The Africa SMME Tech Report

Issue No. 22. Africa-Middle East local and small business tech news for 10 January 2022. This issue features FilKhedma, SweepSouth, Foodics, REEF, and more...

Jan 10

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Will Digital Home Services Hot Up in ‘22?

When we wrote about SweepSouth back in October, we said this.

SweepSouth, the South African gig platform matching domestic workers with residences in need of a good cleaning, has ambitions to operate across the African continent.

Last month (while we were taking a brief holidays hiatus), SweepSouth doubled down on this ambition by acquiring 100% of Egypt’s FilKhedma. Terms were not disclosed.

FilKhedma has raised a cumulative total of US$1.3 million since its 2014 founding, suggesting a modest valuation. And SweepSouth itself has raised $6 million to date, though if we were gamblers we’d be betting on a fresh funding round in 2022.

While there are ways to structure deals without exhausting the acquiring company’s cash reserve we still don’t imagine the purchase price exceeded US$5 million.

Notably, FilKhedma’s last raise was a seed round from The Cairo Angels that was announced on December 5, less than two weeks before the SweepSouth deal was announced.

If we find out more about the terms, we will report it.

FilKhedma says it is Egypt’s largest home services marketplace. The platform allows users to book vetted service providers in home cleaning, maintenance, and other services. The company was founded by Omar Ramadan. Its investors include Algebra Ventures, Glint Consulting, Cairo Angels, Sherif Nagui, and others.

What makes FilKhedma more than just a provider directory is that it required its service providers to pass through an onboarding process before they can begin receiving orders. And FilKhedma guarantees their work. The service operates in three Egyptian cities.

This acquisition is part of a steady march forward for SweepSouth. As this LinkedIn post from SweepSouth investor simple.capital points out, this deal places SweepSouth in all of Africa’s major tech startup hubs, South Africa, Kenya, Nigeria, and Egypt.

This is likely no accident. And we suspect SweepSouth’s investors have considerable say in its market expansion roadmap. And no doubt investors will feel most comfortable seeing their portfolio companies chase opportunities in markets that investors are already comfortable with.

SweepSouth began operating in Nigeria last September. This follows its 2020 expansion into Kenya. And the company has also expanded its service offering beyond domestic help to include gardeners, plumbers, electricians, builders, movers, and other services.

When we wrote about Sweep South and the broader African home services market back in October, we remarked that the home services space has not attracted anything near the level of investor interest than other sectors like fintech and to a lesser degree eCommerce.

This isn’t to say there isn’t a lively digital home services industry on the continent. Or that investors have stayed away entirely.

For example, last year, Ethiopia’s Taskmoby garnered an investment from Google. And Nigeria’s Eden Life raised a $1.4 million seed round to expand its business. But these all paled in comparison to the kind of money that African fintechs were raising in 2020-21.

Is This the Year?

Our question is, will Africa’s digital home services platforms get in on the money in 2022?

The pandemic has been in some respects a headwind for companies like SweepSouth, which had to battle through Covid lockdowns when outside domestic help, for example, was eschewed for safety reasons. While Covid has taught us to respect its unpredictability, it does appear that 2022 may see the beginning of a shift from a Covid pandemic to an endemic state where societies learn how to live with the virus.

Success also breeds imitators and FOMO. So if SweepSouth’s aggressive expansion continues without any major stumbles, we may see more investor interest, which will spawn new entrants.

However, as we also noted in our last report on this space, building home services marketplaces is notoriously challenging. This may help account for the less frothy environment.

Home services platforms also present a classic business model challenge. The dreaded two-sided marketplace.
This model requires matching a sufficient supply of skilled and vetted tradespeople or domestic workers (or whatever the platform aggregates) with sufficient demand for their services among the consuming public. While technology can make every step of the process more efficient, it is still difficult to reach equilibrium. And it is even harder to scale this model across multiple markets.

If as we predict, SweepSouth raises more money this year, the size of the round and the valuation should tell us a lot about whether 2022 will be a big year for Africa’s digital home services space. Or if it will continue raising dimes to the fintech’s dollars.

For more discussion of Africa’s digital home services market, check out our podcast interview with Taskmoby founder Ezana Raswork.

More Action in MENA’s Food Tech Industry

We noted two interesting moves over the past week in MENA’s robust food tech industry.

The first of these will help consolidate the market for point-of-sale restaurant software. The second introduces a new competitor to the cloud kitchens space.

Riyadh-based restaurant-tech company Foodics has made its first acquisition since its 2014 founding.

The company has acquired Amman-based POSRocket, reportedly the region’s second-largest cloud-based restaurant and retail-focused point-of-sale software provider. The company has raised US$7.2 million since its 2016 founding by Zeid Husban, according to Crunchbase.

Foodics, which has raised US$28 million to date, said it made the acquisition to consolidate the region’s restaurant-tech market. And the company said it plans more M&A activity in the near term, as well as international expansion. The company currently operates in Egypt, Kuwait, Oman, Jordan, plus the KSA, and the UAE.

“Our acquisition of the fast-growing and second-largest restaurant Cloud technology provider in the region is very strategic as it naturally establishes our position as the dominant player across MENA and beyond,” said Ahmad Al-Zaini, Foodics CEO and Co-founder.

“The region has recently witnessed a significant acceleration in the digitization of operations in both the retail and F&B sectors due to the pandemic. As a result, businesses have had to augment their online presence, in order to follow their customers’ footprints and provide them with an optimal customer experience. We chose POSRocket as they were able to fully leverage this trend, having gained the trust of an exponential number of merchants for their services, which will be further enhanced with this strategic acquisition.”

POSRocket’s Founder Zeid Husban suggested his company made the calculation that its future prospects were much-brightened by joining forces with a larger and better-funded competitor.

“The POSRocket astronauts are delighted to be joining a larger team and brand, and with access to funding, we are looking forward to a bright future together,” Husban said.

Reef Expands in MENA

The other food tech news that got our attention involved a U.S.-based cloud kitchen player that continues to spread its wings in the MENA region.

Last week, Miami-based food tech company Reef Technologies announced a joint venture with Americana Group, a major Middle East franchise operator to open cloud kitchens that will operate REEF, Americana, and third-party brands.

Americana owns exclusive franchise rights for the management and operation of more than 1,800 restaurants that represent some of the world’s leading food and beverage brands in 13 markets across the Middle East, North Africa, and the Commonwealth of Independent States. Some of the franchises it owns include KFC, Pizza Hit, and Costa Coffee.

“By uniting the region’s largest most established F&B operator with REEF’s culinary ecosystem, this partnership will bring convenient access to some of the most loved brands to neighborhoods across the Middle East and North Africa,” said Michael Beacham, President of REEF Kitchens. “Americana is renowned for its outstanding operations and a deep commitment to quality. We look forward to an enduring partnership and helping to build the future of the industry together.”

Reef’s original stated mission has been to transform urban spaces into “proximity hubs that create jobs and bring new goods, services, and experiences to neighborhoods across the globe.”

This translates into Reef deploying food trucks into parking lots (its original business). This practice has occasionally gotten Reef into trouble. For example, one exploding food truck in Houston. Reef operates what it calls a “proximity ecosystem” of more than 8,000 locations and a team of roughly 18,000 people.

The company has also been busy expanding its ghost kitchen operations around the world.

It acquired Dubai-based ghost kitchen platform iKCon in November 2021. In December it announced it has acquired Chicago-based 2nd Kitchen, a startup founded in 2017 to provide technology that allows businesses that don’t otherwise serve food to offer ordering and delivery from nearby restaurants. So a bar that only serves drinks or an events space, can partner with 2nd Kitchen to provide food in essence without opening their own kitchens.

Reef signaled its commitment to MENA last month with its appointment of Ramez Shehadi as its President of International and Chief Growth Officer. Shehadi was most recently Managing Director for the Middle East and North Africa at Metaverse.

Food Tech will be a key focus of the upcoming BigFive Digital MENA Summit, 17th February in Dubai. Learn more about this event here.

Quick Takes…

A Single African Digital Currency? Tech Cabal wrote this week that the notion of a single African currency — its version of the euro — may come in digital form if it comes at all. Discussion of a common currently emerged from the African Continental Free Trade Area (ACFTA), which created a single market for African countries to trade goods and services. The ACFTA is widely seen as a pathway to lift millions of Africans out of poverty. But the notion of a single currency — the eco — is central to this vision. However, prospects for a common currency are intertwined with efforts in multiple African countries to create their own central bank digital currencies. Read further…

NFTs from Refugee Artists. Leaf Global Fintech, a company that offers a blockchain-based digital wallet for refugees and cross-border traders in Africa, has launched “one of the first-ever NFT collections of impact art generated by refugees,” according to the company. “Many of Leaf’s users are grassroots entrepreneurs who need a financial boost to help them get started or accelerate growth. A successful art sale creates that opportunity by providing the necessary capital to start or expand their business,” the company writes. Leaf Co-founder Tori Samples was featured on the BIG5D Podcast last year. Read further….

South African eCommerce to Reach $9.7B by 2027. A new forecast from research and markets projects South Africa's eCommerce industry is expected to grow at a CAGR of 9.83% from 2020 to 2027. In 2021, South African eCommerce generated US$4.5 billion in sales. As of 2020, South African had more than 18 Million eCommerce users.
The report also noted that eCommerce is one of the few sectors that have shown increased consumer activity during the pandemic. Read further…

Google Puts Cash into SafeBoda. In December, Google’s Africa Investment Fund as its first investment poured an undisclosed investment into Ugandan mobility-tech startup SafeBoda. The funds are designed to support the ride-hailing and delivery service’s ongoing expansion into Nigeria. In 2020, SafeBoda gave up on an expansion into Kenya after two years. SafeBoda was founded in 2015 by Alastair Sussock, Maxime Dieudonne, and Ricky Rapa Thomson. The company has raised $1.3 million since its launch, on top of the new Google investment. Read further…

This Week’s Chart…

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