Sote is Building the Operating System for Africa’s Shipping Logistics

Sote is Building the Operating System for Africa’s Shipping Logistics
February 3, 2021 Admin

Africa must unite.

This belief is rarely debated across the continent. It is pursued through a popular political and economic vision: African countries must remove economic and non-economic barriers to allow free movement of goods & services, people, and capital.

Efforts to increase trade within Africa, and even with other continents, often focus on grand ideas of a single market, facilitated by political negotiation and agreements like ‘The Agreement Establishing the African Continental Free Trade Area’, colloquially referred to as the AfCFTA.

The problem with this picture is that it ignores an important barrier to African trade—the logistical challenges that make it difficult to move goods across or out of Africa.

Here is a picture of what we mean:

Anything weighing over 150 kilograms cannot qualify as a parcel transported by postal service; above that weight, the package is considered freight.

Most goods that businesses need to move, especially when ordered in bulk, qualify as freight. As a result, ferrying these goods across the world is a complex process involving many air, land, and sea partners.

Think of a shipping dock filled with rectangular containers of goods for export (or import). Roughly 20 million of these containers berth at African ports each year. Moving these containers generates about $20 billion in Africa alone, making up a small but growing part of a trillion-dollar global freight forwarding industry.

The companies responsible for this—clearing and forwarding companies—are the backbone of global trade, ensuring that goods are safely delivered across land, air, and sea. Few people would be able to move a container of wooden furniture from Mombasa Port in Kenya to the Apapa Port in Nigeria. Even fewer would do so on a tight schedule. Clearing and forwarding companies facilitate the complex business of trade for importers and exporters all over the world.

An easy way to understand their role is as intermediaries between exporters (e.g. manufacturers or suppliers), importers (e.g. wholesalers), and the many transport services (carriers) that move goods, like shipping container boats and truck owners.

Besides, clearing and forwarding companies add value to the supply chain by providing expertise to cargo owners—the importer or exporter that contracts them to manage their shipment—on documentation, regulation, insurance, logistics, and so on. They provide this expertise to ensure that goods are safely and efficiently moved from one location to another.

This makes them a crucial cog in a highly complex industry, where stakeholders, including manufacturers, truckers, warehouses, shippers, brokers, retailers, etc., all communicate with each other.

Unsurprisingly, clearing and forwarding companies are often old and large, allowing them to leverage vast networks and resources. The downside is that many of these firms have operated in the same way for the last thirty years, relying on manual or analogue processes like faxes and filing physical paperwork.

No clearing and forwarding company in Africa is digital-first, and around the world, very few exist.

For customers, this means that transporting one container could require up to 90 texts, calls, and emails between departments, agencies, company representatives, logistics companies, and other partners—all of this to ensure that everyone involved has the needed up-to-date information.

We can capture the impact of this inefficiency from three perspectives.

First, importers. For their goods to be cleared and moved on to the next step in the logistics chain, they are legally required to work with licensed clearance agents. Traditionally, these clearance agents introduce significant graft in the process and can exploit importers because of the complex and manual nature of the value chain. Traditional clearance agents have been known to provide opaque updates, inflate invoices, and operate shadily. Cargo owners struggle to spot when this happens and usually employ staff to manage the clearance agent partners.

Second, the staff hired to manage the clearance agents. They must collect a lot of unstructured data points like cargo locations and payments, often via pen and paper. Until recently, most goods’ tracking was done through a combination of paper manifests, spreadsheets, emails, and faxes.

As a result, even licensed clearance agents struggle to scale as expansion comes with higher labour costs. Furthermore, companies that attempt to grow hit operational limits when they have to coordinate thousands of people through complex manual processes.

Third, partners in the logistics value chain, including government bodies, warehouses, shipping lines, trucking companies, etc. They all suffer from informational asymmetry, rendering their processes suboptimal from the onset. For instance, looking at key players like trucking companies, inefficient information exchange affects their capacity utilisation. Trucks often sit idle for long periods while the company sources information on where to go for the next load.

The clearing and forwarding industry is a trillion-dollar global industry, but its complexity and analogue processes have left room for innovation to improve the process, particularly in Africa.

Enter: Sote

Sote, an African digital clearing and forwarding company, is capitalising on this opportunity and aims to become the digital logistics gateway for Africa. By bringing transparency, data analytics, and operational efficiency into the industry, Sote is bringing African trade into the world of software.

Sote’s primary customers are cargo owners importing freight into African countries. These include manufacturers, retailers, and distributors who hand over the logistics portion of their supply chain operation to Sote to facilitate the movement of their goods.

Using an experienced team of expert logistics agents and digital workflows, Sote handles the interactions with all the service providers—shipping line, airline, governmental customs agency, governmental bureau of standards, revenue authority, port authority, warehousing, etc.—involved in transporting goods from one location to another.

The unique feature of their logistics service is a customer-facing software that provides a dashboard for stakeholders to track and monitor customer shipments in real-time, meaning they do not need to call multiple logistics agents or clearance staff to confirm the status of their cargo.

Sote’s dashboard is designed to serve as a workflow tool for managing the entire logistics process: shipment status, payment history, estimated arrival time, etc., for containers and cargo. The transparency and visibility embedded in the platform cannot be overstated in an opaque industry which has traditionally thrived on keeping customers in the dark. Today, this dashboard brings data and control to the supply chain, thereby providing a more cost-effective and superior user experience to the customer.

Impressively, this is only the start of the digitisation and automation drive. Sote’s software is being upgraded to manage 95% of all communication with customers, such as document uploads, e-signatures, notifications, and search, to be done through its software.
This is ground-breaking in an industry stuck in an analogue world.

Building The Future

Sote’s long term goal is to become the operating system for the entire African trade ecosystem. A useful indicator of Sote’s success in digitizing the industry will be its ability to increase the staff to container ratio (number of people required to move a single container) from the traditional 1:10 to 1:100.

Sote’s customers ship hundreds of containers a month, are cargo owners importing freight containers into Kenya, which is where Sote currently operates. The company is growing its numbers by partnering with important agencies and firms in the logistics industry.

Sote is poised for significant growth over the next 18 months, even with its current revenue trajectory, but has the potential to become an even massive player in the logistics space with its new suite of products.

At Future Africa, we believe in high-quality entrepreneurs. And above all else, we are inspired by the quality of the Sote Team.

Sote was founded by Kenyan native Felix Orwa, along with Meka Este-McDonald, a former product manager at Verizon and Gigster, and Scott Yacko, a former director of software engineering at Amazon and director of architecture at Walmart.

One of their key advisors is Jean Pascal, the former Chief Sales Officer of the 5th largest customs clearing company in the world, who supervised $5 billion in annual recurring revenue. He recently formalised his role as an Advisor and has been crucial in making introductions to new, large customers.

Together, they have built a Kenyan-based clearance and forwarding team of eight, led by Milan Mehta, a former head of operations at a multinational clearance and forwarding company. The team boasts an average of 10 years of industry experience.

Sote also has a strong engineering team, with two full-time engineers and six part-time employees split across Kenya and the United States.

The team is a truly mission-driven group and one that we believe will be an important part of the company’s success story.

So far, the team has built out its business without access to the full capital needs for execution. Now, with the team raising its $3m seed round, led by MaC Venture Capital and additional backers such Acceleprise, Consonance Capital, Backstage Capital and Rob Solomon—the chairman at GoFundMe, Sote is on track to transform the backstage of the entire African economy.

We welcome Felix, Meka, Scott and the Sote team to the Future Africa community.

Join us to co-invest in African Startups like Sote. Apply to the Future Africa Collective – our community of co-investors funding the future.