital commerce and creating opportunities for companies looking to do business across the continent. The market is there: Over 1.2 billion consumers in Africa spend more than $1 trillion each year on consumer products, with most of it concentrated in Nigeria, South Africa, and Egypt. By 2025, that number is expected to grow to $2 trillion. Here are some of the most important developments that are shaping the new African market.
Tackling shipping inefficiencies
The first issue to tackle is getting goods to retailers and consumers. Africa’s freight industry has highly fragmented management systems, high costs, and complex and opaque processes.
In Nigeria, the supply chain is largely distorted by bad road networks leading to congestion at the country’s central ports of Tin Can and Apapa. The ports control 75% of Nigeria’s imports and 70% of the cargo traffic of West and Central Africa. These inefficiencies cost Nigerian businesses about $6 billion in lost revenue annually, while the country loses about $24 billion of container traffic annually to neighboring countries.
Kobo360, a pan-African company that has raised $30 million from Goldman Sachs, is taking aim at inefficient cargo delivery once it gets off the ships with an Uber-like model. Its platform connects truck drivers with cargo companies to move goods from ports to other destinations.
Startup accelerators are eager to see more such solutions. In Nigeria, the ODX Flexport accelerator takes on entrepreneurs with big ambitions in logistics. OnePort 365 was recently selected for its next program. OnePort founder Hio Sola-Usidame expects his company’s logistics platform will become “the operating system for trade” in Africa and other emerging markets. Its freight management platform allows companies to track logistics requests, provide instant quotes, receive payment around transactions on containerized cargo to and from Africa. The company says its platform has been used in shipping over $15 million of goods.
Smoothing out downstream supply chain efforts
Getting goods out of the ports is the first step. Other startups are focused on giving retailers of all kinds — from larger businesses to small shops and even open-air markets — easier ways to source and distribute products.
TradeDepot is a Lagos-based platform focused on connecting consumer goods brands to thousands of retailers by helping with distribution through its platform. With its own warehouses and fleets of drivers, TradeDepot purchases and stores inventory, and handles everything from shipping and pricing to customer service and returns. Retailers can purchase goods with credit and pay them off as they sell. The company has raised more than $100 million from a range of venture investors and boasts 100,000 merchants on its platform.
Helping consumers spend money
With just 300 million Africans on the internet so far, more innovations have naturally focused on improving commerce in any form. That includes helping Africans find better ways to pay, as 57% of Africans are unbanked. Innovation has centered around new digital forms of payment, primarily over mobile devices. South Africa’s TymeBank lets consumers open accounts on kiosks or online for accessible and affordable banking services. Kuda, in Nigeria, is the country’s first mobile-only bank and is valued at $500 million.
Founded by Babs Ogundeyi, Kuda is licensed by the Central Bank of Nigeria. Since 2019, the company has surpassed some traditional banking systems, attracting over 2 million customers. TymeBank has signed up 4 million customers.
“Financial inclusion is happening over the phone,” says Aubrey Hruby, a co-founder of the Africa Expert Network and an advisor to investors and Fortune 500 companies doing business in Africa. “Mobile money has been a huge innovation.” Mobile money accounts numbered 562 million in 2020.
Removing friction across borders
Enabling all of this is AfCTA, the regional trade pact created in 2019 aimed at reversing a staggering trend: according to the World Trade Organization, moving manufactured goods across international borders costs roughly 2.7 times more than moving the same goods across the same distance domestically within Africa.
The AfCFTA will make it easier for companies to do business across borders by reducing tariffs and simplifying customs procedures. 36 countries out of the 54 African nations have ratified the agreement.
With Africa’s population projected to reach 2.5 billion by 2050, digitization and open trade efforts being developed now will put the continent on track to be a powerhouse of consumers in decades to come.
Aderemi Ojekunle is a Lagos-based journalist who works with TheCable newspaper