The Africa SMME Tech Report

Issue No. 15. Africa-Middle East local and small business tech news for 23 August 2021. This issue features Airlift Pakistan, Zulzi, Mobicred, Payflex, SpotMoney, Pngme, and more...

Pakistan’s Newly Funded Online Grocery Player Airlift Has Eyes on Africa

A Pakistani '“quick commerce” company just raised US$85 million at a US$275 million valuation to expand its local grocery delivery operations into Asia and Africa.

The company, Airlift, currently operates its Airlift Express grocery delivery service in eight Pakistani cities, including Lahore, Islamabad, and Karachi.

The $85 million Series B financing round was co-led by Harry Stebbings of 20VC and Josh Buckley of Buckley Ventures. According to TechCrunch, this round is “by far the largest for a Pakistani startup.”

The remaining investors include an impressive (even eyebrow-raising) list of veterans of some big names in tech, media, and finance.

These include Sam Altman, former president of Y Combinator; Biz Stone, co-founder of Twitter and Medium; Steve Pagliuca, co-chairman of Bain Capital; Jeffrey Katzenberg, ex-chief executive of Disney and Quibi; Taavet Hinrikus, founder and CEO of TransferWise, Stanley Tang, co-founder of DoorDash; Simon Borrero, founder and CEO of Rappi; Bastian Lehmann, founder and CEO of Postmates; and others.

Airlift’s founder and CEO, Usman Gul, left a job as head of enterprise partnerships at DoorDash to launch Airlift in 2019. With the new round, Airlift’s funding to date equals $110 million.

The company began as a mass transit service, basically an Uber-like service for air-conditioned buses in Pakistan’s major cities. Then the pandemic cratered the transit business. The company quickly pivoted to grocery delivery and now operates 30 dark stories throughout Pakistan.

Dark stores are essentially micro-fulfillment warehouses for online grocery delivery services. Generally, solutions like Airlift need many of these micro-warehouses to ensure prompt delivery of orders. The formula of dark stores per square kilometer will vary based on population density, congestion, demand, and other factors.

Airlift plans to use the funding to expand into Asia and Africa in the coming months. The company hasn’t said which African cities are on its roadmap.

Active Global Grocery Delivery Market

The growing list of grocery delivery solutions popping up around the world falls into two broad categories.

There are apps that simply send gig workers to existing stores to act as personal shoppers. U.S.-based Instacart and Gopuff are good examples of this model.

And then there are “dark stores.” In Europe, this market grew so fast that it currently is facing a shakeout as U.S. players swoop in to invest in or outright acquire teetering delivery startups like Gorillas and Dija. One tell that the market was getting overheated was the intense competition to reduce delivery times. To as low as 10 minutes in some places.

The app-based grocery delivery space is already quite active in Africa. The eCommerce player Jumia, for example, delivers meals and groceries in 10 African countries via Jumia Food.

In June we reported that the logistics company Bolt (e-scooters, ride-sharing, grocery delivery, etc.) was filling jobs throughout African and Europe in advance of what appears to be a major rollout of dark stores on the two continents.

A South African delivery platform, Zulzi, is currently raising money to expand its dark store operation. As of May, the company had three dark stores in Johannesburg. And it had plans to open five in Cape Town and four in Durban by roughly this time period. We’re trying to confirm how these plans have progressed. The company was reportedly seeking ZAR100 million (~US$7 million) from investors.

Other grocery delivery players operating in South Africa include Yebo Fresh, a Cape Town dark store that focuses on the townships market, and OneCart, which follows Instacart’s model of shopping at existing local stores through a single app.

The Middle East also has a very active market, with Talabat and Noon offering grocery delivery. Also, the Indian food delivery app Zomato, which operates in UAE, Qatar, and South Africa, recently announced its re-entry into grocery delivery.

And Spain’s Glovo now operates in Cairo, Istanbul, Morocco, and Nairobi.

Thanks to Matchcraftfor sponsoring this issue of The Report. Matchcraft is a global martech company powering local search, social, and display campaigns. Matchcraft’s latest offering, “Powered By”, is an API solution giving third-party platforms access to the technology behind its flagship AdVantage platform.

Quick Takes — The Week in SMME Tech

Pngme to Build ‘Future of Financial Services in Africa’

A San Francisco-based software firm called Pngme has raised US$15 million in order to expand its data infrastructure and machine learning software, designed to power financial inclusion in Sub-Saharan Africa.

The round, led by London-based Octopus Ventures, funded two major hires. Kenyan Lorraine Kageni Maina comes on as Pngme’s new Chief Strategy Officer. Nick Masson joins as CTO. Maina is a veteran of Microsoft and Barclays, while San Francisco-based Masson was previously an engineer at WeWork.

Payflex, SpotMoney in BNPL Partnership. South African buy now, pay later platform Payflex has teamed up with open banking platform SpotMoney to offer interest-free installments payments (i.e., BNPL) through the SpotMoney app. Read the next feature for more on BNPL. And, totally unrelated, SpotMoney’s blog is a standout.

New B2B eCommerce Marketplaces Launches in Ghana. Plendify has launched a new B2B marketplace designed to connect global buyers with African wholesalers, manufacturers, importers, and exporters to make bulk purchases. Read more

A Closer Look at Buy Now, Pay Later

Is BNPL Destroying Itself?

We’ve been covering the Africa-Middle East buy now, pay later market pretty closely. And it’s impossible to accurately cover the regional BNPL market without tracking the moves being made by international players.

This principle was made clear in recent weeks and months as international players including ZipCo. and Afterpay acquired or invested in MENA BNPL companies.

We’ve seen other recent developments (since Square’s mega-acquisition of Afterpay) at the international level that may eventually impact the regional BNPL industry.

There is no question the global BNPL market is getting frothy. And there is growing fear within the industry that pressure to acquire both merchants and consumers is leading to decisions that may come back to haunt the industry. And all the while, new competitors continue to enter the fray.

Here are a few notable recent developments around the world.

  • Paypal announced that it would no longer charge consumers late fees on BNPL purchases. This move signals the company is feeling competitive pressure. Other platforms handle delinquency differently. Afterpay, for example, simply turns off buying privileges for consumers who fall behind.

  • There is a growing chorus of warnings that BNPL promotes irresponsible spending. This is an ironic twist given the space owes its origins to a rebellion by younger consumers against the destructive borrowing practices of their elders. This backlash is being expressed in press coverage questioning the model’s ethics (here’s one example). It’s also showing up in the threats of regulatory intervention popping up around the globe.

  • Australia’s Commonwealth Bank will roll out its own BNPL. In doing so, the bank takes on players like Afterpay and ZipCo directly. Will we see banks jump in elsewhere, including the Middle East and Africa? We’ve already seen payments players like Visa, Paypal, Square, and others jump off the sidelines to either launch products or make major acquisitions.

  • Also in Australia, payo has launched as what appears to be the first eat now, pay later app. The solution is expanding from its pilot in Brisbane to a full rollout in Sydney and Melbourne. If payo succeeds, we expect multiple copycats will pop up. In Australia and globally.

An Insider’s Perspective

To make sense of this all, we caught up with Jason Sive, CEO of the South African BNPL Mobicred.

We started by asking Jason if he shared Klarna CEO Sebastian Siemiatkowski’s view that BNPL is currently in “land grab” mode.

“Sebastian is 100% on point, it's a total land grab at the moment. There are so many BNPL players popping up in every country, it’s just a matter of who will own more merchants and customers,” Jason said.

Jason added something that’s crossed our minds as well. Given the investments being tossed around by international BNPL players, won’t that encourage short-term start-up opportunism?

“New start-ups are trying to build quickly in the hope of being consumed at some ridiculous multiple by one of the big international players,” he said. “The international players are having to acquire smaller players all over the world as organic growth is simply not sufficient in this race.”

We can point to ZipCo’s acquisition of Spotii and Afterpay’s $10 million investment in Postpay. While the Afterpay investment isn’t a controlling share, it’s worth pointing out that ZipCo was initially a minority investor in Spotii.

The Global BNPL Landscape

Nearly all of the major BNPL players operating in the UAE did not exist prior to 2019.

It’s unfair to accuse either Spotii or Postpay of opportunism. However, they may inspire others to launch businesses to lay in the path of international players.

Jason believes all this activity is having a destructive impact on the underlying health of BNPL. In particular, it creates incentives to cut unfavorable deals in order to land key merchant relationships. Under the best conditions, BNPL is a low-margin business that lives or dies on volume.

“It’s a race to the bottom as they try to acquire large merchants. Often offering merchant commission rates that are simply unprofitable. Besides the rates, there is industry talk of huge onboarding fees being paid by BNPL players to the merchants,” Jason said.

“The one certainty is that over the next 12 months, this space will only get more interesting.”

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