Did you know that Africa’s informal sector accounts for around 70% of the food, drink, and personal care products sold to consumers across Africa? Sadly though, these smaller retailers have been long held back due to a number of problems like poor stock levels, no access to working capital or supply chain struggles. Fortunately, there are a growing number of tech-enabled businesses that are building innovations to solve problems just like these in order to support local small and medium-sized local enterprises to reach their full potential. So what does the informal sector have to look forward to in 2023?
Smartphones are the new norm
Over the last ten years, Africa's informal retail sector's supply chain has been going through a gradual process of change. For example, retailers have been getting used to new ways to order products, such as through SMS and local sales staff. But 2022 was a turning point for customers' willingness to use tech-enabled solutions, as smartphone and app use reached levels that had never been seen before. This trend is now likely to branch out from city centres and into rural communities as well. One drawback might be that the devices are quite expensive for many to buy. However, governments, NGOs, and telecom companies are becoming more interested in subsidising access to smartphones because of the huge economic benefits of widespread use.
A new group of business leaders
In the past, informal African retailers were limited due to the size of their in-store floor space, which may be anywhere from one to thirty square metres. In the past, this meant that many of them could only sell a small number of essential goods in limited quantities. But fintech platforms are now making it easier and easier to get quick access to working capital so that these business owners can quickly grow their businesses and keep up with market demand. This change will take some time to trickle in but this marks an important step towards creating more competitive businesses in the sector.
Logistics networks continue to change
At the moment, millions of retailers are limited by a logistics market that is very fragmented. This often comes down to operations that have to deal with unreliable deliveries and price agreements which are dependent on relationships. But as they grow, informal retailers will need faster and more efficient supply chain networks to keep up with their customers' needs. This will begin to see the creation of standardised and streamlined service providers who will go out of their way to meet these needs. Here wholesalers will start to fill this gap, stepping in to support these business owners. This in turn will fuel healthier competition between wholesalers and logistics companies, further developing the market.
The bottom line
Africa’s informal sector is home to many SMEs which form the backbone of the local economy. Tech and logistics companies are beginning to adapt in order to support this lucrative sector by offering quick access to working capital and other operational changes which suit the dynamics of these businesses. To find out how Merchant Capital can support your business’s growth within the next 48 hours, contact us today.