The Africa SMME Tech Report
The Africa SMME Tech Report
Issue No. 21. Africa-Middle East local and small business tech news for 2 December 2021. This issue features Adumo, SwitchPay, YallaMarket, Wave, Fleeti, Yobante Express, InTouch, and more...
SA’s Adumo Invests in SwitchPay
SouthAfrican fintech holding company Adumo announced this week that it has invested in the alternative payments platform SwitchPay with an undisclosed amount.
Adumo, based in Sandton, has aggregated multiple South African payments providers, including Sureswipe, Ikhokha, Innvervation, and now SwitchPay.
Adumo CEO Paul Kent said in a company blog post that the investment comes as consumer interest in new payment options is at an all-time high.
“The impact of the pandemic and the rise of new, more convenient and value-adding payment options is revolutionising how South Africans purchase goods and services,” says Kent.
“The team at SwitchPay has built a world-class suite of alternative payment solutions that brings new forms of value to consumers and retailers alike. We look forward to working with the team as we bring convenient new payments within reach of all South Africans.”
So what, exactly, is SwitchPay? It’s a digital platform that lets retailers offer their customers alternative payment methods, both in-store and online. These include purpose-based lending, customised subscription models, and layby.
The idea of alternative payments is to give more options to consumers, thus creating more opportunities for local merchants to make sales, and increase basket size.
The layby option is interesting in an era where buy now, pay later payment models are becoming ubiquitous around the region, and the globe. Layby is an old-school payment method where consumers pay for a good in advance with installments and take possession when full payment is completed. SwitchPay now allows retailers and consumers to handle layby transactions digitally.
Buy now, pay later has flipped layby on its head, allowing consumers to take possession of the goods immediately and pay it back over time, usually in three or four installments.
Adumo is also active in the buy now, pay later space. In November, Adumo partnered with digital bank TymeBank to offer MoreTyme, a BNPL offering targeting SMEs. BNPL is often seen as a solution for major retailers. MoreTyme’s goal is to given SMEs the chance to increase revenues with a BNPL offering at the point of sale.
MoreTyme allows consumers to pay for their purchases in three equal, interest free installments.
Most BNPL platforms tout the payment model’s ability to increase average order values.
Quick Commerce Rising Rapidly in MENA
YallaMarket, a quick commerce (or dark store) platform that didn’t formally exist two months ago, has announced it will expand from Dubai to Abu Dhabi. And then to Saudi Arabia and Qatar next year.
Last month, Yalla raised a $2.3 million pre-seed funding round, co-led by Wamda and Dubai Angel Investors.
Quick commerce is a relatively new category defined loosely as platforms that promise fast home delivery of consumers goods like beverages, snacks, and sundries.
Quick commerce generally follows one of two models.
One involves operating dark stores, which are micro-warehouses strategically placed to allow for deliveries within a promised time frame (e.g. 15-minutes) of the order being placed.
The other model is the “asset-light” approach where the delivery service simply sends a gig worker to purchase items from a store and deliver them to the consumer, with a fee for the trouble. U.S. grocery delivery service Instacart is the classic example of this model.
Some of these delivery services offer branded consumer goods, while others offer a combination of private label and branded products. Breadfast, for example, a Cairo-based grocery delivery service, offers a combination of FMCG from major brands and its own private label products.
Yalla’s rapid rollout reflects the aggressive expansion of the quick commerce/dark store industry in the region.
As the chart above shows, investors see a significant opportunity in the region, with projections for a $20 billion MENA quick commerce industry by 2024. Other players have raised money recently based on this promise.
Recently, Breadfast raised a US$26 million Series A round in a bid to dominate the online grocery market in Egypt, and beyond. The company has designs on Sub-Saharan Africa once it consolidates its position in Egypt. Breadfast, founded in 2017, has raised about US$30 million to date.
Another Egyptian dark store startup, Appetito, recently raised a US$2 million pre-Series A round. This round was led by another U.S.-based VC, Jedar Capital, that focuses on early stage investments in MENA and Asia.
Appetito, launched in 2020, has a model similar to Breadfast’s. It operates dark stores and delivers a range of private-label products serving Cairo, Giza, and Alexandria with both next day and pre-scheduled deliveries.
Yet the example of quick commerce in Europe should offer a small note of caution. Fast growing Berlin-based Gorillas appeared to run into a wall and sought an investment from U.S. player DoorDash, reportedly at a much-reduced valuation.
Another possible sign of an overheated market is the intense competition based on delivery speed. This suggests a race to the bottom when too many players are competiting for too few customers. Something that begs comparisons to the European scooter wars of 2019.
We’ve started to see consolidation in the dark store/grocery delivery space, the failed DoorDash-Gorillas deal notwithstanding.
For example, Turkey-based Getir (which promises 10-minute deliveries) has acquired UK delivery app Weezy. And U.S.-based delivery app Gopuff acquired U.K. counterpart Dija earlier this year. That transition has not gone well, with reports of a mass exodus of Dija staffers.
Senegal Stands Out on Africa VC Funding Map
Our fellow Substackers over at Africa: The Big Deal do an amazing job of tracking VC funding activity across the continent. Their latest chart shows total funding raised by African startups through the end (almost) of November 2021.
It comes as no great surprise that the top four markets were Egypt, Kenya, Nigeria, and South Africa. These four countries accounted for roughly $3.2 billion in VC funding.
One standout was tiny Senegal, which more than held its own at $222 million. To put this in perspective, Senegal’s $222 million is 38% of Egypt’s $588 million. Yet Senegal has only about 16% of Egypt’s population.
Wave accounted for most of Senegal’s punching-above-its-weight success, however. In September, the U.S.-Senegalese mobile money provider raised $200 million at a $1.7 billion valuation, making it Francophone Africa’s first tech unicorn.
There is institutional and governmental support behind the effort to accelerate startups in Africa’s French-speaking countries and give them a shot at challenging the big four of Egypt, Kenya, Nigeria, and South Africa.
For example, France recently committed 130 million euros to its Digital Africa initiative, which supports tech startups in Francophone Africa. The initiative began in 2018 and is a pet project of French President Emmanuel Macron.
Digital Africa executive director Stéphan Eloïse Gras recently told African Business that the program is designed to “support tech entrepreneurs in their capabilities to design and scale digital innovation for the real economy, from initial idea to Series B.”
Here are a few other Senegalese startups recently announcing funding rounds, albeit at a much smaller scale than Wave.
Fleeti. Last month Fleeti, a SaaS startup launched in 2020 to manage vehicle fleets, raised a $1.2 million seed round from Newfund, Groupe Clim, SkalePark, Janngo, Mapinvest, and Business Angels. According to Fleeti, “More than 200 companies, from SMBs to multinational corporations trust Fleeti for their fleet management and
fuel consumption reduction.”
Yobante Express. In September, this logistic startup launched in 2018 to serve retail and eCommerce businesses raised a $1.2 million seed round. The round was led by Aguila Investments with Launch Africa, R-Ventures, and Grenfell Holdings participating. Yobante Express says it uses “independent and casual couriers and a resilient mesh network of relay points, to deliver packages 40% cheaper, 2X as fast as existing solutions and more efficiently.”
InTouch. In July, fintech startup InTouch secured a yet to be disclosed strategic investment from CFAO Group and other investors. InTouch describes itself as “a leading provider of payment and digital services distribution systems across Africa.” According to its website, InTouch currently operates in Senegal, Ivory Coast, Mali, Guinea Conakry, Cameroon, Kenya, Burkina Faso, Nigeria, Uganda, Tanzania.
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