How Wasoko, MaxAB's Tech Merger is Reshaping Africa's B2B Fintech Landscape

Wasoko and MaxAB have completed a $230 million deal, one of Africa's largest tech merger, combining their networks of over 450,000 B2B informal retailers and reaching 65 million consumers across Kenya, Tanzania, Rwanda, Egypt and Morocco. The merger aims to transform the platform into a multi-vertical ecosystem offering e-commerce, digital services, e-payments, and credit financing. I spoke to both co-CEOs of Wasoko and MaxAB. Let us listen in. The merger between Wasoko and MaxAB is truly a landmark transaction. We've become by far the largest B2B platform across the African continent. And really what this is doing is unlocking not just the potential of e-commerce, but also financial services to help informal retailers across the continent get more for less. Belal, let me bring you in and help us understand some of the challenges that you anticipate in blending MaxAB's operational model with that of Wasoko's, and also how you plan to address some of these challenges to ensure a smooth transition. This is something quite big for the continent. So what are some of the challenges that you anticipate here, and also what are some of the-how are you-how are we seeing you being in a capacity to address them? Yeah, so the good thing is the African continent is way more similar than people anticipate. There are different levels of infrastructure readiness and technology penetration. However, the problems remain the same. So we actually did not face that much changes when it came to the business front. On integrating two big cultures and two big organizations like this, it's never been easy, and it will not be easy. I think identifying that this is a challenge, we need to-both teams need to hear to each other, understand how we operate, because both of them-both companies had really good cultures. They are just different, and we understood those differences, and we acceptably communicated and sent people back and forth between those markets to address those as fast as possible. Daniel, what are the key synergies you expect to achieve from this integration, and how will you manage any operational challenges during this process? There are quite a number of synergies that we are expecting as a result of this merger, but one of them that's maybe worth highlighting is how we really expect to unlock the potential of intra-Africa trade as a result of the merger. So by now having a very deep footprint across both North Africa and East Africa, what we expect to be able to do is source goods locally between the different regions and actually drive the trade and logistics ourselves to better serve customers across markets. For example, taking tea from Kenya and packaging that, blending that according to the preferences of our customers in Egypt, and directly overseeing that export all the way through to the final sale to ensure that consumers in Egypt are able to enjoy Kenya tea at the best value for money possible. In terms of the fintech expansion here, with the merger expanding our so-called services beyond the traditional e-commerce into fintech, what are some of the new fintech solutions that you are likely to see here, and what you are actually excited about? And also, how do you plan to drive the adoption among your users? The fintech services that we already have live and active actually across multiple countries now in the combined group include digital financial services, where we're basically enabling top-ups digitally for merchants to expand their revenue streams to better serve the consumers in their community. We also provide credit financing to help unlock and address the working capital challenges of the small-medium enterprises that we serve, as well as actually digital payments, leveraging our network and our merchant base to be able to pay digitally not just for our services, but even for third parties as well. And it's our core focus to expand and roll out as many of these different products and business lines to all of our markets over the coming 12 months. And Bilala, let me bring you in. Marks AB has been a pioneer in transforming the Egyptian grocery market. So how will this merger enhance your ability to offer innovative supply chain solutions and also fintech services to your network of retailers? This is quite a lot we are seeing here, quite a market. Maybe you can expound more on that. Expanding into other markets and diversifying our business to become way beyond Egypt was something that we were looking to achieve. And with this merger, we've been able to achieve it much, much, much quicker. Because we had reliable partners that we can depend on, and out of a sudden, we diversified overnight the business outside of Egypt. So this was one of the key reasons we got into this. Now, at the same time, as Dan mentioned, there's way more for us to offer collectively. So most of the biggest FMCGs cover all our markets. So signing one deal with one company that can put their products into the shelves of hundreds of thousands of retailers across the continent, it's something that wasn't easy before. Without investing so much money in building distribution networks across the continent, now with one deal, they can put their products into more than 250,000 retailers overnight. So this definitely is allowing us to fulfill our vision and to build a B2B e-commerce platform, but not ending with e-commerce. And Kenya is your second largest market after Egypt. So what are some of the innovations or improvements we are likely to see from this end in terms of the supply chain management resulting from this merger? So we run our business in a hyper-local format. So we allow our country managers to find their own solutions and then work with the products and tech teams to make sure that those solutions are scalable. Now, by doing that, you realize that some of the teams on ground will come up with super innovative solutions that are not only working for their own market, but can be expanded into other markets. And this is what we call cross-pollination of knowledge between those markets. And we created a structure where those local teams can share knowledge so that we can expand the solutions that the local team would come up with across multiple markets pretty quickly. And let me stay with you, Bilal, and also throw to you these questions, because there's quite a lot you're saying here, replication from one market to the next. You have Kenya, Tanzania, and Rwanda. So how do you plan to leverage the merger to replicate this success in new markets, particularly in Egypt and Morocco? Yeah. So basically what we've seen in the East African markets that Wasoko have been operated in is that they came up with an operating model that is very tailored to cities that are smaller than the ones we have used to operate in here in Egypt, as an example. So Cairo is definitely much bigger than any average city. Now, we have not expanded into all the smaller cities and counties in Egypt because we couldn't figure out the operational model that allows us to scale that efficiency. However, because the cities on the East African continent, part of the continent has been much smaller, the team on ground has figured that out. And we're leveraging the technology that has been built over there and the operational know-how of serving smaller cities with smaller population, with much lower access to internet in a cost-effective way. Given Marks AB is a strong foothold in Egypt and Morocco here in terms of the market growth, what are your expectations for the company's revenue growth and also market impact over the next year, especially following the merger? We're still looking to scale a market like Egypt. However, we're looking to scale the other markets even faster. So by doing that, Egypt will become a smaller part of the business. But that doesn't mean it's not going to be growing. It's going to be growing. But we see so much potential in the Moroccan market, as an example, in the Kenyan market, as an example. So we're investing heavily in those markets to make sure that we have a much stronger foothold over there. And Daniel, still in terms of the market growth, what are some of the market-specific strategies will you employ to address the unique challenges and opportunities in these new regions, and also in terms of addressing any potential risks? Because there's a lot that is happening when it comes to the market fluctuations in terms of the currency and also, you know, how these could impact your growth projections. I really think that the key to risk mitigation, especially given volatility across our different markets, is diversification. So really making sure that we have a well-rounded business with a strong footprint across many African markets. By doing so, we really expect that we'll be able to benefit from the overall Pan-African growth trends that we are very, very strongly excited for, while avoiding any individual country risks and volatility that might come up from time to time. And in terms of the return on investment here, $230 million. It's quite a big number there. So how soon are we likely to see the return on investment? We have absolutely benefited from an excellent set of investors. Both Wasoco and Maxab had some of the most prestigious, both early-stage venture capital investors focused on the region and globally, as well as now very, very successful equity growth investors for the later stage as well. What I'd say is we are very focused on continuing to grow profitably, sustainably, and continuing to unlock our full potential and deliver the full value of the Pan-African B2B platform that we're building. And by doing so, we expect that we will bring world-class returns, not just to investors, but also building out a world-class company as well that will truly be a pioneer and hopefully a leading example of the kinds of companies that can be built coming out of the African continent. All right. And in terms of your financials, what is your expectation? How much are you expecting to get? Let us look at Kenya, which is the second-largest market. We have Tanzania and also Rwanda. What are your financial expectations looking at the varied countries here? I would say that we are looking to significantly grow each and every one of our countries over the next 12 months. And that growth is not just going to be concentrated in the e-commerce business, but also especially in the financial services that we're offering, which we've already seen those services alone more than double in terms of their revenue contribution over the past one year. So continuing these trends, really seeing growth across the suite of services that we offer as a Pan-African B2B platform, that's really the focus for us. From the back-end process, Daniel, how are you likely to deal with some of the cyber risks associated when it comes to B2B commerce? I would say that cybersecurity is essential for any business, especially in the tech business. For us, we are very, very fortunate to have a leading team of world-class technologists who have built out our in-house technology, including leading AI machine learning algorithms that have enabled us to really use our own data to unlock the full potential of our business, optimize our routing, ensure proper demand prediction, as well as ensure that overall our systems are secure and fully, fully protected against any threats that they might be facing across our markets. In terms of the regulatory landscape here, what are we likely to see in terms of the different markets that you are in and also looking to expand? And also maybe let us in on what's more on the pipeline. So from a regulatory perspective, the good thing is that those two businesses did not overlap in a single market, right? So basically, we had no regulatory issues to allow us to do this deal. And if I would zoom in on the FinTech business line, which we are very keen about scaling in the upcoming period, we've been working very closely with the local governments of all the five markets, understanding the needs and the direction and the strategy of the central banks and the regulators over there. And we're coming up with some innovative solutions to allow us to tailor for the needs of every market on its own. We work very closely with them because we see that aligning what we do with those directions is what allows us to scale the business in a manner that actually helps the communities across those markets.

Wasoko and MaxAB have completed $230 million deal, one of Africa’s largest tech merger, combining their networks of over 450,000 B2B informal retailers and reaching 65 million consumers across Kenya, Tanzania, Rwanda, Egypt and Morocco.  The merger aims to transform the platform into a multi-vertical ecosystem offering e-commerce, digital services, e-payments, and credit financing. CNBC Africa's Tabitha Muthoni spoke to Daniel Yu and Belal El-Magrahbel, co-CEOs of Wasoko and MaxAB for more. 

How Wasoko, MaxAB's tech merger is reshaping Africa's B2B fintech landscape

Wasoko and MaxAB have completed $230 million deal, one of Africa’s largest tech merger, combining their networks of over 450,000 B2B informal retailers and reaching 65 million consumers across Kenya, Tanzania, Rwanda, Egypt and Morocco.  

How Wasoko, MaxAB's tech merger is reshaping Africa's B2B fintech landscape

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