Category Archives: SME solutions

SAP Engages with Nairobi to Transform Enterprise Innovation

Cloud technology giant SAP aims to enable enterprises to make digital transformations that can result in significant increases in revenue and efficiency by connecting processes and making their internal systems, data and networks more intelligent.

SAP Africa had its first-ever “drive event” in Nairobi for customers and partners in November 2022 to explain more about business innovation and transformation and to show companies how with the right technology and insights, and with the right partner, they can grow exponentially.

SAP bills itself as the “coolest software company you have never heard of” running the critical systems of top companies in diverse industries like ice cream, pet food, beauty products, and finance where 77% of all global transactions go through an SAP system.

Excerpts:

Why Innovate? Hardeep Sound, the SAP Regional Director, East Africa said that since 2000, 52% of the Fortune 500 companies have gone out of business. In Kenya, household names like Intercontinental and Tuskys were among the 1,300 and 2,530 companies that folded shop in 2020 and 2021 respectively.

The pace of growth has also accelerated in recent years; whereas between 1955 to 2011 it took a Fortune 500 company 20 years to reach a billion-dollar valuation, today they are getting there in 4 years. He said that companies in Kenya could enhance their value by mining customer data, doing analytics, managing customer relationships and experiences, managing human resources, digitizing supply chains, and monitoring how they spend their resources.

Easy Connections: Stanley Dube, SAP’s Head of Presales in Africa explained how Nokia sold 126 million model 3310 devices, and while his still works 22 years on, the company is a shell of its past. He said that one teaches people how to use phones and applications – they simply buy new devices and start using apps, without realizing how they are partners with companies like Apple and Google who do software updates and backups in the cloud. And if someone loses their phone, they can recover everything back in a matter of hours on a new device.

He likened owing a phone to SAP’s vision to enable companies to be intelligent and sustainable enterprises to deliver business and societal outcomes, with SAP’s modular ERP in the cloud that can manage finance, procurement, manufacturing, warehousing, asset management, research, supply chain and human resources combining 50 years of experience and meeting 80% of the enterprise needs of most companies. SAP’s ERP can connect with apps from other technology vendors while they also have a store that has 2,000 applications where companies can find products that others have built and which they can use.

Aside from the savings that can be 20% to 30% over five years from having SAP run backups, operations, data centres, software, licenses, and maintenance, it frees up managers from doing things like generating reports and shifting to do other things that can add value to companies like strategic planning.

Finding Value in Data: Bhavesh Chavda, Senior Director of Business Technology (BTP) Platform, spoke of the importance of harnessing data; it’s not just about migrating data from an unsafe on-site server room to the cloud, companies also must assess the quality and timeliness of their data for it to be useful and accessible and interrogated by management and by other applications. He said managers should be able to interrogate data, without knowing how to do any coding (“no-code, low-code”). The SAP BTP cleans up enterprise data and enables data-driven decisions, with continuous automation, low code extensions, and application testing. The BTP discovery centre is a free tier to try out for companies to connect, automate, and innovate and 12,000 customers around the world use BTP. He said that SAP’s ERP can connect even with third-party apps while companies can sign on to the free business technology platform (BTP) and start building on new applications.

Rapid Feedback with SAP: Sherif Hamoudah, Head of Ecosystems & Channels for SAP Signavio spoke about SAP Signavio, a transformational system that enables companies to do what used to take consulting teams months to do. Signavio drills through 60 different processes for enterprise transformation within a day, spotting redundancies and inefficiencies and recommending fixes that have been adopted by other organizations for continuous improvement. He gave examples from the auto industry where semiconductor shortages are affecting car manufacturing, and in finance, where global firms are using Signavio for risk compliance.

Using Data to Drive Revenue: Rais David, Senior Customer Experience Solutions Specialist SAP spoke of the value of data and the importance of using current data to discern trends in revenue. Google is phasing out cookies by the end of 2023 and this is at a time when mobile e-commerce accounts for $511 billion or 7.5% of all sales. At the same time, $93 billion of online sales are abandoned each year because customers find there are too many steps to complete a purchase transaction. SAP systems manage 3 billion consumer data identities, while protecting their privacy, and process $570 billion making them the 7th largest entity in sales.

Fast Turnaround on Implementation: Lewi Maina, Consulting Services Manager at SAP emphasized the importance of businesses being quick to implement changes if they are to thrive in fast-changing environments. He said that once they took a path, they should aim for a quick turnaround time for projects as he said that some companies in Africa can now deploy Rise and other SAP projects in a few weeks. This is a takeaway from previous transformation projects at companies that took up to three years. He said that the five keys to a successful deployment were implementing cloud with an agile mindset, using preconfigured solutions, leveraging on modern integration and extension technologies, and ensuring transparent documentation on deviations.

At the drive event, testimony was shared from some clients of SAP including;

  • David Kariuki, ICT & Innovation Manager of the Kenya Electricity Transmission Company (KETRACO), the state agency that builds high voltage transmission lines across Kenya. In 2018 after the government asked entities to take procurement online and plug into their central procurement system, known as IFMIS, KETRACO chose SAP’s Ariba as it sought to replace a manual procurement process where suppliers brought in envelopes and huge booklets of tender documents to be reviewed and scored in a time-consuming and laborious process. After a long process of digitization, standardizing procurement, tracking activities to reduce time loss, and overcoming supplier resistance, KETRACO, which was one of the first companies in East Africa to deploy SAP’s Ariba is now a centre of benchmarking for e-procurement. They also have access to innovation, as SAP updates come over the cloud quarterly for them to adopt.
  • John Wachira the Group Manager of Information Technology at the Safal Group (popularly known for its Mabati Rolling Mills products) spoke about the complex deployment with SAP to consolidate the group’s 36 operations that are in eight countries. They are in the second phase now to consolidate the end-to-end manufacturing, downstream operations, and commercial operations into one standard business environment on the cloud. They have gone live in six countries with two to go.

Future of Tech summit.

The Rest of World publication celebrated its second anniversary with an event in Nairobi featuring techies, writers and other guests and with panel talks on issues around technology in Africa.

Excerpts from the event.

  • Valuations: Panelist Ali Hussein Kassim wondered about the venture capital due diligence that placed the valuation of Flutterwave at $3 billion exceeding Nigeria’s largest bank, Zenith which has a stock market listed valuation of $2 billion.
  • Compliance: Kassim also lamented that fintech companies were doing business without engaging with regulators or undergoing KYC (know your customer), AML (anti-money laundering) and CFT (combating the financing of terrorism) steps that would keep them out of trouble. The result of this was cases like Flutterwave in Kenya, while in Ghana, Dash, a remittance firm had one of the largest pre-seed funding rounds in Africa, raising $32 million, only to be shut down a month later by the Bank of Ghana for not having a license. – “you can’t build a payment service for Africa when you don’t have a license to operate in your own country.”
  • Salaries: Whether the global tech giants that have recently set up in Nairobi are distorting employee pay scales and leading a talent war that smaller firms are losing out.
  • Appropriate Policies: Another panelist Nanjira Sambuli said techies must engage with governments about what is going on in their industry, or they would wake up and find unfavourable attempts to regulate them. She warned of the danger of the government’s copy-pasting regulations from other markets such that “that we must now opt-out of marketing messages that we never signed up for” and the excessive obsession with certifications that the government now wants to extend to informal workers. Also, in Kenya, after an umpteenth attempt, an “ICT Practitioner bill” was passed by Parliament in June 2022, only for the country’s President, Uhuru Kenyatta, to refuse to assent to it.
  • Knowing what problem you’re solving: About the spectacular year of Kune Foods from its million-dollar VC funding to its (not unexpected) demise.

One of Rest of World’s first stories was on the lending app Okash and its unorthodox collection methods. In two years, it has since published over 8,000 stories from 80 countries around e-commerce, labour, culture and social media.

More tech events are planned for Mexico City, Jakarta, and Delhi.

Investing to make Africa self-sufficient in food

The ongoing war in Russia and Ukraine shows the need for countries to have excellent food security. Currently, several African countries are expected to face increasing food inflation from shortages of fertilizer and grain that are produced in the war regions, combined with rising oil prices as well as global shipment chain disruptions. Wheat prices are up 45% while fertilizer prices have also risen 300% since the conflict began.

One of the most interesting programs from the African Development Bank Group that is being showcased at the 2022 annual meetings in Accra, Ghana is an ongoing farm improvement project that links to food security and climate resilience in the production of vital cereals such as maize and soya bean and also of poultry.

The AfDB Group’s African Development Fund, which this week celebrates 50 years since its establishment, approved funding of $34.75 million towards the implementation of Ghana’s Savannah Zone Agricultural Productivity Improvement Project (SAPIP), one of whose pillars aims to provide access to agricultural finance in two ways: extending “missing middle” loans to commercial farmers, and food processors including makers of animal feed and a poultry revolving fund that finance imports to small poultry farmers. These have competitive interest rates and flexible repayments that are matched to production periods.

It includes a symbiotic relationship between larger nucleus farms and smaller out-grower farmers who previously had challenges accessing resources and inputs for intense cultivation. But now they get these from this to nucleus farms who have been supported by the AfDB to source modern farm equipment and certified seed. They then hire them out to smaller farmers and provide inputs to the out-growers and provide a ready market by buying produce from the out-growers.

in the harsh Northern regions of the country where farming capacity is underutilized and other land is degraded, conservation farming is encouraged by minimum-till cultivation and reforestation that set trees planted on boundaries and degraded farm areas to restore water and carbon levels and rebalance the environment.

Employing lessons from the Bank’s Technologies for African Agricultural Transformation (TAAT), including improved certified seed, blended fertilizer adapted to suit local farm needs, subsidized inputs and mechanization, the TAAT program was rolled out as (TAAT-S) in the savannas regions. It started in 2018 with four commercial farmers on 87 hectares and received more funding under the Savannah Investment Program to support land development, high-quality inputs, and minimum-till cultivation of maize, soya bean, rice and other staple crops. By 2021 it had 118 farmers cultivating 13,000 hectares with further support from 30,000 smallholder out-growers who cultivate an average of 2 hectares. They now benefit from technology transfer, access to markets financial and mechanization services provided through commercial farmers in the out-grower arrangement.

Four mechanization service centres have been established in the country with a full complement of equipment for land preparation, from planting up to harvests for operations on both large and small farms. Small farmers who do well can graduate to larger farms while other specific programs target to make women and the youth become better entrepreneurs. Large farmers who participate in the scheme can, as a result of their increased acreage and yield, be able to approach financial institutions and access larger facilities such as asset finance of $200,000 – 300,000.

There’s is also the Savannah Investment Program (SIP) being implemented in nine districts of northern Ghana in which the Agriculture Ministry works with farmers to help the surrounding communities improve staple crops and animal yields to reduce grain and poultry imports. The country imports $400 million worth of poultry products a year, but the Ministry is certain the demand can be met locally if farmers’ capacity was enhanced. It has developed value chains finding buyers for the farm outputs with governments, schools, hotels and other institutional and retail buyers.

To enhance local value chains, poultry breeds are improved with exotic breeding while goats and sheep were introduced to the pastoralist communities. To improve sustainability, poultry farmers are assisted to venture into feed production, to reduce the substantial cost of animal feed.

The improvements have been achieved with a subsidy cost of about $100 million a year. But subsidies are the norm in food-producing countries in Europe and the Americas that then get to export their surplus to other nations.

The Ghana program is now a flagship of the Bank’s “Feed Africa” portfolio and a template for other African countries. The program will be rolled out to other countries including Tanzania, Uganda, Mauritania and Egypt.

Speaking ahead of the annual meetings in Accra, African Development Bank Group President Dr. Akinwumi Adesina said that TAAT has delivered improved agricultural technology to 76 million farmers. The interventions have led to enhanced harvests and crop self-sufficiency in countries like Sudan and Ethiopia that received and cultivated new heat-tolerant wheat varieties.

The Bank has just announced a $1.5 billion emergency food production facility to help African countries enhance food production and mitigate disruptions from the Russian war in Ukraine. Taking on lessons from TAAT, instead of relief food distribution, which is a short-term measure, the AfDB is signaling that the continent has the resources, technology and a plan to boost production and ensure food security. It will target to deliver subsidized certified seed, technical support and extension services to over 20 million farmers.

Nairobi Hub Spaces in 2022

Interesting times in Nairobi the last few weeks as Microsoft launched its Africa Development Centre (ADC) office. The Kenya ADC, was launched three days after another one in Lagos, Nigeria that will serve the West Africa region. Across Africa, the company now has 450 staff and engineers working at ADC’s in the two capitals.

The new office also houses the Microsoft Africa Research Institute, its first on the continent as all as a Microsoft Garage, an incubation hub, joining others located in the USA, Canada, Israel, India, and China.

Visa launched an innovation studio in Nairobi, its first in Sub-Saharan Africa to showcase payment solutions and innovations. Visa will co-create e-commerce solutions for the future with partners in the new space that was launched by Patrick Njoroge, the Governor of the Central Bank of Kenya. Visa has other innovations centres in Dubai, Singapore and USA (San Francisco) – which is its flagship “One Market”. There are already partnerships in Africa with Paga and Safaricom.

Who’s next?

It’s not just about technology; NSE-listed agricultural firm Kakuzi has launched an online “Avocademy” hub for farmers to learn about the processes of growing and managing avocado – the current “green gold” crop.

Other Hubs and co-working spaces:

Amazon announced that a new AWS Local Zone would be available in Kenya providing cloud infrastructure. Companies can use it to host their applications by connecting through Amazon local partners including Safaricom.

Google has announced that they will be opening a product development centre in Nairobi and is now hiring engineers, product managers, software engineers, user experience (UX) designers and researchers. Perfect timing as their pioneer Country Manager, Joe Mucheru will continue to serve as Kenya’s Cabinet Secretary for ICT, Innovation and Youth Affairs for the next few months.

Dominoes.

E-commerce insights from Jumia and Chap Chap Go

Yesterday Jumia released their Africa e-commerce index 2021 with some interesting trends, a  year after Covid-19 impacted lives across the continent.

Sam Chappate CEO Jumia Kenya said that in Africa, e-commerce still has room for growth as currently, it still accounts for just 1% of  transactions, and another 300 million people will be accessing the internet in two years. 75% of traffic to Jumia is on mobile, while it is 85% for Kenya.

  • Gross merchandise value has shifted – from 40% of pre-pandemic sales coming from everyday stuff (FMCG, beauty products) to now 60%. Now, a 2kg sugar bag is the top-selling product on Jumia in Kenya. 
  • NYSE-listed Jumia is in ten countries and Kenya number 2 in searches, behind Nigeria. Top cities in Africa are Lagos, Cairo, Nairobi, Casablanca, Abidjan, Gaza, Abuja and Accra.
  •  With 11,000 sellers and 1,600 pickup stations, Jumia has the biggest logistics infrastructure in Kenya. Coca-Cola is probably bigger but it’s a closed system whereas Jumia has opened their system and logistics infrastructure to third parties/partners (e.g. Premier Foods and Unilever). Small companies can use pickup stations for   FMCG.
  • Sales of Jumia are 51% primary cities, 27% secondary cities, and 22% rural – so 50% outside Tier-I cities. Most deliveries in Kenya are to Nairobi Mombasa and Kiambu.
  • Now big in fintech .. 35% of Jumia orders are paid through Jumia pay which has 4 million downloads – they have now opened Jumia pay to third-party partners, starting in Egypt.

Also, Chap Chap GO, an -e-commerce startup that’s winding down, uncovered some gems from its year of operations in Mukuru and Langata areas trading a limited basket of products. Its founder Soud Hyder, a digital commerce specialist, shared some urban e-commerce insights on Twitter.

  • Fastest moving items were wheat flour (Ajab), cooking oil (Salit), cooking fat (Samli), and then sugar – all needed on a daily basis by Mama Chapos (informal roadside cafes).
  • Ajab Flour was super interesting; it’s very popular with Mama Chapos despite being a relatively newer brand, they cited quality and texture for it being the preferred choice, something to do with the elasticity of the chapos and preferred kneading consistency by the cooks.
  • Samli was a product requested by customers, trialled with a small cohort in Jul-Aug 2020, mostly “Mama Chapo” type of customers.
  • GIL (manufacturer of AjabFlour) has a lower quality fighter brand called Umi, intent was to help them garner market share but turns out the premium brand is more popular even in the lower tier of the market, customers are willing to pay a bit more for quality.
  • The market has already validated the “measure and pour model” (weka ya kupima), unhygienic & inconvenient but the market has found equilibrium, works for both retailers and customers, an additional 3% margin is not bad at all for folks in informal retail
  • .. Mama Chapos ended up becoming our core customers because of on-demand service, fair pricing and convenience. We were not always the cheapest but the convenience aspect really helped them focus on their business.
  • We used a hub and spoke model, had small depots in the neighbourhoods we operated in .. the eventual goal was to partner with existing businesses/retailers that had storage space to spare and delivery capacity.
  • We mostly did two, Fresh Fri (B2C – middle class) and Salit (informal retail/kibandas), our B2C footprint was relatively small, so ended up doing quite a bit on Salit including repacking it in 1L reusable jars, see the cost of packaging easily adds 3-5% to the price.
  • Differences in margin is all about supply and buy planning (basis of commodity trading) and following market prices being set by the bigger suppliers/manufacturers, if they drop you have to drop otherwise you won’t move stock.
  • Flour and oil move every day so it’s a volume game and moving bulky items from depot to customer/market in the most efficient way possible, for those who are able to do it really well e.g. the Eastleigh wholesalers and some of the bigger distributors.
  • So FMCG margins are razor-thin in sub-Saharan Africa, pricing makes or kills a business, so wholesalers and bigger retailers make money from rebates in subsequent months, invest capital to build seed customers and retention, build volume for rebates, qualify for credit .. and build credit lines with manufacturers, that net 15 or 30 or 45-day credit line could easily get sub 10% margin, so not a bad hustle if one has all their ducks lined up, but it’s hard, not the easiest of businesses to run, so many things could go wrong
  • .. which is why you are seeing an influx of new oil and fats brands, if you crack distribution, you can carve out a niche. They call vegetable oil these days “Salad* after the brand Salit.
  • Primarily it’s a quality, price point and availability problem. So more on the distribution side, like milk ATMs, if you can plug a brand on top that and execute, even better
  • Unfortunately, we shut down our FMCG business in Q4-2021 and are formally shutting down @ChapChapGO .. we’ve become another statistic of a fledgling startup but hope the insights and lessons learnt will benefit and inspire others.