29 Apr 2020 / Article

“Digital shift has become companies’ top priority”

Obi Ozor, CEO and Co-founder of Kobo360

At the forefront of African start-ups, 31-year-old Nigerian Obi Ozor, co-founder of Kobo360, nicknamed the “Uber for trucks”, has agreed to launch our series of interviews dedicated to the next generation of African entrepreneurs and their vision of the current health crisis and its consequences for Africa.

Winner of the Africa CEO Forum “Disrupter of the Year” award in 2019, Kobo360 is the continent’s rising start-up. The company’s app, which connects lorry drivers and those that need them, provides users with various services to make the transport of goods more fluid. Since its creation barely three years ago, the start-up has already raised nearly 37 million dollars (including 20 million dollars in August 2019 in a round led by Goldman Sachs, and 6 million dollars in December 2018 from International Finance Corporation), has almost 150 employees in six African countries (Nigeria, Ghana, Togo, Kenya, Uganda and Côte d’Ivoire) and has acquired, in particular through the current crisis, nearly 5% of the market share in Nigeria.

Originally hails from the city of Enugu (South-Eastern Nigeria) and graduate of the University of Michigan (United States) – where he met his co-founder and compatriot, Ife Oyedele II, Obi Ozor gives us a resolutely optimistic vision of the crisis long-term impact on the continent, and claims his faith in the inevitable rise of digital technology across Africa and the world.

 

How has the pandemic and its consequences impacted the activity of Kobo360?

Before the pandemic outbreak, our activity was solid with more demand than we could fulfil. We were using over 10,000 trucks a month, each of them doing two to four trips. However, in March, many drivers decided to stay at home and this figure dropped to 3,000 trucks a month.

What were the first steps you took to tackle this shift?

We tried to follow the World Health Organization (WHO) guidelines for our employees and customers, and we organised a joint workshop to ensure all our staff were protected. We distributed hand sanitizers and gloves to truck owners and set up a hotline. In the six countries we have activities, governments had varying responses and we had to adapt. In collaboration with them, we set up a digital pass and distributed it to drivers so they can show officers that they are allowed to transport goods. In the meantime, we thought about how we could keep prices low along the supply chain. To counter the drop of drivers, we decided to heavily discount the prices of diesel, tires and maintenance to incentivise drivers. The result is that we will be at around 6,500 trucks in April and we expect in early May to match our February numbers.

According to you, what is the impact of the outbreak on the logistics and transports sector in Africa?

This is having a big impact. We have seen a 90% delay in shipping, whether at Kenya, Ghana, Côte d’Ivoire or Nigeria’s ports. We have also seen a 70% decrease in non-essential goods traffic. Cement transit, for example, has dropped by 50%, mainly due to regulation. In the meantime however, traffic of fast-moving consumer goods (FMCG) and agro-related goods has grown by 30%, and this demand continues to increase. Overall, the volume of goods in transit has reduced by 30%. The COVID-19 pandemic implied a mass production shutdown not only in Africa, but throughout the world. Demand from China dropped and this affects us a lot as it is the biggest buyer of commodities in Africa.

How do you see the months to come for Kobo360?

We are living in unprecedented times so it is hard to tell. Everything depends on how fast the virus can be managed, how the severity of its impact on the production of goods and services can be managed, how job losses can be mitigated, etc. We don’t really know now what the true impact will be. This uncertainty compelled us to draw up a six-months strategy with the help of our partner International Finance Corporation (IFC) and Goldman Sachs which we review every week. We keep adapting and that’s what we recommend to every other start-ups across Africa.

Are you interacting with other start-ups during this period?

I do speak with many of them via different groups. I share our own experience and I also mentor a few start-ups across the continent.

The outbreak has not prevented Kobo360 from launching its activities in Côte d’Ivoire in April. How come?

We did not change the plan because we had already completed all the paperwork in January. So there wasn’t much more left to do to get started. However, in the other markets we wanted to expand into this year such as Egypt and Tanzania, I don’t yet know if it will be possible.

How do you see the overall situation evolving in the months to come for the transport and logistics sector?

This crisis is very impactful but we think this could be a short-term one. There is a scenario where, within six months, Africa can recover. But right now, we can’t ignore the economic hardship the continent is going through, with many layoffs and people struggling to earn their daily wage. Nor can we ignore the fact that 75% of our economy, especially for Nigeria, is based on exports of raw materials. Their declining prices affects Africa more than any other continent. So there is also a scenario where we could see later on in many export-dependent countries a devaluation crisis maybe even worse than the current one.

How do you interact with governments?

We work very actively with Ministries of Transport, Trade or Investment. We share data with them to help them assess the impact of the pandemic on the economy and put in place the right regulations. In Kenya, for example, we have seen an increase in corruption and extortion attempts by the police, and we have shared this data with the government. These phenomena increase the costs of logistics and are harmful to the economy. Reliable data contributes to better quality of policy and that is our goal. We are seeking the implementation of measures that reduce the pressure on our drivers and make it easier for them to travel on the road.

Why have governments been so keen to cooperate with you?

The supply chain is key for the economy and Africa still lacks reliable transport and logistics infrastructures. Trucking represents 95% of the transport market in Africa versus 70% in the United States. So this is really the only means of moving goods and our customers need us more than ever. Before the outbreak, Kobo360 was already enabling the movement of goods everywhere across Nigeria. In the time of COVID-19, Nigeria has realised how essential our platform is and that is why we have been able to get all the necessary permissions needed. With this streamlining, we are allowing our customers to move goods. Plus, as I said, governments are able to get important data from us, to better understand the lack of trucks, and what is going on in the supply chain. So a good thing to come out of all of this is that governments will have seen how useful the digital world can be. 

Good things could come out of this health crisis?

We are living in an interesting new paradigm. Digital has become part of government strategy. Not only in Africa… the whole world is now thinking digital. Companies are also thinking more digitally. Before, there were still lots of resistance. They knew digital was important but it was not yet considered to be vital. With the health crisis, we are seeing that digital is becoming their top priority. Within two months, it has become mainstream. You now have businesses that want 100% of their delivery to be digital. They would have never done that before.

Are small and medium-sized enterprises (SMEs) also involved in this accelerated transformation?

From what we see, it’s SMEs more than large companies that are moving the fastest to a 100% digital solution. Perhaps because SMEs are precisely those most affected by this crisis and that, unfortunately, supporting them has not been the priority of African governments.

Do you think this crisis will have a long-term impact on the sector? Why and how?

It will have a long-term positive impact for logistics and supply chains. More than ever, people get to see how critical the supply chain is and how the digital world can help to improve it. For Kobo360, it will become easier to support the entire supply chain. Within just two months the change in mindset has been tremendous. The adoption of our Global Logistics Operating System (G-LOS) products will become faster due to this crisis. In February, we had 1.3% of the market share, and now we are reaching 5%.

Do you see other long-term changes coming?

Yes. In Africa, doing business is very challenging because you have to meet requirements, hold physical meetings and so on. Going digital will drastically reduce the needs for physical meetings. This episode will also contribute to making companies more resilient. Until now, normal start-ups would focus on aggressive growth instead of focusing on profits. But many of those start-ups will face closure due to the crisis and I think strategy will shift more towards sustainability. Investors are seeing that only sustainable companies can survive the crisis. You cannot run losses forever. Another good outcome could be that African governments will start focusing more on healthcare. They will see more than ever the importance of a proper healthcare system. African countries are also beginning to understand that our dependence on commodities is a major weakness and that a change towards more diversified economies would bring huge benefits. Diversification, digitalisation, innovation and prioritising healthcare systems… this crisis could be a real game changer for Africa.

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