By:Bloomberg
Kenyan based e-commerce firm Wasoko, backed by Tiger Global Management, is merging with an Egyptian counterpart to link more consumer goods companies with Africa’s informal traders of essentials such as rice, flour and soap.
By joining with MaxAB, a Cairo-based one-stop supplier for a network of mom-and-pop stores in North Africa, the merged company will sell to more than 450,000 merchants in eight African countries including Morocco, the Democratic Republic of Congo, Zambia and key East African nations.
Both companies declined to provide the valuation of the combined entity, although last year Wasoko raised $125 million in Series B funding and MaxAB added $40 million in pre-Series B capital. Both companies also have 4DX Ventures Management as an investor.
With rapidly growing populations, but little formal retail, about 70% of what Africans eat, drink and use for personal care are sold through neighborhood outlets or kiosks. The continent’s informal retail sector is estimated to be worth $850 billion and the merchants already served by the two companies sell to more than 65 million consumers.
“This really allows us to build out something properly pan-African that hasn’t been done before,” Daniel Yu, founder of Wasoko, said in an interview. “Crossing these regional divides is something that we are perfectly positioned for.”
Wasoko and MaxAB are tapping into the continent’s nascent e-commerce market, offering informal retailers the ability to download an app that allows them to restock within a day or two of placing an order.
Both companies also offer financing for the merchants and logistics units that ensure the oil, toilet paper and food gets from warehouses over often tricky roads to the merchants.
Retail Struggles
Still, other retailers have struggled to sustain operations in some of Africa’s largest markets, citing difficulties finding good real estate, high relocation costs for managers, and subpar infrastructure. E-commerce giant Jumia Technologies AG is referred to as the Amazon of Africa — has struggled with persistent losses since its listing in New York in 2019.
Wasoko and MaxAB don’t face currency issues at this stage as what they are earning in any one country is immediately being used to grow operations in the same place.
“Given that we are really focused more on the just-in-time fulfillment of the products locally, that helps shield us from a lot of the currency challenges that exist in many markets,” Yu said.
While the new company plans to be pan-African, Yu and Belal El-Megharbel, MaxAB co-founder and chief executive officer, declined to say which market they would enter next. Both will continue as full-time executives.
