Can e-commerce be a game-changer for SMEs in Africa?
We had the chance to interview the entrepreneur, educated lawyer and professional jazz pianist Gilles-Komi Maglo. Gilles is the CEO and Founder of MES&DAK, a business that aims to close the financing gap for SMEs with a focus on Africa. He provided key insights about not only the business model of MES & DAK and its solutions to reduce poverty through helping SMEs, but also discussed perspectives on the potential of e-commerce and the impact it can have on the integration of markets within Africa and with international markets.
Mr. Maglo, musician and entrepreneur – one might assume that this is a rather unconventional combination. What brought you to start your own company?
When it comes to music and leading a business, there is a difference in what I do, but not in how I do it. In both roles, you have to share the same traits: resilience, discipline, and a strong eagerness to learn. Furthermore, I come from a family of entrepreneurs.
I saw my father’s company with about 400 employees shrinking until they closed – not because they were not doing good. This local business was not big or good enough to be considered as contractor for international development institutions. Since most construction contracts were financed either by Western Countries or by International development institutions, my father’s company could not participate. Foreign companies came in and did that work. When our business had to close, I asked myself: What could be my contribution to my African community? How can we use the opportunities of the African market? Nobody has asked me to become an entrepreneur. But I wanted to use the education I benefitted from to support local companies in their development.
What is your solution to support SMEs (A/N: small and medium sized enterprises) in their development?
McKinsey came out in 2013 with a study called Lions go Digital in Africa. They estimated that in 2025 the volume of transactions of e-commerce in Africa will be something like 75 billion USD per year. Yet, despite this huge potential, there is no corresponding ecosystem in place in Africa that is adapted to the specific needs of SMEs. That’s why we have built from scratch an ecosystem to assist SMEs. At the heart of the ecosystem there is a platform, named M’Network. Everyone, whether business persons, consultants or students, can register for free.
As a business, you can open a personalized online shop, named M’Butic on M’Network and start selling. Second, we have innovated a digital ERP (A/N: Enterprise Resource Planning) solution for SMEs. We work with interested companies to enhance their business and operation plans. We do this with the support of consultants registered on M’Network. Once a company is investment ready, the business owner decides who he or she wants to contact for funding. Through a digitized funding canvas, which is included in the ERP solution, credit committees of selected financial institutions can make informed decision more quickly; up to 60 per cent of time is saved. Finally, after a positive funding decision, we provide a tool to the financial institution to follow the development trajectory of funded enterprises through our system. This is our Fintech solution, named M’Bank.
What is the business model behind your platform? And who is paying the consultants you just mentioned?
In our business model, all participants are winners: Since we help the bank to work time-efficiently, the bank can lend more money and the businesses benefit from that. If your funding is 1000, the bank will pay you 1100. That time, we as MES & DAK collect a provision of 100. Out of this 100, we keep about 20 per cent of the payment and 80 per cent goes to the consultant. In common payment models, often consultants want 50 per cent of the payment before and the rest directly after their service. That model is not going to work in our case. Consultants get around 30 percent before the service, 50 per cent after and the remaining 20 percent can be part of a deal between both parties to have a collaboration. We want to change the mindset of those who see consulting just as a quick way to make money. We want to get away from that.
Besides the salary: What else are incentives for consultants to engage with the businesses?
We are building a bridge for those who live in the diaspora and want to contribute to the development of the African community. Consulting can be delivered online, with no limitation in terms of space. This support is appropriate for small businesses because they need cost-effective technical assistance. Consequently, we create sustainable business relationships between consultants and companies that are designed to last for at least 24 months. We want to hold them accountable for the work they are producing to support the SMEs.
Could you also give us a sense of numbers: How many businesses or consultancies are on your platform at the moment?
Right now, we are testing in Cameroon, Nigeria, Ghana, Mauritius, Kenya and Ivory Coast and have 1200 sign-ups, a mix of enterprises and consultants. Once we are ready with testing and market validation, we must be capable to scale very fast to foster positive economic development.
Speaking of the impact your business model can have just reminded me of the United Nations Sustainable Development Goal 8, which is also about job creation and economic growth. Did you also include the SDGs in your platform design?
Yes, definitely. On our platform, businesses can indicate the SDGs they are contributing to with their business models. Thus, funding institutions and customers can directly search for the business models that contribute to specific SDGs. Still, often times those who are mainly targeted by the SDGs do not even know or care about them. That’s why we promote the SDGs through their integration in our platform. We are taking the SDGs to the bottom of the pyramid.
Besides the insights you gave insights into your business, we are also interested in your perspective on the development of e-commerce, since you worked around the topic for nearly eight years. What do you perceive as the biggest challenges in e-commerce development, especially in Africa?
Definitely, one challenge is internet connectivity. What can you do with the best app and the best smartphone, when there is no access to internet? Luckily, broadband access is improving in many developing countries.
There is a second challenge for e-commerce: Many governments put measures in place to help small businesses grow. But from one country to another they have difficulties to harmonize regulation frameworks for doing cross-border business, this is not supportive for e-commerce businesses to blossom. Imagine you are the owner of a growing online business in one of the 55 different states of Africa. You want to grow outside of your limited national market, but there is no harmonized legal and regulating framework. This impedes you to scale fast. Clearly, this is one of the advantages, players in the USA and China are enjoying.
Political leaders have to consider the needs of SMEs instead of putting up barriers. Because in e-commerce, you as a business owner do not have any geographical boundary. Once customers like your products and services, you must go as far as you can.
Do you also see potential of e-commerce to improve the lives of people with low income?
My answer is clearly yes. I give you one example: We set up an M’Butic for Ethiopian women who otherwise have very few possibilities. Through this shop, the women can sell hand-made clothes globally and generate additional income for their families and the whole community they are living in. This is how we will change the situation for good!
Income creation is a paramount goal for us, because many young Africans are unemployed. Yet, this challenge displays itself as an opportunity for e-commerce, because SMEs provide up to 90% of the jobs in the private sector. How do we help those small businesses with e-commerce to create jobs? Definitely, it’s not importing goods from elsewhere into Africa – that would not create jobs, that would make us only consumers. But if we help local businesses to improve performance and productivity, but also have a facilitated access to the market and sell their services or products, then we are likely to develop sound communities that are running business systems. We are not closing the door to import products, but interconnecting African markets is our priority. We have to think about how we develop our own ecosystem. When that thinking on a business side, on a consumer side and also on a political side comes together, we are likely to champion those challenges in connection with e-commerce.