The Business of a Start-up in Africa

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Business Start-up Africa

Suzana Moreira is the founder of moWoza, a social enterprise adopting mobile phone technologies to aid food distribution in Africa.  Suzana has travelled extensively across Africa, and has developed significant insights into sustainability at the Bottom of the Pyramid.  It is from conversations with grass-root communities across Africa that moWoza was born.  Food security, nutrition, literacy, female empowerment and climate change are issues that Suzana is addressing through her work in social enterprise and community development.  Suzana regularly contributes research and articles to academia, NGOs and business institutions on the topics of innovations leapfrogging in emerging markets, social enterprise and sustainability.  Prior to setting up moWoza, Suzana worked on several large infrastructure development programmes in Europe and in the manufacturing industry in South Africa.  Suzana holds a MBA from the Imperial College London Business School.

BY SUZANA MOREIRA

On March 14th, the NY Times reported that the Washington Post was not using Twitter, YouTube or Foursquare to map road blockages and resource availability during the disruptive snow storm, but rather Ushahidi, an IT platform built in Kenya.  Because Ushahidi originated in crisis from a bedroom, no one tried to patent and monopolize it.  Because Kenya is poor, with computer systems out of the reach for many, Ushahidi made its system work on cellphones.  Because Ushahidi had no venture-capital backing, it used open-source software and was thus free to let others remix its tool for new projects.”  Ushahidi today is used all around the world in crisis and crowd situations.

Ushahidi, is an African start-up that has attracted the world’s attention, likewise, M-Pesa, African inspired Kiva and Integr8 are world renowned business models that were conceived in Africa and have overcome the usual African challenges of poverty, corruption and inadequate policies.  Each of these challenges should be viewed as creative catalysts in the knowledge that the resulting model will be at least innovative and at most disruptive.  It is the processes and systems that are adopted to overcome these challenges that turn the African start-up into the success stories we hear about in the developed world.

Africa is becoming a business destination and many start-ups are positioning themselves to become part of this growing business trend.  As Vijay Mahajan points out in ‘Africa Rising’, 300 million of the 900 million consumers are tirelessly working their way out of extreme poverty to become lower middle class citizens. The World Bank says the percentage of Africans living on $1.25 a day or less dropped from 59% to 51% from 1996 to 2005 and has decreased further since.  The Development Policy Forum (DPF) estimates that by mid-century, the greatest population concentration will be in neither China nor India but in sub-Saharan Africa. The region is expected to gain a billion inhabitants – from 900 million today to 1.8 billion in 2050. The urban population alone will triple from 300 million to over a billion in 2050.  Africa offers huge business potential in the upcoming years.

The principles of doing business in Africa are the same as doing business in any developed country in the world.  Emphasis however lies on conducting extensive due diligence, understanding that decisions take time and that access to capital is best sought internationally.  Depending on the scale and nature of the business, corruption can be an issue to be offset but as most Africans will attest to – there are options and an entrepreneur can proceed without being involved in these somewhat complicated and thwarting business practices.

Although Africa is not as connected offering the hi-tech wizardry of the developed world, Africans are overcoming electricity shortages and lack of internet connections by applying unique mobile phone technologies that deliver services which range from connecting farmers to agricultural cooperatives to mobile phone education aimed at youth, and, interestingly corporate companies are rolling out mobile phone training programmes for their staff.  As with any start-up, on the ground market research will expose countless opportunities.

Success in many African countries is in engaging and developing relationships with village elders or with church and health leaders in particular communities.  These are the people who can endorse the offering that you are taking to market.  This is familiar to the business ways of the developed world, where business success is associated with brand leaders and strong sponsors.  Village and community leaders are also useful in negotiating premises, recommending resources and providing the bridge between a start-up and the local authorities.

Perhaps most challenging in Africa, depending on the industry, is infrastructure capacity.  Whereby e-commerce and sophisticated distribution models are taken for granted in the developed world, logistics and distribution can turn the viability of a great start-up concept into a failure.  Start-ups need to carefully analyse supply chain complexities and the constraints of accessing marketplaces.

Many innovative start-ups are piloting there innovative technologies in Africa.  moWoza is a social endeavour that is emblematic of a new generation of African start-ups that have recognised the pressing need for transformation and empowerment amongst the people of Africa.   Initially operating between South Africa and Mozambique, moWoza, is servicing the low income economic migrant who regularly remits goods back to their dependants in the home country.

Most African migrant workers are extremely price sensitive and prefer to shop in South Africa where there exists a larger competitively priced product selection than in their home countries.  However, sending these goods across borders is costly and by relying on informal distributors to transport the goods across the South African borders to their home countries they are risking confiscation at the border crossing, extremely late deliveries and the dependant receiving damaged goods.

moWoza provides a unique mobile phone powered cash-to-goods, end –to-end service that guarantees the migrant worker that the dependant will receive the goods in the dispatched condition on a confirmed date. By committing the time and resources to conduct extensive market research across various African countries, forming focus groups and understanding what situations migrant workers faced, moWoza was able to develop a value proposition that delivers a superior offering to its target market.

Illiteracy and malnutrition are high on moWoza’s agenda.  The World Bank has set targets to reduce illiteracy and relapse into illiteracy – this has spurred moWoza, whose low-income migrant target market are predominantly illiterate, to design and deliver literacy programmes through its agent network.   In addition, most Mozambican migrants in South Africa originate from rural areas where malnutrition amongst children is acute.  By offering food packages that conform to the World Health Organisation basic food basket standards, moWoza is ensuring that its economic migrant workers’ dependants are consuming nutritional food.

There are many possibilities and with a good service offering, it is only a matter time before moWoza will pursue secondary revenue streams. Community leaders are opening doors and suggesting other services that can be commercialised.  This is Africa.  A new era has begun, and for start-ups that are willing to commit themselves to the development of Africa there are endless opportunities.

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