Kobo 360: Can Africa leverage digital technology to solve its supply chain woes?
The combined purchasing power of the African continent is due to reach about $2 trillion by 2050, a 54% increase from the current combined purchasing power of about $1.3 trillion. This is a potentially huge market, unfortunately, a lot of these predictions are still speculative.
Sustaining and increasing an economy’s purchasing power depends largely on the magnitude and effectiveness of the trading that occurs within such an economy. Even with the increasing adoption of digital innovations globally, the physical process of commodity exchange can never be relegated to a position of irrelevance. And the major backbone of commodity distribution has always been the supply chain.
A badly coordinated supply chain is indicative of a potentially stunted economy. So many seemingly impossible things are possible, but growing an economy with an uncoordinated supply chain is not one of them. It is therefore important to find immediate ways to remedy Africa’s dilapidated supply chain structure. Fortunately, African entrepreneurs have been doggedly creating and implementing innovative solutions across the continent to optimize its supply chain. One such company is Kobo 360.
Kobo 360 is one of the African Logitech companies that is set to revolutionize the transportation of goods across Africa. Kobo 360 through its platform has solved some of the enduring problems that bedevil cross-border movement of goods in Africa such as payment among different stakeholders, improvement of the efficiency of truck drivers, and reduced operational costs that are almost always transferred indirectly to the final consumers. The company has strategically positioned itself to take advantage of the $180 billion annual haulage spending in Africa.
The Kobo 360 digital platform connects truck drivers with manufacturers and wholesale distribution companies. The truck drivers are contracted through the Kobo 360 platform to deliver the goods to a third party, mostly wholesale distributors or their company depots. They currently work with some of the biggest multinational companies across the continent such as Nestle, Unilever, and Lafarge, among others. Their business model saves these businesses from accruing the cost of having standby distribution trucks. It enables companies to pay solely for the product delivery services without taking responsibility for overhead expenditures required in owning and maintaining transport trucks.
An example of how the Kobo 360 business model works is this. A manufacturing company A with a head office in Lomé Togo, produces household beverages such as chocolate drinks in its manufacturing plant that is located in Lagos Nigeria. The company has a depot in Accra Ghana where it has one of its largest markets. Company A has requested for a haulage service to transport a truckload of the chocolate drinks to its depot in Accra. Company A registers on the Kobo 360 platform, requests a quote and follows other due processes as prescribed on the platform. The platform matches available trucks/drivers with the needs of Company A and provides contract details for both parties. The driver is paid an upfront on its fee to enforce the contract. The truck driver heads to Accra while being guided by a special mapping system on the platform. Once delivered, the driver receives the complete fee payment. The same process is repeated for the truck driver’s return trip.
It is important to note that Kobo 360 does not receive shipment fees from the manufacturers until the goods have been delivered. It has employed an alternate financing model that funds the drivers’ costs and insures them against unforeseen losses.
Beyond the direct benefits this has had on the manufacturers and their distributors, the Kobo 360 model saves time and ensures faster time to market. This creates necessary flexibility and agility within the supply chains of the manufacturers that help them to respond to market dynamics faster.
The Kobo 360 is an example of the encompassing solution that Africa’s supply chain needs right now. But can such digital innovations completely solve Africa’s enduring supply chain challenges and fast-track its growth to become a highly-value purchasing power economy?
According to Kobo 360, one of the main challenges of its business is the complexity of cross-border transportation within the continent. From unnecessary delays to direct requests for bribes to charging drivers exorbitant fees, the entire movement system across country borders on the continent is disorganized and unfit for business purposes.
One of the major causes of poor cross-border systems is bad economic policies. Amidst some of the major challenges bedeviling the continent’s supply chains, a significant one that has been of great hindrance to the growth of businesses such as Kobo 360 is bad policies. An example of this occurred in 2020 when the Nigerian president decided to shut its borders and exclude its immediate neighbors from transacting business with Nigeria even though they were all part of the ECOWAS family. The overarching effect of border policies on cross-border business transactions/movement of goods is extremely high.
The cost of logistics and product distribution represents about 70% of the final commodity prices in Africa in clear contrast to the United States with 6%. So, the importance of having the right people develop and implement effective border policies cannot be overemphasized. Without unifying cross-border policies across the continent, the supply chain industry will continue to suffer. The overall effect of these dysfunctional structures creates gaps at the nexus of demand and supply, leading to an increase in the final costs of goods which creates another dilemma of inflation that thereafter leads to a reduction in people’s earning capacity and dwindles the overall economy’s purchasing power.
Although this is one of the challenges and mismatches the AfCFTA seeks to solve, it is still a long way from full implementation.
So yes, companies like Kobo 360 can create a digital ecosystem that can sustain and probably fast-track Africa’s growth towards a high combined purchasing power, but without fixing border policies that hinder the effective transportation of goods, their positive effects will become almost negligible.
