Many African countries are well known for producing agricultural commodities but a major issue is getting these goods to market, says Uju Uzo-Ojinnaka, CEO of Traders of Africa.
It is a technology-enabled hub that increases access to commodities by boosting exposure for the variety of goods featured on the platform. There is also an offline platform that caters to the needs of those not online.
Spotting the opportunity
For nine years, Uzo-Ojinnaka worked in the banking sector before joining her family to run a business importing construction products from China and elsewhere. While studying at the China Europe International Business School (CEIBS) in Zurich, Switzerland, she had issues accessing forex to pay for goods in China and needed help to exchange currency, as she continued to work for her family business.
“Dollars were scarce at the time as the Nigerian government had placed control on foreign exchange, and my family had an invoice to settle in China. Someone introduced me to an Indian merchant that wanted 20 containers of groundnut and asked if I could help source the product. I accepted because I would make foreign exchange to help pay for my goods in China. I put together a team to help me look for a large deposit of groundnut, but we couldn’t find it,” she says.
Despite eventually losing the deal, Uzo-Ojinnaka spotted a business opportunity to make it easier to buy commodities in Africa. She spoke to one of the faculty members at CEIBS, Dr Pedro Nueno, and convinced him to invest in her business plan.
“He invested when we were about to launch the business in August 2017, and we started in September with 9,000 suppliers sourced from five African countries. The main initial goods were agricultural items.”
However, finding additional suppliers was an issue for the platform. The CEO says that to deepen its supply base, the company created an academy that trains smallholder farmers and traders on how to boost production and trade in commercial quantities. This would ensure a steady stream of traders and suppliers to feed raw materials into the platform.
“We introduce selected trainees into the academy where they are mentored on how to source products. This method has become our inroad into different countries through various partnerships.”
Five years later, Traders of Africa has 18,000 suppliers from 15 African countries on its online marketplace. It also has numerous offline smallholder farmers, with 485 products in total. The company’s annual revenue is $4.8 million.
Expanding the scope of the business
Uzo-Ojinnaka says that Traders of Africa initially started in Lagos, Nigeria, but was quick to expand to other African countries.
“I wanted to start with five African countries – Uganda, Rwanda, Kenya, Nigeria and Ghana. We went from Lagos, Nigeria, to the other four African countries to recruit merchant acquisition directors who would source and onboard suppliers,” says Uzo-Ojinnaka.
Starting with agro-commodities, the company soon expanded into other products such as fashion accessories, minerals and metals, food and beverages, beauty products, packaging, construction materials and furniture. The website can be used for any raw material or product, Uzo-Ojinnaka says, as long as there is strong demand. Traders of Africa takes commission on each transaction that is processed.
Payment barriers a key problem
At the early stage of the business, Uzo-Ojinnaka says there were issues with payment terms and trust between buyers and sellers on the platform. Most suppliers wanted to be paid in cash, while most buyers wanted to use payment terms such as a letter of credit, which created a problem and delayed transactions.
The company addressed the problem by paying the suppliers upfront and allowing buyers to pay Traders of Africa back at a later date.
“We knew we needed to innovate or risk going out of business. We built a B2B platform, and the trade volume is high. We had escrow services, insurance and verification in the system. But two months down the line, there were no transactions. Before we figured these issues out, there was a time I couldn’t pay salaries for two months. Fortunately, my staff understood and stood by me.”
Having addressed the initial challenges with payment terms, the CEO says the company is still struggling with capacity building, logistics and funding.
Traders of Africa’s immediate growth plan is to have partnerships and offices in 10 African countries and to increase its annual revenue.
“We want to be the Alibaba of Africa. We are currently in Nigeria, Benin, Togo, Cameroon and Mali and will be in Ghana, Uganda and Tanzania in the next few months. At maturity, Traders of Africa should be able to generate $20 million monthly, which is part of our growth plan.”