Kenyan start-up Little hits 1 million customers across East Africa and builds out other services through its platform, including e-bikes

12 November 2021

Top Story

Kenyan start-up Little started as a ride-hailing company but has transitioned to provide a wider range of service. It has just launched in Somalia and has plans to attract external investment. Russell Southwood spoke to its founder Kamal Buhabhatti, CEO, Craft Silicon about how it has grown.

Kenya’s Little started out as Little Cab in January 2015 and over five years has rolled out to four other East African countries: Uganda, Tanzania, Ethiopia and this week, Somalia: “It has really scaled up quite well. We launched in Uganda just before Covid-19 so growth was extremely slow but it’s now really picking up.” There are now 1 million active customers, 60-70% of whom are in Kenya.

The name change reflects a shift in emphasis as the plucky local contender seeks to compete with the two international ride-hailing companies, Bolt and Uber: “Initially we were just ride-hailing and then Covid-19 came. In response we started takeaway food, drinks and grocery deliveries on the same app. You can book a doctor’s appointment and also order a Covid-19 test from home. You can also order movie tickets and make payments. It’s more like a super-app.”

Because its parent company Craft Silicon is a significant payments solutions provider it has been relatively easy to make this the core of the Little platform: “Customers, drivers and merchants can all make use of it. For example, a driver can fill up his car at the petrol station without cash. We also do ‘small ticket’ lending up to US$50.” Another approach has been to provide corporate ride hailing, where payment is integrated into the company’s ERP system.

The multi-service approach is designed to widen its revenue streams as both Bolt and Uber have tightened the screws on ride-pricing. Little is the David against the two international Goliaths who have much deeper pockets. Little has also tried bus rides but found the market too difficult: “The product didn’t go well. There were lots of difficulties from local bus operators and we did not have enough money to continue to subsidize the rides.”

Arguably its most radical move is that it will be launching today e-bikes and e-scooters on various large-scale university campuses. This looks like a way of trialing how well this quintessentially European city product will work in the rather more gritty environment of African cities like Nairobi.

The company is profitable but needs more investment to keep pace with its roll-out plans: “We are bootstrapping at the moment but it’s always a challenge when competing with the bigger players. You can’t compete on price alone. The solution is to localize the product and innovate.”

South Africa’s Mergers, Acquisitions and Exits – US$52 billion in first half of 2021

In this week’s second Top Story, Chanzo Capital’s Eric Osiakwan looks at the growing level of mergers, acquisitions and exits in South Africa.

Mergers and acquisitions worth US$52B were completed in South Africa during the first half of 2021, with the value of deals growing by 958% from 2020 with the tech sector in the lead according to Refinitiv Data that provides financial markets and infrastructure data . According to Digest Africa, the value of mergers and acquisitions in the African tech ecosystem in 2018 was US$504M with 24 out of the 39 deals taking place in South Africa making it the country with the most mergers, acquisitions and exits among the KINGS countries. Which is why am focusing South Africa’s mergers, acquisitions and exits. On the 1st of September 2021, ZipCo announced plans to fully acquire South African buy-now-pay-later (BNPL) fintech, Payflex . On the 17th of the same month, Tech company Advannotech Pty Ltd, acquired IT-TEC MN Pty Ltd a Western Cape-based information technology company specializing in ICT support, security, networking and infrastructure . In March, First National Bank (FNB) acquired local fintech firm Selpal .

South Africa and Nigeria, the two leading economies in Africa, have always been in fierce competition with each other. South Africa’s leading fintech, MFS Africa founded by Dare Okoudjou in 2010, announced on 20th October 2021 their acquisition of one of Nigeria’s leading super-agent networks, Baxi, subject to approval from the Central Bank of Nigeria making it the biggest intra-Africa acquisition and the second highest acquisition in Nigeria to date after the Stripe acquisition of Paystack last year . This seems like a response to Nigeria’s Jiji acquisition of South Africa’s Naspers’ OLX operations in 2019 . Baxi’s 90,000 agent network processed over US$1B in transactions in 2021 to date. MFS Africa is the largest fintech interoperability hub in Africa connecting telecoms companies, banks and mobile money (Momo) operators across over 35 countries via a single Application Protocol Interface (API) with an estimated 320M Momo customers in 35 countries in Africa. At the height of the pandemic in 2020, MFS Africa acquired Beyonic in Uganda – another strategic acquisition that increased their footprint in East Africa in the same way the Baxi one increased their footprint in West Africa . In 2016, the company took a majority position in Sochitel, a leading airtime top-up provider based in London with operations in Joburg, Douala and Accra which they exited in 2020 at 3.5x book value .

MFS Africa has also been making some strategic early-stage investments to build a base of companies it can acquire later such as the investments in Maviance in May 2021 and Numida in April 2021 . MSF Africa had earlier made investments in EzyAgric and Inclusivity in 2019 as they started their frontier investments program lead by their corporate development team. In a strategic move to enter the Chinese market, MFS Africa allowed China based VC firm LUN Partners Group to lead their B series funding round in which they raised a total of US$14M in 2018 . Part of that capital is what they have used for their strategic investments and acquisitions to consolidate the market giving them an edge over their competitors. According to CB Insights the company has raised US$17.7M to date with which they have made all these strategic moves - including the partnership with Xoom – a Paypal service to bring new international Momo transfers to Africa .

These mergers, acquisitions and exits started in December 1999 when Mark Shuttleworth sold his leading digital certificate authority provision company Thawte founded in 1995 to VeriSign for US$575M . This was before mobile took hold on the continent making Mark the first African dot com millionaire at the prime age of 26 in the middle of the dot com bubble . This placed Africa on the global technology map for developing a global technology company that was at the time number two to VeriSign the acquirer. Mark used his acquired wealth in September 2000 to form HBD Venture Capital (Here Be Dragons), the first venture capital firm in Africa from Cape Town. Along with the fund, he started the Shuttleworth Foundation in 2001, a non-profit that aimed to improve access to and quality of South African education. In 2002, he became the first African to go to space as a tourist paying $20M for an eight-day trip to the International Space Station where he participated in experiments related to AIDS and GENOME. In 2004, he funded the development of Ubuntu, a Linux distribution based on Debian, through his company, Canonical Ltd. In 2005, he founded the Ubuntu Foundation with an initial investment of $10M.

Keet van Zyl who initially worked for Mark’s HBD later launched Knife Capital with Andrea Bohmert and Eben van Heerden in 2010. Knife Capital took over the management of seven HBD portfolio companies some of which they exited including CSense to GE, Fundamo to VISA and orderTalk to Uber Eats . Knife also exited iKubu a radar system for cyclists to Garmin in 2015 and disposed of their stake in a management buyout in FlightScope in 2017 .

In 2009, the South Africa government introduced a unique tax incentive, Section 12J which allowed the wealthy to write off some of their taxes against investing in risking early-stage ventures. This led to investments in real estate but also in early-stage startup tech ventures through firms like Grovest, Karlon Ventures, Knife Capital etc who had section 12J dedicated funds . Even though the 12J is been phased out in 2021, it has generated significant momentum for investment and could later return in a different/better form . Some of these investments are going to find their initial public offering (IPO) on the new Cape Town Stock Exchange that started operations at the beginning of October 2021, the South African Stock Exchange (A2X) that currently offers 56 securities or the Johannesburg Stock Exchange (JSE). And so would the entrepreneurs who are pitching to raise at our 9th in Mauritius (see website for latest dates).

In Brief

Sudan: A Sudanese court has ordered the country’s three main mobile operators to restore internet services, after access was cut off last month following a coup by military leaders, Reuters reports. A judge ordered Kuwaiti-owned Zain, MTN of South Africa and local provider Sudatel (Sudani) to restore internet services immediately, according to lawyer Abdelazim Hassan, who raised a complaint on behalf of the Sudanese Consumer Protection Society. In a tweet, the US Agency for International Development (USAID) called the blackout ‘a violation of international law’.

South Africa: STL, an industry integrator of digital networks, announced a strategic partnership with Limpopo Connexion, a subsidiary of Limpopo Economic Development Agency that provides world-class broadband services to government bodies and enterprises in South Africa. STL’s Digital BSS/OSS platform gives customers access to a cloud-native and comprehensive app development ecosystem and a hybrid cloud management system. This will enable Limpopo launch digital services and future-ready applications such as e-education, telemedicine and e-governance, transforming billions of lives in the region.

UK-based Vodafone Group has inked an agreement to transfer its 55% shareholding in Vodafone Egypt to its sub-Saharan African subsidiary, Vodacom Group. In a press release announcing the development, Vodafone stated the transfer would simplify the management of its African holdings and ‘further strengthen the delivery of connectivity and financial services in Africa’.

Cote d’Ivoire: MainOne has upgraded Ivorian ISP, VIPNET’s capacity from 155Mbps to 1Gbps. VIPNET is a telecommunications operator that provides connectivity services and technology integration solutions through the national broadband coverage. Over the years, VIPNET has positioned itself as one of the major internet providers in Côte d'Ivoire and they are known as the Third Internet Access Provider and First Alternative Operators in Côte d'Ivoire. VIPNET became MainOne’s 1st local ISP partner in Côte d'Ivoire. Following a successful year, a request was made to upgrade its capacity provisioning as a result of MainOne’s world-class connectivity services and VIPNET business growth/expansion.

Nigerian telecom regulator NCC has given a N20m grant to four start-ups to promote local content, encouraging the development of new indigenous technologies and contents, that are oriented in cutting-edge research and stimulate sustainable economic growth.

Meta announced the launch of Facebook Business Coach, an innovative and easily-accessible way for owners of small-and medium-sized businesses (SMBs) in South Africa, Nigeria, and Kenya and other English speaking countries to learn more about how to grow their business online with Facebook, Instagram and WhatsApp.

Nigerian mobile operators MTN and Airtel have been granted approval in principle to operate mobile payment banking services in the West African country. Airtel says it plans to provide services through a subsidiary known as Smartcash but noted that final approval is subject to satisfying certain standard conditions within six months.

IM card provider, Workz, has introduced a new biodegradable SIM card to its product range to help mobile network operators reduce their environmental footprint. The SIM card, titled EcoSIM, completely biodegrades at the end of its usable life, either in landfill or compost conditions eliminating its plastic waste.

Paratus Namibia and MTN Namibia have signed a national roaming agreement, the first of its kind in the Southern African country, allowing them to expand their own networks without duplicating coverage in specific areas. In a press release, Paratus and MTN claimed the deal marks a milestone for the country’s telecoms sector, as it ‘will provide not only a better mobile LTE service to customers, but also a very attractive competitive option in the market’.

To support universal and affordable broadband access in Africa, IFC has partnered with Liquid Intelligent Technologies to expand data center capacity and the rollout of fiber-optic cable on the continent. The partnership with Liquid Intelligent Technologies, Africa’s leading independent fiber and digital services provider, aims to increase digital connectivity and inclusion in Africa and to support the region’s growing digital ecosystem. IFC’s equity and debt investments in Liquid Intelligent Technologies, which to date total approximately $250 million, will support the company to grow its hyperscale data center capacity in Egypt, Kenya, Nigeria, and South Africa through its subsidiary, Africa Data Centres. As Africa’s population grows and is increasingly urbanized, data consumption is expected to grow strongly and with this comes the need for secure local data hosting.