Andile Masuku
The present travails of Y Combinator-backed Nigerian logistics tech startup Kobo360 present a sobering backdrop to this week’s Tech Tides Africa column hijack.
The quite a few reported challenges dogging the previous ecosystem darling – which apparently embrace a crippling debt load, revolving door of key management and overwhelming operational points – put into sharp focus why tech entrepreneurship in Africa’s critically sub-optimal freight haulage business just isn’t for the faint of coronary heart.
Meet Gugulethu Siso
But, it is a area inhabited by the fiercely resolute Zimbabwean founder and passionate intra-African commerce proponent Gugulethu Siso since launching her logistics tech startup Thumeza in 2018. (Say, in the event you actually need to see her actually come alive, ask for her unfiltered tackle the African Continental Free Commerce Space’s (AfCFTA) potential to unlock financial alternative.)
Following varied survival-focused iterations, Thumeza’s present fintech proposition revolves round revolutionising entry to financing for small-scale transporters in Africa’s provide chain sector.
Based on Siso, transporters supported by Thumeza have secured contracts with main business names reminiscent of Lori Programs, Choose n Pay, Worth Logistics, Spar, Skynet, Cipla, and South 32.In right now’s column, she gives a uncommon perspective on survival, adaptation, and, most of the time, failure, in one in all Africa’s most relationship-driven industries. Her expertise spans a number of African markets—from Zimbabwe to South Africa, Botswana, Kenya to Uganda. It consists of what went into securing partnerships with main business gamers like Lori Programs and serves as a real-talk primer for any founders considering following within the footsteps of many a logistics tech founder both holding on for pricey life, or who haven’t survived lengthy sufficient to mirror on what sustainable enterprise progress appears like.
Siso’s insights. In her phrases:
Constructing a startup in Africa is an train in survival, the place entrepreneurs pivot not out of technique however necessity. Nowhere is that this extra evident than in logistics, the place well-intentioned founders launch into the sector, believing they’ll disrupt the business, solely to seek out themselves caught in an inevitable cycle: logistics market, software program supplier, fintech lender, and, for a lot of, eventual closure. Having lived by means of this cycle, I’ve seen firsthand how promising companies fail as a result of brutal realities of working in African markets.
Relationship actuality verify
After I based Thumeza, it started as a logistics market. The thought was easy: join small-scale transporters with cargo house owners whereas we held the tip contract. On paper, it regarded like a strong enterprise mannequin. In actuality, the logistics business in Africa is not constructed for disruption, it is constructed on relationships. Offers aren’t made by means of a web-based matching algorithm, they’re sealed in golf membership lounges and restaurant bars. I’ve misplaced out on alternatives just because I wasn’t in the proper circles. Greater than as soon as, I’ve solely heard about important networking occasions, like a {golfing} weekend, months after they occurred. By which period, in fact, contracts had already been allotted, and I used to be left combating over the scraps.
Fee purgatory
After overcoming numerous obstacles and securing a contract with a well known organisation (who I shall not title and disgrace as a result of I do not need to shut that door ceaselessly), I used to be left ready on invoices that took as much as 180 days to be paid. There was merely no justification for such excessive cost delays. With out insider data and going through nearly sadistic cost timelines, we had been at a loss. I keep in mind a name with a then-executive at Kobo360, after I outlined our challenges, they bluntly said that with out entry to the proper networks and the working capital to assist it, scaling could be unimaginable. It was a tough fact we could not ignore.
So, we pivoted. We thought, “Possibly the issue is not logistics itself however the inefficiencies in managing transport operations.” That led us to software program improvement. Nonetheless, one other harsh fact emerged: logistics in Africa just isn’t a software-first business. Firms nonetheless depend on outdated ERP techniques that break down incessantly, however they do not see the necessity to change as a result of these techniques are embedded of their workflows. Promoting logistics software program to individuals who do not need to purchase software program was a dropping battle.
False fintech promise
An especially brief stint as a software program supplier (actually lower than a monetary quarter later) then led us to fintech lending in 2021. The enterprise logic was sound: transporters battle with money circulation constraints, which we had been intimately conscious of. They want working capital to maintain their vans on the highway, and we might present that. What we did not totally grasp was that fintech lending is a completely totally different beast.
Your largest query in lending is at all times: Can I get my a reimbursement? I keep in mind somebody in a boardroom as soon as asking me as we had been organising Thumeza Fintech, “In case you weren’t you, would you lend your self cash?” The painful but sincere reply on the time? No. But, we had been now within the enterprise of doing precisely that, lending cash to transporters whose monetary instability had pushed us to pivot within the first place.
Community alchemy
From 2021 to 2023, we pursued this mannequin and examined varied hypotheses, together with bill financing. That experiment, whereas delivering nice prime line revenues, was a nightmare money circulation smart. Throughout this section, we witnessed all types of situations, from vans having breakdowns to truck house owners taking funds meant for operations to buy their spouses model new vehicles. Nonetheless, regardless of the struggles, we noticed some success, increasing into South Africa and serving purchasers in Botswana, Kenya, and Uganda. These successes had been resulting from a lesson we would discovered the laborious means: leverage the networks you may have, shamelessly. Conversations that had taken 6 months now came about over one night by means of a fast, informal WhatsApp name by merely asking for assist and connections.
At Thumeza, we have survived by turning laborious classes into technique. We shifted our focus to receivables financing by means of early bill settlement, enabling us to disburse and acquire funds in a safe, structured method. Our assortment mechanisms are as near hermetic as potential, backed by robust relationships with cargo house owners, stringent cession agreements, and worst-case protocols. For sure, our authorized crew is one in all our most crucial stakeholders.
Similar unhappy sample
Nonetheless, as I continued on this journey, I observed a sample. Many logistics startups had been following the identical trajectory: market, software program, lending, closure. All too typically, what launches as a promising startup turns into yet one more failure statistic.
There are a number of explanation why this occurs: Unit economics do not work when profitability takes a backseat to development; buyers – particularly these outdoors Africa – count on the identical scalability they see in Western markets; founders concentrate on fundraising, not sustainability; and relationships matter greater than know-how – in African logistics, offers are constructed on belief, not automated techniques.
Founder actuality verify
Some recommendation for founders navigating this area: perceive your market deeply – do not assume what works in your market will work elsewhere in Africa; money circulation is king – if your enterprise mannequin would not tackle money circulation constraints, you are in hassle; construct belief with business gamers earlier than attempting to disrupt them; and know when to pivot—realising that not each pivot is a step ahead; generally, it is a signal to re-evaluate actually every thing.
Breaking cycles
So, what’s subsequent for Thumeza? Glad you requested. We’re constructing a enterprise pipeline that not solely ensures liquidity but additionally makes us a horny candidate for micro-acquisition. Our exit is more likely to be pushed by energetic volumes and powerful partnerships somewhat than conventional funding. However we all know higher than to imagine the journey shall be linear. In African startups, the one certainty is uncertainty.
Sadly, many logistics startups will proceed to observe this predictable dying spiral. However those that can break the cycle—by understanding their market, prioritising sustainability over hype, and navigating the complexities of money circulation—stand an opportunity of constructing one thing that lasts. And possibly, simply possibly, they will not need to pivot one final time… into closure.
Andile Masuku is Co-founder and Government Producer at African Tech Roundup. Join and have interaction with Andile on X (@MasukuAndile) and by way of LinkedIn.
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