Nigeria’s Sabi plans financial-services partnerships for South Africa expansion

Some partnerships are now being finalised and Sabi is still looking for further agreements in South Africa to supply small merchants with financial services, CEO Anu Adasolum says. The company, which also operates in Kenya, opened an office in Johannesburg this year as part of a joint venture with South Africa-based tech platform Vumele. Sabi has the option to increase its stake in the venture.

Servicing Africa’s informal economy is key to achieving growth. The IMF has said the sector contributes over $800bn to Africa’s economy, while the International Labour Organization estimates that informal work accounts for over 80% of total employment in some sub-Saharan Africa economies. Informal output, according to the ILO, makes up more than 50% of the region’s official GDP.

Retail is a key part of that: Euromonitor has estimated the combined value of traditional, modern, and e-commerce retailing in sub-Saharan Africa at $380bn in 2021, worth on average between 20% and 50% of GDP.

Yet smaller informal retailers remain underserved in terms of both tools and finance. That has prompted a wave of companies such as TradeDepot, MarketForce, Twiga and Wasoko, (renamed from Sokowatch) which seek to connect small shopkeepers with suppliers via digital channels.

Sabi, founded in 2021, offers a marketplace for small merchants. It provides a ledger to track sales and invoices, and helps traders manage their inventories. Tracking their supply chain activity provides information that Sabi can use to decide whether to make merchant loans.  Shareholders in the company include CRE Venture Capital, Atlantica Ventures, Waarde Capital and the Norrsken 22 tech growth fund.

• Bloomberg reported in April that Sabi planned to raise $125m in a Series B round. The founders declined to comment on the company’s fundraising.
• Sabi may also enter other west African countries as well as the Democratic Republic of Congo (DRC). A decision on the expansion, which would also involve finding further financial partners, will be taken in the second half of 2023, says co-founder Ademola Adesina.

Nigerian economy

Sabi’s founders were previously executives at West African renewable energy company Rensource. The company has over 200,000 merchants and as of September, an annualised gross merchandise value of more than $600m. Nigeria remains its largest market. Sabi is exploring widening the products it can supply to merchants in Nigeria to include electronics and textiles, Adesina says.

Higher Nigerian inflation has not led to any visible weakening of consumer demand in the country, Adesina says. There is “strong activity” on the demand side, but consumers are targeting new, cheaper brands in preference to established, more expensive names “across the board,” he says.

• The weak naira may bring a silver lining for the Nigerian economy, with dollar strength leading to strong investment in local commodities for export including soya, cocoa and maize, he adds.

Bottom line

Mass job creation in Africa will depend in part on the ability of small informal retailers to scale up.