FROM MAGAZINE: Spring in the step for Africa’s e-logistics startups

A steady flow of big-ticket investments is ensuring the wave of digitisation in Africa is more than a passing one. Logistics startups riding high on the back of technological support are building solutions to identify and bridge gaps in the supply chain. The challenges for these startups go beyond mere lack of infrastructure, and the inflow of capital is making sure their eyes are on the goal of making logistics accessible.

Kenya's Twiga Foods raised $30 million from lenders and investors led by Goldman Sachs in a Series B round. The funds will allow the B2B food distribution company to expand in Nairobi with a distribution centre. According to Crunchbase, Twiga's Series B is the biggest financing round raised by a Nairobi-based company in 2019, and the third largest round of all time for the city.

Pan-African e-logistics company, Lori, will expand to Nigeria, almost a year after completing a successful pilot in Nigeria with some top cargo companies including Olam, Honeywell Flour Mills and Flour Mills Nigeria. The %u2018Uber of trucks' acts as a matchmaker between truckers and companies that want to move cargo. While Lori has never made its financing public, it is said to have raised more than $20 million from Asia-based Hillhouse Capital, Africa-focused venture capital fund EchoVC, and members of the Cargill family, owners of the US agricultural commodities group which uses its services.

Kobo360, a Nigerian digital logistics platform backed by the International Finance Corporation, recently secured a $30 million Series A funding from US investment bank, Goldman Sachs, TLCom Capital, YCombinator and some Nigerian banks. The funding will be used to scale operations, accelerate supply growth and develop the technology offering on the platform.

Bwala Africa, a Nairobi-based last-mile logistics startup has secured a deal with an undisclosed European tech firm to develop a new tech platform for the startup. The deal is valued at $8,00,000. The deal comes as Bwala Africa opens its Series A round to investors. The startup aims to raise between $5 million and $8 million and is in talks with various venture capital companies and private equity firms.

The wave of digitization in Africa is evident in the steady sprouting up of logistics companies riding on the strength of possibilities created by technology. Increased access and affordability to connectivity is pushing the envelope for solutions needed to fill gaps in the logistics supply chains. The interest and steady flow of investments is making sure these tech-logistics companies bridge the gaps in the African supply chain for a multitude of verticals and sectors.

'Digitising logistics in Africa'
In the report 'Digitising Logistics in Africa' by Briter Bridges, authors Dario Giuliani and Lisa Hannah surveyed more than 40 leading logistics startups "to get qualitative insights and anecdotes about the sector and its development."

Elaborating on why Briter Bridges chose to investigate the role of up-and-coming logistics companies in the African continent, founder Giuliani says, "Briter has been tracking businesses and market insights across dozens of verticals and, as part of our research, we decided to devote some efforts to bringing to the surface the opportunity presented by the logistics sector, which over the past 2-3 years has seen investment skyrocketing and several new players entering the market all across Africa and other emerging markets."

Founded in 2018, Briter Bridges is a data-driven research organisation focused on collecting and visualising information on markets across underserved markets. Apart from collaborations with 40 active logistics companies, Briter Bridges pored over research sourced from thousands of companies listed in its database.

Poor infrastructure not the only challenge
According to the Briter Bridges report: "Africa's infrastructure financing gap floats between $67 and $107 billion a year and represents one of the fundamental constraints to both time and cost efficiency in the logistics."

"Besides access to finance at both early and growth stage, which is a problem that goes well beyond the logistics sector, transparency, overheads costs, and reliable market information are all obstacles for emerging companies," says Giuliani.

Kamtar, an online platform for transporting goods in West Africa, connects verified drivers and their trucks with customers. Founded in February 2018, Kamtar employs over 40 people in Ivory Coast and Senegal and has registered more than 3,000 trucks on its platform.

Turns out challenges of running a logistics startup in Africa is more than just the evident lack of infrastructural support.

Outlining the initial hiccups while transporting goods, Delas N'dri, co-founder, Kamtar says, "Before drivers start paying attention to your small innovative startup %u2018that is going to change the whole industry', you need to send them business. Less talking, more acting. It takes time before they consider you as a long-term partner and trust you enough to give you flexibility on payment or ability to negotiate on prices. Building those trustful relationships was long and tiresome, but we are starting to see the first signs, which is great!"

N'dri is confident bringing "something useful to our customers". He believes the worst that can happen is having a community of partners that does not respect your standards of quality, which destroys your value proposition. "If you manage to involve your partners in that long-term goal by training them and showing them the money, very few things can happen to you. That being said, doing logistics is always risky: accidents, borders, delays are daily issues that you need to deal with, especially when you handle several hundreds of operations per month. But so far so good, we always find solutions that accommodate our customers and our drivers," he adds.

Operating in a similar space, Kobo360 aggregates end-to-end haulage operations to help cargo owners, truck owners, drivers, and cargo recipients to achieve an efficient supply chain framework.

"The logistics sector in Africa is currently estimated at $150 billion but yet is plagued with opaque pricing, expensive middlemen and supply chain inefficiencies. What Kobo360 offers is a platform that is accessible to anyone who is looking to move goods, as well as truck drivers looking to transport cargo. Our app has been built to make business easier, faster and more efficient for our customers and drivers. It has a range of features including digitised waybills with automated invoices, a customised dashboard and multi-language functions for our drivers across the continent, as well as a first-of-its-kind bidding tool for drivers and customers to assess the price of a trip before selection. With Kobo360, there is complete transparency and our customers are assured of the safety of their goods," informs Obi Ozor, CEO & founder, Kobo360. The startup has presence in Nigeria, Togo, Ghana, Kenya and Uganda.

According to Giuliani, access to internal data generated by the companies' operations represents a big opportunity to learn in real time about the good and bad of doing business.

Not without technology
As technology is transforming the way life and business is conducted, these startups are extracting the best of solutions by its creative use to meet logistics needs.

"Technology is very helpful in logistics. Real-time matching, GPS, automated invoicing or online financial reports make you save a lot of time and provide real quality of service to your customers. However, many of our drivers are illiterate. It naturally makes it very hard to rely on apps. On top of this, a lot of our customers still prefer making a phone call than requesting a proforma through a web dashboard. But everything is changing very quickly. Out tech is here, being improved every day, and it is our role to help the market transition more and more from offline solutions to online ones. Incorporating technology into traditional logistics and go with the sector's digitalization is useful, but developing a fully digital solution seems to be a bit presumptuous for now," N'dri says.

N'dri believes that in 10 years, door-to-door delivery will start "annoying" both sellers and customers. "We just launched our network of pick up points across the country, powered by a proprietary technology and we are convinced that in 10 years from now, most of the e-commerce products will be waiting for their owners in brick-and-mortar shops. As for haulage, I'm not sure things will be fundamentally different. But I believe that adoption of digital will make Kamtar employees' lives much easier than it is today!"

Giuliani expressed confidence in the growth of businesses in Africa in the next 10 years despite the regular struggles. "I tend to shy away from 10 years forecasts but I feel confident saying African markets are seeing a positive increase in the number of businesses and deals, although the lack of infrastructure and the high market fragmentation constitute significant obstacles to a smooth development of the industry. Surely, the recent interest by Asian players, from governments to private businesses, in Africa's startups can be seen as an opportunity or a sign that 'something is cooking'."

Looking into the future
According to the Ernst & Young's Africa Attractiveness 2019 report released in September, "whilst Africa is somewhat behind the curve in terms of tech maturity, there is a strong focus on building tech capability to enable the rising urban populations." However, the report adds that the recently ratified African Continental Free Trade Area Agreement (AfCFTA) could prove to be a major growth stimulus.

In July 2019, African leaders from 54 countries signed the AfCFTA, the world's largest free trade area by the number of countries.

"The AfCFTA will take many of the legislative roadblocks that have made it extremely difficult for goods to be moved across the continent. However, there are still many concerns about the process of delivering goods," says Ozor.

For Kamtar, the founders are currently profitable and growing, allowing them to wait for their Series A round of funding. "We are looking at a Euros 3 million round for Q4 2020 in order to expand geographically and finance our working capital needs that is becoming bigger and bigger every day," informed N'dri.

As the Briter Bridges report talks about opportunities in urban logistics and trade in the future, Giuliani is convinced that "lots of opportunity today lies in bridging the supply side and distribution channels, especially beyond capital cities."