“Serving the hordes of hawkers and traders by the roadside may be at a high cost even for a tech-enabled business model. The easy and bigger pickings may be in offering its technology to serve as the accounting, IT, procurement etc. departments for large informal retailers in markets like Dakar’s Marché Sandaga or Idumota in Lagos”.
In most Sub-Saharan African economies, informal businesses account for between 50-65% of gross domestic product and 80% of jobs. They range from men and women scrapping a living from stalls on the roadside to businesses selling textiles and electronics with a turnover of tens of thousands of dollars. What they have in common is poor record keeping and extremely slow adoption of technology, so low levels of innovation and productivity.
More and more start-ups are throwing tech talents into formalising aspects of the operations of businesses in Africa’s large informal sector, improving their efficiency and facilitating access into formal markets, especially credit and other financial services.
One of such start-ups is the Senegalese distribution chain innovator ProXalys in which Haskè Ventures, a venture capital active in the Francophone Africa, has invested $150, 000 in pre-seed funding.
ProXalys, founded in 2021 by finance expert Thierno Sakho, specialises in digital transformation in business-to-business commerce, with informal sector retailers as its primary target. The start-up aims to modernise and empower Senegal’s informal traders who account for a whooping 90% of the country’s $24.91 billion GDP.
A key challenge for the sector has been growing competition from large distribution chains that have modern and formalised processes. With this new competition, informal businesses are reinventing themselves, particularly through the digitisation of conventional supply chain processes.
ProXalys is working to level the playing field for the informal sector by digitising the entire value chain and reinventing the supply chain processes of the numerous actors in this ecosystem.
According to Sakho, “Digitisation is crucial for the informal sector. We intend to strengthen and modernise the distribution channels. Our goal is to enable informal traders to withstand the dual digital and distribution revolution created by the large multinationals operating on the continent.”
Informal traders, which include small scale vendors that operate on the side of the road – many of whom are women – and distributors of everyday products, find it impossible to access formal credit facilities which are much cheaper than informal alternatives. This is because they don’t keep records and often keep their money in cash so their finances are invisible to financial institutions.
ProXalys has three tools for managing and capturing daily financial flows in real time: an order-taking application for informal distributors; an IT system for administrative management (which includes order tracking and payment management; and a supply chain logistics management system – including: inventory, warehousing, transportation, and delivery.
The start-up also provides a procurement service for everyday products, such as onions and potatoes, with staggered payment terms and free delivery within 24-hours. A solution that will allow informal traders to extend their sales capacity thus enabling them to secure working capital for stock.
With more than a hundred customers, ProXalys is winning the trust of informal traders in Dakar. But the start-up does not plan to stop there and is also working to boost agricultural value chains. Each year in Senegal, 150 million dollars (100 billion F CFA) are lost in agricultural production due to limited market access.
“We support producers of all sizes, as we are the unique intermediary between them and informal distributors,” explains Sakho. ProXalys also works with formal sector customers across retail and hospitality value chains.
Thanks to the first round of fundraising, ProXalys intends to expand its reach in Dakar and in the major cities of Senegal with the ambition to eventually support the entire West African region. The start-up will invest the $150 000 capital in the reinforcement of its technology, and in the development of its physical infrastructure – which will include the consolidation of its vehicle fleet and warehouses.
Greater Picking in Africa’s Large Markets?
ProXalys’ strategy -supporting “producers of all sizes”- may require finetuning. Serving the hordes of hawkers and traders by the roadside may be at a high cost even for a tech-enabled business model. The easy and bigger pickings may be in offering its technology to serve as the accounting, IT, procurement etc. departments for large informal retailers in markets like Dakar’s Marché Sandaga or Idumota in Lagos.