Last month we wrote an article on the Catalyst Fund (CF), an early stage innovation investment vehicle run by global strategy consulting firm Bankable Frontier Associates (BFA) and supported by the Bill and Melinda Gates Foundation and JPMorgan & chase Co. We provided a brief insight into Catalyst’s portfolio companies, by documenting their respective products, markets and sponsors. As promised, we will begin to go deeper into some of the 20 businesses, and to start us off we have Sokowatch, the B2B e-commerce company connecting Africa’s informal retail stores directly to local and multinational suppliers—such as Unilever and Proctor and Gamble.

Sokowatch does all this by allowing shopkeepers to order products at any time via SMS or mobile app for free same-day delivery to their stores. Based on ordering data, Sokowatch then automatically calculates and extends credit to stores to allow them to increase their purchase sizes and grow their businesses.

Sokowatch was founded in 2016 and has since received $75,000 in financial support from the Catalyst Fund along with continued mentoring from its CF sponsoring investor, the US based fintech inclusion VC firm Quona Capital. The company has progressed well, with orders exceeding well over 100,000 and operating in Kenya, Tanzania and Rwanda.

In July 2018, Sokowatch announced that they had closed a $2 million seed investment round, lead by 4DX venutures, with others firms such as Village Gloval, Lynett Capital, Golden Palm Investments and Outlierz ventures also investing.

The funds will go towards expanding Sokowatch’s operational market across East Africa, as well as piloting additional value-added services to its clients (shops).

Tapping into Africa’s informal retail market

Informal African markets have started to attract attention from investors and economists alike. This relatively nascent interest has partly come about due to outdated statistical methods not accounting for billions of dollars in informal economic activity. One estimate by The International Labor Organization places up to two-thirds of Sub-Saharan Africa’s non-agricultural employment in the informal economy. The 2016 KPMG study has estimated that fast moving consumer goods (FMCG) spending in Nigeria alone at $41 billion annually. A large portion of those goods move through the continent’s vast network of roadside markets, shops, and stands, subsequently moving under the radar of censuses.

Daniel Yu, chief executive officer (CEO) and founder of Sokowatch stated that “with over 90 per cent of retail sales across Africa happening through informal retailers, we believe that there is a huge opportunity to formalise small businesses. Because the African continent has a median age of only 19 but is already the world’s second largest population, we expect new tech-enabled solutions to leapfrog the traditional models of malls, banks, and delivery companies when it comes to providing retail, finance, and logistics services for the African mass market.”

With increased digitalisation and an ever growing customer base, Sokowatch’s future looks bright…