Boost is Giving African SMEs the Power to Grow Through Digital Tools

Boost is Giving African SMEs the Power to Grow Through Digital Tools
August 17, 2021 Oreoluwa Aremo
Boost Ghana (Future Africa portfolio company)

About 90% of African businesses—over 100 million—are categorised as Micro and Small Medium Enterprises (MSMEs). They are responsible for 70% of the total employment and represent up to 40% of GDP. 

The problem is that these small businesses struggle to grow. The MSME industry is fragmented and inefficient. MSME owners have challenges accessing credit, bulk discounts due to their low volumes, and their risk aversion means they generally lag behind consumer trends, making them vulnerable to competition from a growing range of e-commerce players. 

The Problem: Slow MSME Growth in Emerging Markets

Given their contribution to economic activity and employment, MSMEs are a critical vehicle for socio-economic development in Africa. These businesses are the key to Africa’s economic transformation. They remain the heart of their communities, but their struggle to grow and thrive limits the value they deliver to the continent. 

One challenge MSMEs face is access to working capital: African MSMEs receive roughly $70 billion in working capital finance each year; the credit gap exceeds $400 billion.1 This huge shortfall exists because lending to MSMEs is considered riskier than other forms of lending as MSMEs often lack acceptable assets for collateral or verifiable income data. Without access to credit, MSMEs cannot leverage essential growth opportunities such as building inventory, hiring staff, investing in expansion, etc. They cannot grow. 

Access to credit is not the only problem that MSMEs face. 

Consider retail MSMEs who are often at the bottom of the distribution chain. As MSMEs, they have weak purchasing power. Without access to credit, they have to buy little and often, sourcing from different suppliers. As they cannot negotiate wholesale prices with distributors, they face higher costs for their supplies. 

Their suppliers also face difficulties. African societies are more reliant on cash, meaning suppliers often have to accept payment-on-delivery, which is riskier. African retail also has a ‘last mile’ problem: the final leg of goods delivery is expensive as it typically involves multiple stops with low drop sizes, where one or two deliveries could be several miles apart. Finally, there are often many layers between suppliers and small retailers (e.g., agents), and, in a disorganised market, suppliers have little visibility of retailers and vice versa. 

We can see the constraints faced by a retail MSME in Africa in this snapshot. Ade, a small shop owner, has been unable to increase her revenues. Although she has identified that hiring another employee would allow her to expand, she does not have the cash to hire. The cash she has is spent on buying stock that keeps getting more expensive. 

The constraints of the African MSME market are inhibiting Ade from providing more employment opportunities and creating greater economic value in her local market. 

Boost can support Ade to deliver all the value she can. 

The Future: Boost 

Boost Ghana (Future Africa portfolio company)

Boost aims to unlock MSME growth in emerging markets. It does so by giving these businesses easy access to tools that ease pain points in their business processes. Boost targets retail MSMEs, the largest cluster of small businesses in Africa. In Nigeria, for example, about 55% of small businesses are retailers and wholesalers

Boost’s immediate value offering is a mobile stock ordering solution that connects retailers to suppliers through a low-data site accessed through a connected WhatsApp platform. Using WhatsApp as the gateway to the ordering platform makes the site accessible to most retailers with mobile phones. 

Perhaps the most interesting thing about Boost’s strategy is that they have gone pan-African quickly, with fast-growing operations already established in Ghana, South Africa, and Nigeria.

They have created a system where a retail MSME customer can access stock directly from suppliers at competitive prices. Boost aggregates products and makes them visible in their product catalogue for the retailer to browse on their mobile, and organizes delivery of purchased products directly to her shop. She saves time, hassle, and money from having to source and move stock herself. In addition, if she orders continuously, she will qualify for a stock boost on payment terms to grow her sales and ensure she can meet her demand. 

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How Boost Works

From the retailer’s point of view, here is how Boost works: she initiates a chat with Boost’s low-data product catalogue. There, she orders the stock needed for the next week, confirms the order, and checks out. Back in the WhatsApp chat, she receives her invoice and confirms the order details. In the end, she receives payment instructions (Boost accepts digital payments via bank deposits, EFT, or mobile money), makes her payment, and receives the goods 1-2 days after. Quick, easy and efficient. 

Boost manages the product platform on the back end, aggregating products from multiple suppliers into an easily browsable site. Once a customer order is complete, Boost combines orders for multiple retailers like Ade and purchases these in bulk from partner suppliers at wholesale prices. They then push out delivery assignments to a network of logistic partners. This way, Boost can maintain an asset-light fulfilment model while focusing its resources on developing future digital products and services for its core retailer customers. 

Boost offers opportunities for growth through efficiencies gained in the value chain for all the stakeholders involved: the retailers, the suppliers, and the delivery partners. 

The retailer gets the benefit of ordering stock via mobile without having to go through the hassle of sourcing products from multiple suppliers to find the best prices at the time. Access to fair prices gives the retailers opportunities they’ve struggled to receive due to the difficult nature of the market. 

Boost’s solution is most impactful in Africa, where consumers are very price sensitive. In Nigeria, one of Boost’s initial markets, 22% of MSMEs report that the pressure to reduce their prices is the foremost economic issue affecting their businesses. Having a solution that gives retailers room to lower their prices without harming margins is a powerful way of improving customer retention, increasing revenue, and accelerating growth.

The supplier benefits from better visibility and direct access to the difficult-to-reach MSME segment. The layers between manufacturers and small retailers are stripped away, and they can now sell ‘directly’ to them. Having a clear sight of hundreds of thousands of small businesses enables suppliers and manufacturers to accurately assess market characteristics and tailor their offerings to them, to drive customer loyalty, increase the value they can extract from this market and fuel their own growth. 

Furthermore, because Boost uses an asset-light fulfilment model, they’re further enabling another segment of the market: logistics providers.

 

The Team 

Mike Quinn is the Boost Platform CEO. He has extensive experience building start-ups across Africa, having co-founded and led Zoona, one of Africa’s early fintechs, for 10 years. While Mike was CEO, Zoona grew to 2 million active customers in Zambia and Malawi, processed over $2.5 billion in transactions, raised $35 million in global investment, and enabled 3,000 micro-franchise entrepreneurs. 

Mary Roach is the Boost Platform COO. She has over 20 years in program and operations management and over a decade supporting emerging market start-ups. Prior to joining Boost Mary was the COO of Loowatt, a sanitation hardware and service company working across the UK and emerging markets. She has previously held roles with Ceniarth, GSMA, M-KOPA, and GE. 

Will Croft is the Boost Platform CTO. He has over 10 years’ experience building and scaling platforms from scratch including GSMA Intelligence a source of mobile industry insights, forecasts, and research used by hundreds of telcos and banks worldwide. He will leverage this experience to develop the Boost platform and technology stack. 

Benedikt Hoffmann is the Boost Platform Strategic CFO. He is an accomplished executive bank manager with a strong interest in technology that improves financial access with a special regional focus on international growth markets. He also has deep knowledge and vast experience of impact investing and sustainable finance, and will support Boost’s capital raising and structuring along with scaling of its franchise model. 

Dr. Ndidi Nnoli-Edozien is the Boost Platform Chair. Among many accomplishments, she initiated the Sustainability and Governance Function at Africa’s largest business conglomerate, Dangote, where she served as the Group Chief Sustainability and Governance Officer. She will provide long-term strategic guidance, networks, and support Boost’s partnership strategy. 

Joseph Kuvor is the Boost Ghana CEO. He was Zoona’s Head of Customer Experience and Impact, and has worked in Ghana’s mobile and banking sectors in customer insights, business planning & strategy, customer value management, marketing, pricing, sales & distribution, customer experience and impact management.

Du Toit Marais is the Boost South Africa CEO. He was Zoona Zambia’s COO, and has 17 years’ senior operational experience in tech, distribution, marketing, and data. He is also a multi-time entrepreneur and has worked with a variety of founding teams. 

Peter Ekunkoya is the Boost Nigeria CEO. He spent 15 years at Coca-Cola and 5 years at Procter & Gamble, where he developed deep capabilities in sales & commercial management, business & strategy development, financial analysis & planning and people management.

There are currently 100 million MSMEs across Africa. These businesses represent significant economic value and fuel growth in their countries. Boost’s mission is to give them all the power to grow.

At Future Africa, we are excited to be a part of Boost’s journey as it transforms the future of SMEs across Africa. We welcome the Boost team to the Future Africa community.

 

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