African Logistics is broken 🚚

But with big problems comes big opportunity..

Author

Caleb Maru
February 11, 2023

Welcome to Tech Safari!

Your tour guide on African Tech 🧭

Today is Startup Saturday - where we dive into startup news in Africa - the world's most exciting continent.

Hello to the 163 new people who have joined the Safari since Tuesday! If you haven't already, sign up to join 3,730 smart folks curious about African Tech

On Tuesday we held our first event - Investing in African Tech and it was a doozy. A few of the highlights:

Thanks to everyone who came! And if you missed it, you can play it back here.

Today we're super excited to share..

Our second event: Connect with Africa ⚡️

We're teaming up with Afropolitan to host Connect with Africa ⚡️

Afropolitan curates an online community, events and content to let Africans live abundant lives. But their next goal?

To build a Digital Nation of 'Afropolitans.' It's a wild vision that I'll be exploring in next week's newsletter.

And on Monday 20th I'll be hosting a Twitter Spaces with Eche (Co-Founder of Afropolitan) on how the global world can connect with African tech, culture and community.

Alrighty, let's get moving! Here's the tour plan for today 🧭

  • Logistics in Africa is broken 🚚

  • Deal Roundup

  • Events and Opportunities

  • Tech Twitter

Alright, lets get this tour started!

Logistics in Africa is broken 🚚

It was a brutal week for logistics startups.

Gokada (a last-mile delivery company) laid off 54 employees this week, and is on the brink after acquisition talks with Kwik fell through.

And Sendy - a Kenyan logistics contender that raised $26 million from Atlantica Ventures and Toyota - wrapped up their operations on the ground in Nigeria.

It got me wondering - what’s happening in African logistics? And who is best positioned to win?

So today I’m touching on logistics in Africa, why its such a tricky space and the startups that are winning (and losing) in the industry.

Let’s dive in.

How much??

It costs $4,000 to move a 40-ft container from Shanghai to Lagos, Nigeria.

Now, guess how much it would cost to get that container from Apapa Port in Lagos, Nigeria to Lagos Mainland?

$4,000.

That’s a 20-minute trip (maybe 1 hour in Lagos traffic).

It’s the same price to move a container from the other side of the globe to Lagos, Nigeria and to move that container 10 km across Lagos.

I’ll give you a minute to re-read that.

Crazy, right?

So it’s not surprising that 70% of a product’s prices in Africa are due to logistics costs.

This is compared to 6% in the United States.

It’s safe to say that logistics in Africa is broken. We can link this to a couple of reasons:

  • Poor infrastructure - bad roads, inefficiencies and low capacity at ports. Your container might be sitting in Apapa Port for months before someone can move it.

  • Fragmented supply chains - between 54 different countries, regulations, taxation laws and customs are different and are not transparent

  • Tracking and managing logistics - it’s hard to find drivers, track the supplies carried and optimise routes to make operations more efficient.

  • Financing - it’s expensive to drive trucks, but most drivers are unbanked/underbanked and can’t access financing.

But the world is still turning, and goods need to move from place to place - in 2020, logistics revenue was $344.2 billion.

So with these problems comes great opportunity. And where there is opportunity is you will probably find startups.

Startups in African logistics are solving the procurement, financing and transportation of goods.

And while they should be raking it in, a certain class of logistics startups are struggling, and struggling hard.

Asset-heavy ain’t it

Both Sendy and Gokada felt the burn this week.

In November 2022, Gokada (a last-mile delivery company) laid off 20 employees. This year Gokada started with 82 employees, and this week it laid off another 54.

Sendy (which raised $26 million from Atlantica Ventures and Toyota’s Investment Arm), cut 30% of its staff last year. And this week the company closed down operations on the ground in Nigeria.

Now it could just be market conditions - it’s hard to transition from a growth-phase to a sustainability-phase and funding is hard to find.

But Sendy and Gokada have similarities in how they operate. They have their own fleets, which means they need a lot of people to run operations and a lot of money to fund them.

GoKada's fleet

GoKada's fleet

Starting and managing a fleet of trucks or motorcycles is expensive, hard and cuts down (already thin) margins.

And Sendy’s transition to software-only services in Nigeria shows that it’s hard to enter a new market - with different routes, regulations and customs.

Right Space, Wrong Play

So, it seems like last mile delivery is not where you want to be.

It’s asset-heavy, difficult to organise and your margins will be low - unless you’ve captured a lot of the market.

Instead, startups that are winning in logistics are working on:

  • Fragmented supply chains: It’s hard to find drivers and coordinate between 54 different countries, regulations, taxation laws and customs.

    • Startups like OnePort 365 and Jetstream help companies arrange and coordinate the moment of goods through digital platforms.

  • Tracking and optimising logistics: Tracking the supplies carried and optimising routes to make operations more efficient.

    • Startups like Leta use software to optimise delivery routes and make sure loading space is used efficiently. 

  • Financing: It’s expensive to drive trucks, but most drivers are unbanked/underbanked and can’t access financing.

The logistics space is up for grabs, but I thing asset-heavy startups will struggle, and asset-lite startups will take the cake.

What do you think? Let me know below

PS - I’m a white belt on logistics in Africa, and I’m hungry for more articles and opinions from investors/founders and operators in logistics. Drop me a line 👌🏾

Deal Roundup

Startup raises

  • Mawingu, a Kenyan high-performance, low-cost internet service provider has raised $9 million in a Series B round led by InfraCo Africa, E3 Capital and Dutch Entrepreneurial Bank.

  • Gwala, a Moroccan startup that provides real-time earned wage access to employees has raised an undisclosed amount at a pre-seed round from Ingressive Capital.

  • Thriveagric, a Nigerian agritech that connects farmers to finance, best practices and markets have won the $1 million grant prize from the Agriculture Youth Technology Africa (AYuTe) Challenge.

  • Sand to Green, a Moroccan agritech that aims to create suitable land for growing crops in the desert has raised $1 million in a seed round from Catalyst Fund, Katapult and other angel investors.

Fund raises

  • Partech, a global VC has closed its Second African Fund, Partech Africa II at $263 million. The largest Africa-focused fund to date. The fund focuses on early to growth-stage startups in Africa.

Events + Opportunities

  • Applications are open for the Google for Startups Accelerator, African Women Founders Africa Program. Looking for women-led tech startups up to Series A stage. Deadline on 20 February 2023.

  • (Sneaky Event #3) - We are hosting a Founders AMA (ask me anything) event! Featuring Jasiel Martin- Odoom (Africa Investment Officer at Accion) and Marge Ntambi (Venture Fellow at Rare Breed) on Wednesday 1 March 2023. Sign up here.

Startup Twitter

Our favourite tweets on African tech this week

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Catch you soon!

👋🏾 Caleb