Uju Uzo-Ojinnaka thought that expanding her family import-export business from Nigeria to other countries in Africa. But her first deal with an entrepreneur illuminated the compliated and often convoluted nature of intercontinental agricultural trade.
Uzo-Ojinnaka launched Traders of Africa in 2017 to simplify the process of connecting buyers and sellers of agricultural goods across Africa. Her focus in particular was ensuring that smallholder farmers, who often get short-changed in the agrifood supply chain, would have access to better pricing and markets.
“We started mapping smallholder farmers and our idea was to encourage everybody to see the value in what they’re doing,” Uzo-Ojinnaka told AFN. “The big time farmers are very important, but so are the smallholders. So how do you ensure that they get value for what they do so that they continue to produce?”
Traders of Africa operates an online e-commerce platform where suppliers can sell products, such as nuts and kernels, raw materials such as palm and coconut fiber, dairy and seafood, as well as farm machinery, construction materials, furniture, minerals and metals, beauty supplies among many more goods of African origin.
The marketplace is used by suppliers in Rwanda, Uganda, Ghana, Kenya and Nigeria.
The platform collects and analyzes the sales data to better understand who is buying what and from where. The data, says Uzo-Ojinnaka, “will be very important for governments and organizations in terms of showing what’s needed in different regions in Africa.”
Traders of Africa earns revenue via commissions or markups of goods, but only after negotiating with sellers.
Founder’s journey
It all started with a deal for Nigerian groundnuts. Uzo-Ojinnaka, whose family business handled import-export of construction materials between Nigeria and China, was randomly introduced to an entrepreneur in Ghana looking to source groundnuts—peanuts—from Nigeria, one of the world’s largest producers of the legume. Uzo-Ojinnaka figured the deal would be simple: she would obtain 20 containers of groundnuts, and the entrepreneur would pay in cash.
Not so fast.
Uzo-Ojinnaka says her first snag was having difficulty sourcing enough peanuts to fulfill the order. She couldn’t come close, in fact. Even after the buyer reduced the purchase volume to one container, she still couldn’t find a supplier to fulfill the order.
Uzo-Ojinnaka wondered whether buyers from other African countries or international buyers has similar difficulty fulfilling requests for African-made and grown products. She was shocked to find that in the era of Internet and connectivity, there was no simple way for buyers to obtain African produce and goods at wholesale levels.
As Uzo-Ojinnaka dug into the issue, she realized that much of the problem stems from the agriculture sectors’ dependence on smallholder farmers and fragmented supply chain. While smallholder farmers drive food production in their home countries, they’re often cut out of direct trading with buyers due to their small production capacities. Instead, they often sell their products locally, sell to middlemen who pay below-market rates, or leave their product to waste if it can’t be sold or consumed.
Exploitive pricing my middlemen presented such a problem that the Nigeria government banned the direct purchase of produce by foreigners unless they are registered and licensed as local buying agents.
Trust barriers
The anticipation for Traders of Africa’s platform was so great, that by the time it officially launched in 2017, “we had over 9000 suppliers on the platform,” Uzo-Ojinnaka recalls. But the marketplace quickly ran into several significant barriers. The first was users’ trust.
Online marketplaces can help farmers find off-takers, but only if there’s trust in the platform, and trust that they buyers and sellers will fulfill their obligations. The lack of in-person engagement in a market accustomed to face-to-face business presented a problem for Traders of Africa.
The second issue was payment expectations. Suppliers wanted to be paid in cash, while the buyers preferred using various forms of credit.
To solve both issues, Traders of Africa worked with field agents to assess the quality of product listed on the platform. It then acted as an intermediary, accepting credit from buyers and disbursing cash payments to sellers in their local currencies. The startup relies on third parties to handle its logistics.
African Trade Invest
The issue with payments gave rise to another idea: Uzo-Ojinnaka and her team developed a sister platform, African Trade Invest, to allow people to invest in the trading that took place in Traders of Africa’s marketplace.
For instance, when a supplier gets a confirmed order, investors on African Trade Invest provide upfront financing to the supplier to help them fulfill their order. The investors get a share of the profit once the order is fulfilled and sold.
Individuals can invest either in Nigerian naira or US dollars with profit shares of 8% and 5% for the two currencies respectively.
As Traders of Africa looks ahead, the company is aiming to expand to 12 countries in 2022. While most buyers on the platform are based in Africa, it also hosts buyers from Asia, namely China.
“What I see happening is that most of American and European markets buy from Asian companies that buy from Africa,” Uzo-Ojinnaka says. The buyers in Asia thus serve as middle men for African goods.
Traders of Africa wants to do more direct trading with Europe ad the US, and has already fulfilled several orders to Europe.
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