The good journalists at Techpoint might be sounding like broken records now. Africa is not ready for eCommerce. Africans are poor. There are too many “evil forces”, as it were, for eCommerce to function effectively.
However, recent investments have seemingly renewed vigour in Africa’s eCommerce industry, albeit with a slightly different focus from what incumbents like Jumia and Konga operated.
What’s going on? On December 6, 2021, TradeDepot, a Nigerian B2B eCommerce startup, raised $110 million in equity and debt financing to extend its Buy now pay later (BNPL) services for African informal businesses.
Led by the International Finance Corporation, with participation from Novastar venture and other venture capital firms, the company’s SEC filling places the equity round at $42 million. Arcadia funds, a lender focusing on P2P marketplaces, led the debt round.
An exciting model: Rather than operate the familiar B2C marketplace à la Jumia or Konga, the startup connects manufacturers like Unilever, Nestle, Chi, UAC to thousands of retailers in their shops or kiosks, and it helps with distribution through its warehouses and fleets of drivers.
The model has been seemingly well-received. TradeDepot reports that the number of merchants on its platform grew from 40,000 to 100,000 in one year. The company operates a BNPL model to help merchants receive goods in advance and repay with up to 5% interest rates.
They’re not alone: TradeDepot, as well as the likes of Sabi, Alerzo, Omnibiz, Marketforce, and Capiter, all startups with the B2B retail tagline, have raised a combined $164.5 million in 2021.
Beyond marketplaces, we’ve seen other startups like Bumpa, Kippa, and Chari, working to create digital solutions for SMEs.
These large funding rounds signify an increasing bet on Africa’s huge informal sector, but I’ll leave you with some points to consider.
Yes, the market is huge, but probably not: As of 2017, sub-Saharan Africa had 44 million MSMEs, 97% of which were microenterprises. Exciting right? Well, only a little.
Firstly, several of these businesses are unregistered. Also, access to the Internet is required to reap the benefits of digitisation fully, but generous estimates place Internet adoption in sub-Saharan Africa at 26%.
Interestingly, Kenya’s Sokowatch, which raised $14 million in 2020, offers an offline solution through SMS.
Fun fact: MSMEs account for 95% of all businesses worldwide. Brazil, China, and Nigeria contribute 67% to that number.
Though it seems that most of these B2B startups, especially those without offline offerings, might capture only a fraction of Nigeria’s MSME market, they could generate tons of value from those who sign up. Thousands of small businesses could become more efficient.
But will it cause a cultural shift? Will the perceived success of a few businesses cause a ripple effect to Africa’s eCommerce sector? While you drop your thoughts in the comments section, look out for our reporter, Chimgozirim’s analysis on this topic later today.
What else is on the news?
Ekiti CcHub partnership: The Ekiti State government has partnered with CcHub to create a governance innovation hub. They’re launching this hub to improve service deliveries for the State’s healthcare sector. Dig in.
This is not the first time we’re seeing a tech-focused partnership from Ekiti State. Here’s one it did with Max.ng in August 2020. The story is due for a follow up don’t you think?
Financial Inclusion: The Director-General of Nigeria’s Securities and Exchange Commission (SEC), Lamido Yuguda, has said 60% of financially-excluded adults in Nigeria are under the age of 35.
According to Yuguda, 94% of financially excluded adults are dependents, business owners, or farmers, with only 1% working in the official sector. Where he got these figures from are unclear, but they’re fascinating. Read more
What else I’m reading/watching
I’ve watched four seasons of The Office on Netflix. My screen protector will probably not survive my attempts to punch Michael Scott. Have a good laugh!
I regret to inform you that Digital Human as a Service (DHaaS) is now an acronym. I couldn’t resist
The tech helping shops – and Santa – deliver this Christmas. Read
South African cannabis company lists on German Stock Exchange. Read
- Future Africa is hiring a Finance Manager, Backend Developer and Frontend Developer. You can apply here.
- CounselHero is looking for Senior NodeJS Backend Developers. Apply here
- Busha is looking for an SEO Specialist. Check it out here. And a Social Media Executive
- The Tonic Technologies Ltd is hiring a React Native Developer. Apply here
- Innovation Upstream Inc is looking for a Senior Front End Developer. Check it out here
Have a cheerful day!