Lowering Barriers for African Small Businesses
Small businesses are the lifeblood of the African economy, representing around 90% of all companies on the continent, providing roughly 60% of all jobs.
But a trading environment disconnected from international markets constrains any ambition to growth, limiting the prospects not only of business owners and their employees, but the entire continental economy.
Can a new era of tech bridge some of these gaps? We spoke to three of the continent's leading innovators - and participants in Afreximbank's Evolve initiative - to get a true picture of Africa's potential.
“The traditional banking networks and service providers haven't even begun to scrape at the surface of providing anything to those small businesses”
Informal retailers dominate local African economies, selling $180 billion of goods every year in cities alone. But with limited access to basic business tools and finance, these shops often run out of stock. It becomes a negative feedback loop: Without the goods their customers want, they can’t sell enough to keep their shelves full.
Wasoko is an innovative, mobile-based service that enables small retailers like these to order stock via mobile app or SMS, with free same day delivery. Founded in 2016, the company now generates circa $100 million of annualized gross merchandise value for over 24,000 merchants, proving the fact that digital financial inclusion is one of the most important routes to economic success. "The reason why digital financial inclusion is so important for small businesses in Africa is that there's simply no way that you'd be able to reach the sheer number of these small businesses without using digital means,” says Daniel Yu, CEO of Wasoko.
While solving the supply issue, what is truly game-changing is the company’s use of data to provide lines of credit.
“In our specific sector, there are about 10 million mom and pop stores across Africa. The traditional banking networks and service providers haven't even begun to scrape at the surface of providing anything to those small businesses,” claims Yu.
Informal retailers lack the financial records required to access traditional financing. Wasoko extends loans based on historical purchasing data, which it uses to build a credit profile. This money can be used to maintain inventory, leading to more sales, and ultimately providing an avenue for growth that would otherwise be unavailable.
But credit isn’t the only finance gap small businesses face. Sometimes customers want to buy but can’t give you the money – even when they have it.
“If you have a mobile phone, the entire continent is open to you.”
“If you’ve been to Lome, Togo, you know the borders literally go through the city,” says Dare Okoudjou, Founder and CEO of MFS Africa. “One of our customers is a lady called Joy, who runs a school there. Half of her students come from Ghana, the other half come from Togo. She has to be paid by both.”
This is harder than it sounds. Currencies and regulations between African countries are extremely fragmented. With roughly two-thirds of sub-Saharan Africans lacking a bank account, payments are increasingly made using mobile services like mPesa.
But as Okoudjou explains, “If I’m an MTN customer in Uganda, I can only transact with other MTN Uganda customers in Uganda.” With its single API for all mobile operators to plug into, MFS Africa acts as digital payments gateway for over 155,000 users facilitating inter-operator, inter-national money transfers.
The effect, continues Okoudjou, is that “If you have a mobile phone, the entire continent is open to you.” Joy can collect payments from her border-straddling students. And businesses can more easily expand beyond their local market, out into the rest of the continent.
But what if your customer base is scattered across the globe?
“We’re empowering people to create jobs, become captains of industry. We’re just getting started.”
“Before I started this business, I barely wore anything African,” says Moulaye Taboure, Co-Founder and CEO of ANKA. “I quickly realized more was at stake than the artisans of Africa. It was our own culture.” Taboure had created a platform for selling African artisanship to the world: Art, decor, and fashion.
Anyone can upload products to ANKA via its ecommerce enabling backend. They get the cheapest rates on export shipping and export from 46 African countries and counting, out to 100 markets globally. They can take payments in any currency, via bank transfer, credit card, mobile payments, and PayPal. And they get paid however suits them. These features overcome barriers to local and intra-African trade. But they also open up the world, including the significant African diaspora.
After decades of being targeted as global consumers, Taboure believes his platform is helping Africans shift their mindsets: “We help people change their perspective. You could be a woman who until now has struggled to find a job. But now you’re chief of an enterprise, creating things from your own hands that people admire.”
For now, the focus is on supporting micro-retailers sell their creations to a global market. But Taboure insists this is only the beginning, “We’re empowering people to create jobs, become captains of industry. We’re just getting started.”
Africa is ripe with talent. But talent can be suffocated by disjointed infrastructure and historically arbitrary borders.
These three fast-growing companies demonstrate how a new generation of innovators, and the tech they use, is bridging gaps that have constrained opportunity. Every time a barrier is overcome, talent finds a new path to flow. Whether that’s as simple as selling more to locals, or as ambitious as carving space in the global marketplace.
