London — The digital transformation of the logistics business in Africa will be good business for telcos and ISPs. Multiple transactions through the new platforms will require cloud services and data centres. Changes like this bring new smartphone customers into the business. Truckers will need the app on their phone to get new business. Russell Southwood spoke to Ife Oyedele, CTO and Co-Founder, Kobo360 about its recent investment round and what it's planning to do.
Kobo360's co-founders Obi Ozor (ex-Uber Nigeria) and Ife Oyedele did the their university education in Michigan together and the seed of the idea for the company was born there:"We were shipping goods from the USA to Nigeria and we faced a lot of inefficiencies. When we moved back to Nigeria, we got into Uber and learned a lot from that about the market place model".
"We decided that we wanted to support enterprises that were getting trucks (to do business). It's a highly fragmented industry. The majority of the truck owners are from the north and most of those wanting trucks are in the west". The dominance of truck ownership seems to be connected with the North's historic position as a trading hub:"It's just been the business of that part of the country for the past 50 years and it's passed from generation to generation. A driver takes over his Dad's or his Grandad's business".
It set out to run an Uber-style aggregator model and first developed the platform in 2014. Then came the hard work of approaching both truckers and potential trucking customers. The truckers entered their routes and registered the number of trucks and drivers they had and their information.
Requests from companies requesting trucks were matched to drivers based on a variety of different parameters. At the point of pick-up, the driver gets 50% of the cost of the job and the remaining 50% on delivery and the customers are directly involved in that process. The receiver of the goods has to sign delivery confirmation on the app. Drivers used to wait 2-3 weeks to be paid and are now getting fully paid on completion.
"It's all been about professionalizing the industry. We're trying to make it simpler for truck owners and drivers. We also them find reverse loads but there are still lots of challenges with internet connectivity".
Oyedele points to one of the key blockages in the distribution system, Nigeria's main port Apapa:"There are inefficiencies around warehousing pick-up and off-loading everywhere but there are huge delays at Apapa. It can take 2-3 hours to do a pick-up. Using the app and its data, we can predict the best times to go in and pick up".
It claims that drivers using its platform can increase their monthly earnings by 40%.:"We partner with major diesel companies to give the truckers discounts. Fuel accounts for 42% of their expenses. We're also trying to get discounts on lubricants and truck parts. We are trying to create a basic HMO package for low price insurance".
All this adds up to a US$5,000 monthly working capital, insurance products, and discounted petrol, comprehensive HMO packages and an incentive-based education program for drivers' families through our driver-empowerment programs KoPAY, KoboSAFE and KoboCARE. The app has versions in Hausa, Pidgin, Twi, Swahili and French, enabling drivers to use it in the language they are most comfortable with.
It has registered 10,000 trucks and of these, 4,000 are 'actives', making trips to every part of Nigeria every month. There are 40 large enterprise buyers(like Unilever, Honeywell, DHL, Dangote and Olam) and 150 SMEs:We opened up to the latter this year and offered shorter trips. We started with food as there was a steady demand and an immediate need. We're not doing groupage. It's something we'll look at in the near future. At present customers are buying the whole capacity of the truck".
It has expanded into Kenya and sees a great deal of differences between the two regions:"There are differences between East and West Africa's transport corridors. There is better roads infrastructure in East Africa and better responsiveness to tech. But the East African markets are demand constrained. There's a lot less demand than there is in West Africa".
Outside of this foothold in East Africa, expansion plans are cautious and based on existing customers. They will move with existing customers into Ghana, Togo and Cote d'Ivoire. Co-founder Obi Ozor was quoted in 2018 as saying: "The expansion will be with existing customers, one in the port operations business, one in FMCG and another in agriculture," said Ozor.
The key to its latest US$6 million seed round with Goldman Sachs was the original funding by the World Bank's investment arm:" The World Bank and IFC seed round put us on the map and we're now recognized by a lot of organizations. They took a chance and we went through a lengthy due diligence process and they concluded we might have a chance of making something big out of this."
The main competitor at the moment is South African Josh Sandler's Lori Systems which launched in Kenya in 2017 but there are also a small number of trucking companies with large fleets.
The African Continental Free Trade Agreement (AfCFTA) is a trade agreement which is in force between 27 African Union member states. It was signed in Kigali, Rwanda, on 21 March 2018. As of July 2019, 54 states have signed the agreement.
The agreement underpins the company's ambition to have a presence in 26 African countries in 3-5 years time and to have become a 'unicorn' by then. AfCFTA will be a good thing for the supply chain ecosystem. We will be able to leverage the agreement to expand".
The company is also technologically ambitious, wanting to be a pioneer user of Blockchain for documents and transactions."There are lots of things going on and improvements being made that bring more usability to it. It's a digital repository for transactions and we want to use it as a storage place for documents. We're not currently using it but we want to be able to do so by early 2022 with a beta phase early next year".