Business

DukaPress is a new customized WordPress eCommerce platform. It allows you to easily set up a fully featured online shop which can be used to sell digital or physical goods to customers all over the world.

I’ve been using WordPress for many years, and am a huge fan. When I saw DukaPress last week, I was at impressed to see that it was built locally in Nairobi, but I also wondered why another eCommerce WordPress build was needed, as there are already some good ones out there such as WP-ecommerce and Shopp. So, I asked the Kelvin, from Nickel Pro, and here is his response:

I know you’ve probably been using WordPress even longer than I and the rest of the DukaPress team so I can probably say you know that WP-ecommerce is a bit…buggy (I say this with the highest amount of humility, we are nowhere near achieving what they have). The other free WordPress e-commerce plugins are much less usable, to us, than Wp-ecommerce.

Shopp is really really good but it sits behind a pay-wall – which is okay.

We built DukaPress to be fully featured, yet super simple to use and, well, free. It actually did not start out life as something we’d give out to the public – we built it primarily to serve our own purposes at Nickel Pro because we build a lot with WordPress and when it came to building e-commerce stuff it was always a big problem. One thing led to another and DukaPress, the plugin for public release, was born.

Around the net where WordPress e-commerce is being discussed, there is always a lot of complaints, primarily against WP ecommerce (some people call wp ecommerce a trojan for their ‘for sale’ upgrade), we hope that with DukaPress, people out there have a viable and better (I hope!) alternative.

Other than that, we offer features that none of the other WordPress e-commerce plugins do! As you rightly assumed, we support all three Kenyan mobile payment systems ZAP, yuCash and MPESA! Although I have to qualify that and say that integration of this is still being developed to be more fliud. We’re just at version 1.0.1

How shall we make money with this? We already do, we’ve used it in at least 4 major projects for our client work and it has already paid for itself.

Other than that, we’re currently working on version 2 which will bring full WordPress Multisites support – so that you can build your own etsy.com in 15 minutes – among other features we think are nice. At that point (in the next month or two), we may launch our own etsy.com-type service (or, in better terms, a wordpress.com which can host fully featured shops); or licence the multi-site version of DukaPress for a fee; or both. No other e-commerce plugin has “successfully” pulled off a WordPress Multisites integration to date i.e. users still cannot build a wordpress.com that can host shops without a great amount of hacking.

DukaPress is also a gateway for www.madoido.com.

I think there are certainly similar plugins which may outperform DukaPress but I also do think it probably beats some of the more established ones. I hope the larger WordPress userbase gets to prove me right, but even if they don’t, DukaPress certainly makes our lives easier, and gives a really welcome international perspective to our business.

On a personal level, I’m impressed to see Kelvin and his team at Nickel Pro working on DukaPress, and I hope that they continue to make it better. If you’re a WordPress pro, or in need of an eCommerce solution, check out their website, documentation and features.

Safaricom is Kenya’s largest mobile operator with approximately 80% of the market. Most people don’t know this, but they get hundreds of business and technology proposals each week from people all over the country – techies and non-techies alike. It was with this problem in hand that they decided to open up an “Innovation Forum” for Kenyans to share their ideas.

In short, it was a disaster. Draconian legal terms and conditions mixed with ham-handed community engagement meant that they met with a lot of resistance and outright mockery on public channels such as Twitter and Facebook. Just a sample from one blogger:

Engaging the Community

Safaricom is now back to the drawing board. Their problem hasn’t gone away, they’re still overwhelmed with emails, letters and proposals for business ideas that might/might not make sense for them to engage on. Wadzanai Chiota-Madziva heads up their VAS (value added services) department, and is in charge of this. After the noise caused by the less-than-stellar launch of the Innovation Forum, she and CEO Michael Joseph met with one of the techies who was very concerned about the way they were handling this: Al Kags.

Al Kags has sat down in a couple of meetings with them thus far, finally he suggested a board that could serve as a buffer between Safaricom and the people sending in proposals. The Innovation Forum Board’s job would be to speak for the community to Safaricom, as well as push for better access to APIs, a developer sandbox and possibly and app store. They would also be responsible for helping to translate Safaricom’s position to the community.

I was invited, along with some other’s from the tech community, to sit down and discuss this with them last week. It was a fruitful discussion about the possibilities and the roles and responsibilities that the board would have.

Some of the discussion was about the need for a buffer to be created between Safaricom and submissions to foster fairness and openness, to provide confidence to developers to innovate without fears of intellectual property (IP) misappropriation.

“The intention is for the board to create a fair environment for innovatioin by playing the middle ground between Safaricom Ltd and the developer and innovator community”

The position is largely one of an enabler. The board would oversee the Innovation Forum by:

• Create and agree rules of engagement with all parties
• Advocate developers perspectives at Safaricom
• Facilitate understanding of Safaricom position with the developer/innovator community.

Figuring out the Board

The people invited for the meeting, as the potential board, were Moses Kemibaro, Jessica Colaco, Al Kags, Karanja Macharia, Rehema Parmena and myself.

While it is up to Safaricom to decide who is on their Innovation Forum Board, those of us at the meeting pushed back a little on how they had done this. If they want to interact with the community, it might behoove them to reach out to that community for some of the nominations.

They listened, and starting today going through the end of the week, you can make your own nominations for the Innovation Forum Board for Safaricom to review on the website. This is your chance to put a name in of someone that you think would represent the community well on the board.

Kenya is quickly gaining a competitive advantage in the mobile payments space. Led by mobile operator giant Safaricom with their Mpesa product, the market locally sees huge value in mobile money transactions. Add to that a regulatory system that is relaxed enough for innovation to be encouraged, and you have a great space for interesting things to happen.

Pay.Zunguka

The team at Symbiotic always have more than one iron in the fire. I was surprised by their most recent release of a new product called Pay.Zunguka last week. Simply put, it’s a payment gateway and aggregator, allowing merchants, developers and content providers a way to monetize their work with the public.

There are two sources of inspiration in Pay.Zunguka (guys, we need to talk about names at some point…), that is the ability for people to utilize international online payment methods like PayPal and Google Checkout, but more importantly that users here in Kenya can do it all without a credit card, only using their phones. That’s a big deal, and it’s a nod towards recognizing that credit cards aren’t necessary, we can bypass that mess.

Mbugua Njihia, CEO of Symbiotic, tells me that their plan is to first integrate with content providers and create an easy-to-use micropayment space, charging 3% per transaction. This will be followed by a partnership campaign to work with larger organizations who don’t have an efficient payment platform for consumers.

PesaPal

PesaPal I’ve written about before. It’s a mobile payment gateway as well, but one with a specific focus online. Liko and team have made great headway recently, but not just in the technology, which is critical. They’ve made headway in some other important areas, funding and marketing.

We’ve talked about the need for local investors to buy into local technology startups. When that doesn’t happen, the international ones swoop in and take advantage of local investor myopia. In this case, PesaPal is receiving a healthy seed capital investment for scaling and marketing. With cash flow happening right now, it’s a good time to invest, and I’m glad to see someone doing so with this team.

I talked to Liko yesterday about this. Their strategy has shifted somewhat since last year, instead of just focusing on web merchants, the PesaPal team is working on relationships with educational institutions and educational book suppliers to make parents lives easier when their child starts the school year. The parent can now pay their child’s school fees using Mpesa or Zap, and then are directly linked to the list of that year’s books with the option to buy them too, and have them delivered to the school for their child’s first day. Brilliant!

This is the kind of fresh thinking that is great to see coming from tech startups: they’re not thinking or selling the tech, they’re selling a solution to a problem.

Zynde

Zynde is a new player in the space, but you’ll start to see a pattern here when you jump over to their website. Because none of the large companies are addressing the very real need for agnostic payment gateways the market is filling in that gap for them.

A quick email chat with David Kagiri of Zynde gave me more insight into their focus behind the service:

“My main driver was that new technologies existed that could enable me deliver cost effective solutions. After interaction with owners of small businesses I realized that most don’t keep track of their business finances and the cost of the available off shelf software that would help them with that was beyond their reach. I came up with a simple solution that uses the SaaS (software as a service) model so that I could deliver cost-effective solutions to them and an API that will enable creative developers to extend it to multiple mobile platforms and reach the masses.”

Zynde will have to prove themselves in what is quickly turning out to be a highly competitive space with competent players.

I haven’t been able to use PayPal for two months. I just got profiled for extra security measures on Facebook. I can’t make certain purchases from Africa. Few organizations ship goods to me here.

Let’s be honest; living in Africa, or being African, gives you a certain unwelcome aroma in the eyes of global corporations. Frankly, we’re just not trustworthy.

The Africa trust problem

This isn’t new to any of us who live, or spend a great deal of time, in Africa. You’re blacklisted, given extra screening, and generally treated like a second-rate human. You’re not trusted, and you’re not worth the time to figure out if you can be trusted.

Frankly, as a total continent-wide user base, we just don’t make enough of a blip on the radar to be worth their time. There’s not enough money here in their minds, there is lower-hanging fruit elsewhere with a lot more spending history – and therefore power.

Does it make it right? No. Do my own stories of wrongs and misbehavior matter? No.

Jon Gosier states it well when reflecting on his blacklisting by PayPal (one of the very worst company offenders):

“Once again, the message perpetuated here is to be cautious when dealing with Africans, Africa or anything you suspect of being related to the aforementioned.”

A closer look at African cyber crime

From the Internet Crimes Complaints Centre (IC3) 2009 Annual Report [PDF download]

Nigeria has a significant 8%, but Ghana, South Africa and Cameroon all come in at a measly 0.7%. How in the world do Africans get so much worse treatment for so little compared to the others? There’s no doubt that one country in a continent of 52 countries has a problem – we all get punished for it.

Here are some more interesting statistics, according to the Consumer Fraud Reporting statistics for 2009:

“The majority of reported perpetrators (66.1%) were from the United States; however, a significant number of perpetrators where also located in the United Kingdom , Nigeria , Canada , China, and South Africa.”

So, there are two strong Africa contenders for fraud, but it’s amazing how much more hell internet consumers in African nations (outside of Nigeria and South Africa even!) have to go through in comparison to their much more cybercrime-ridden finalists like the US, Canada and the UK…

Texas in Africa puts this well after a recent foray into this space with Delta:

“it also reflects knee-jerk prejudice and the willingness to write off an entire continent of people as liars and cheaters. The consequences of this attitude are far reaching”

Too true, and there are only two ways that this might change:

First, we in Africa come up with our own payment and business solutions that work here first, and then interact with other global systems.

Second, the global corporates wake up and realize that there is quite a bit of spending power and money to be made in Africa, just like the mobile operators found out in the 90′s.

It’s not often that you hear of a tech startup from South Africa who chooses to build and deploy their product to Kenya first. In fact, I’ve never heard of such a thing. However, that is just what is happening with Mocality, a mobile and web-based business listings and directory application built for Africa.

Mocality’s job: create a digital platform that makes it easy for business owners to promote and expand their businesses in Africa.

“As a business owner, you get free SMS, a contact list, a free mobile website and a free mobile business card.”

Mocality represents this change in the paradigm that we’ve seen coming on for years in Africa. An application built agnostic to the client platform (mobile phone or PC), where data is fed into whatever you use in a meaningful way. Where the mobile usage is just as rich as the PC use.

In fact, they’ve studied usage of mobile phones on their system and have seen the usage of smartphones to be so negligible as to not matter. As CEO Stefan Magdalinski says, “This is the Mocality reality: RIM, Android, Apple are 2% of usage.”

About the Team

Successful startups generally have great leaders, Mocality has that. Stefan Magdalinski (@smagdali) is a seasoned web veteran and entrepreneur, co-founder of Moo.com and an early entrant into the programming space in England in the mid-90′s, and just recently relocating to South Africa for Mocality. They have plenty of funding, from MIH, a subsidiary of Naspers Group (who has been eying Kenya with recent forays such as Kalahari and Haiya).

I’ve met with Stefan in Kenya and South Africa, and I’ve also had the chance to meet some of the members of his team here in Nairobi. The impression that I’m left with is that this is a serious startup, with plenty of funding and a great vision and a strategy put in place to pull it off.

How it Works

Mocality is built for Kenyan businesses that don’t have enough money (or value to gain) to advertise in a print directory.

Again, a paradigm shift. They’re saying that they don’t care about the big end of the power law of distribution (the big companies), only the longtail (small, marginalized businesses). This is apparent in the images below of their typical user:

• SMS, WAP & Web tools (now J2Me, iPhone)
• Businesses can self list
• Geo-coding All business locations
• Map view of business
• Business toolkit:
1. Add customers & suppliers
2. Send bulk messages (400 free SMS monthly) (but with anti-spam controls)
3. Send mobile business card
4. Add details (e.g. Menus, Special Offers)
• Website, google optimised (white hat only)

Important to business owners in this segment is that the platform is free. Services will be added to the platform over time that business owners can pay for, but currently the only cost to them is data or SMS usage on their own mobile phone to access Mocality.

Scaling using the Crowd

Initially, the Mocality team walked all over Nairobi getting businesses to put their listings on the platform. They were successful, and in about 6 months of hard work were able to get approximately 11,000 businesses listed. That’s good, but barely puts a dent in the number of companies operating in this city.

The team then launched a crowdsourcing option, where they experimented with allowing anyone in Nairobi to add their own (and other’s) businesses to Mocality, and they got paid a bounty to do so. Within the last 6 weeks they have as many listings entered as the previous 6 months. If you live in Nairobi and want to become an agent, you need a WAP-enabled cameraphone and only need to visit http://www.mocality.com/money.

That’s impressive, but the impact is even more apparent when you look at the visualization:

If you have a business in Nairobi, you can get your listing onto it by visiting www.mocality.com email to info@mocality.co.ke or SMS callme to 2202 from within Kenya.

On Friday I’ll be addressing some of the top business decision makers for Nokia in Africa. My goal is to shake them up a little, make them think deeply and differently about the African market.

Nokia hasn’t truly innovated in Africa since they put a flashlight in a Nokia 1100 in 2003.

I’ve been asked to discuss my views on how the handset and mobile services business situation is developing, what the opportunities are in those areas and suggestions on how Nokia could lead in this market.

Therein lies the problem: I’m only one person with one opinion, they need to hear from others with different experiences.

What would you say?

Add yours in the comments below. The best will be brought to the Nokia executives attention:

Here are a couple from Twitter.

• Top-end or low-end handsets, what does Nokia stand for here? (via Niti Bhan)
• Innovate on the user experience for low-end handsets. (via Rombo)
• Is Nokia serious about social impact, or is that just face paint?
• Africa is ripe for experimental phones and financing models, what is new coming out of Africa first?

Don’t just think cheap handsets. What else would you do within business models and solutions?

A lack of regulation, or at least a more relaxed regulatory environment, have been directly responsible for Kenya becoming a hub of innovation, specifically in the mobile payments and banking space.

The gorilla in Kenya’s room is Safaricom. The posted a Ksh 21billion pre-tax profit yesterday, citing growth and profits in almost all areas, including 137% growth in data services, which they see as the next big cash cow.

Safaricom has directly benefited from this environment and their savvy marketing and business moves have left others in the dust. Businesses should be allowed to make profits and smart strategic decisions rewarded by profit and market position should be expected and encouraged – else why do they do it?

A couple of weeks ago new regulations, put together last year by the CCK, were floated by the Monopolies and Prices Commission. These rules were intended to curtail the massive growth of firms like Safaricom and the ScanGroup, to the detriment of competitors and the market as a whole. Naturally, the only firms upset with these rules were the incumbents.

Just yesterday, Dr. Ndemo, the permanent secretary for information and communications decided that Kenyan professionals who drafted these new rules weren’t professional enough and called in consultants from the United States to review them. While it is true that the Monopolies and Prices Commission is weak in ability to fulfill its mandate, this move comes off as an appeasement by Dr. Ndemo to Safaricom as it came out on the same day that Safaricom was having it’s annual shareholder’s meeting. It makes you wonder who dances to whose tune.

Both sides have good points. Smaller firms do have an uphill battle, not only due to their size, but also due to the unfair practices that larger firms tend to busy themselves with in Kenya to keep the competition at bay. However, large firms also have point. If they are playing fair, should they be punished for being better than everyone else?

Too much regulation in a sector can cripple a country’s innovative business growth, especially technology (see South Africa’s banking rules…). Dominant players have the same effect.

Maybe, instead of adding unnecessary regulations, governments should look to truly and strongly punishing unfair and dirty practices that are already on the books. A 200,000 Ksh ($2,500) fine is the most that Kenya’s monopoly commission can do, and it’s laughable at best.

Mxit is a massive mobile social network that was started in South Africa a couple years ago. Today, Safaricom announced a partnership with them, using their marketing muscle (7 pages of ads in today’s newspaper) to import Mxit into Kenya.

[For the time being, we'll ignore the complete ripoff of Twitter in their marketing...]

Mxit is a free instant messaging platform that uses the data network, thereby making it cheaper per message than sending an SMS. They claim 19 million users, most a younger demographic, who spend time chatting with friends or in chat rooms. MXit also supports gateways to other instant messaging platforms such as MSN Messenger, ICQ and Google Talk.

Local apps and entrepreneurs react

This should be a slap in the face to Kenyan programmers and tech business entrepreneurs. The model to build the same type of mobile social network has been openly working and available to do for at least three years.

To be fair, Mbugua and the Symbiotic team tried to create something like this a year ago, called Sembuse. Both he and Idd Salim aren’t very happy about this latest move, claiming that Kenyan entrepreneurs can’t get the same access or opportunities as their South African counterparts.

From Mbugua:

“The issue is not that they have a partnership with Mxit but that from personal experience, local developers and companies suffer greatly in their quest to have such partnerships.”

From Idd:

“Most likely, the marketing retards at Safcom were convinced to believe that Mxit will increase data ARPU for Safcom. Mxit is meant to be a replacement to SMS. … So Instead of sending an SMS, you will use Mxit. Safaricom will lose KSHS 3.5 per SMS, but gain KSHS 0.003 per data exchange over Mxit. Talk of Safaricon Conned! Pwagu amepata pwaguzi.”

The issue with Safaricom

On one side, the Sembuse team have a point. Safaricom has been promising to open up their API and platform for real extension. This has never been fulfilled. They have promised to (honestly) engage with the local programming community, and this hasn’t happened either. They were publicly called out on all of these facts and more at the Mobile Web East Africa conference this year.

In many ways Safaricom walks arrogantly through the Kenyan market, lying, stealing and cheating their way to even larger profits. However, they also push the edges. While others are happy to sit back and make their current margins, Safaricom takes risks and eats their lunch. Innovation, whether it’s home built, bought or stolen still has the same effect.

Business reality

For whatever reason (marketing, value add, etc), Sembuse didn’t catch on – it hasn’t reached critical mass. Numbers of users, rather than technology ability even when it’s better, are the things that larger companies are looking for in this type of play. If you don’t have half a million users, you aren’t even in the game.

Though I’m no Safaricom apologist, I can’t fault them for making a decision to go with a tested product from an established business. Yes, SMS is currently a cash cow, especially here in Kenya. However, everyone can see the writing on the wall: data is the future, and controlling the channel is more important than anything else.

As David Kiania from the Skunkworks list noted, “Rule No. 4 in business: Cannibalize your revenue and business model before your competition does it for you.”

I’m more disappointed that no Kenyan company has been able to make a go at this by themselves, just like Mxit did years ago. You don’t need Safaricom or any other mobile app provider to be successful in this space, Mxit if anything, has proven that.

Like I said 2 years ago, this is a sure win if you can pull it off correctly. The technology to do this is not new, as Idd Salim points out as well, neither is the model – so you know that the strategy here is on marketing and communications to show the value add to potential customers.

More than anything else, Kenyan entrepreneurs should be upset with themselves for missing a sure opportunity, not upset with Safaricom for making a good business decision.

Just a week ago I was in Cape Town talking about how entrepreneurs in Africa are looking at the prepaid mobile phone market and are trying to solve for the cost structures for data provided by the mobile carriers. Who knew that internet giant Facebook would beat them to it?

This week Facebook launched 0.facebook.com, where they worked out deals with 50 mobile operators in 45 countries to either zero-rate data costs coming to that URL, or paying that data cost themselves. This means that anyone, even those with no airtime on their mobile phone, can still take part in Facebook.

“Thanks to the help of mobile operators we collaborated with, people can access 0.facebook.com without any data charges. Using 0.facebook.com is completely free. People will only pay for data charges when they view photos or when they leave 0.facebook.com to browse other mobile sites. When they click to view a photo or browse another mobile site a notification page will appear to confirm that they will be charged if they want to leave 0.facebook.com”

Interestingly enough, 5 of the 6 largest Facebook using countries in Africa do not have access to this service yet: Morocco, Nigeria, South Africa, Ghana and Kenya.

Why this matters

What has happened is that Facebook, even with all of their problems and questionable ethical moves on privacy issues, still have a great strategist with a global perspective in their midst. What they have realized is that the only way to increase penetration in the developing world is to cover the data costs for their users (or, if lucky, snooker a mobile operator into not charging them for it).

I pay for someone to visit this blog. I pay my web hosting fees and that means that you can visit it for free. Almost. Unless you’re on a free WiFi service you still have to pay your ISP to connect to the internet. This is akin to me paying off your ISP for when you visit my website.

It’s a big deal, and I think we’ll see a lot more of this happening. It raises the bar for everyone else. If you want to play in this league, you now need to pay off the mobile operator for the traffic that goes your way. Meanwhile the mobile operators laugh all the way to the bank – it’s a huge win for them, and a big score for mobile web consumers in the developing world.

People are excited about M-Kesho (money for the future) which launched yesterday, where Safaricom has linked their mobile payments service Mpesa as a joint venture with Equity Bank in Kenya. This basically extends Mpesa into a bank and insurance company, with the future offer of microcredit as well.

• Equity bank has 80 branches in Kenya.
• Mpesa has 17,500 outlets in Kenya.
• There are approximatey 8.4 million bank accounts total
• Equity has about 4.5 million bank accounts
• Mpesa has 9.5 million users
• Kenya has 107,000 credit cards in circulation

See the pattern? These are are big companies with huge local connections and inroads into the popular culture. This is a strong indicator that every Kenyan will have access to banking and insurance via mobile phone very soon.

“This is a bank account introduced by both Equity and Safaricom where customers can earn interest from as little as 1 Ksh. Customers can withdraw cash from their Equity Bank Account to their M‐PESA accounts and customers can also deposit through their M‐PESA accounts to their M‐KESHO Bank account. Other features of the account include Micro credit facilities (emergency credit availed through M‐PESA), Micro insurance facilities as well as a personal accident cover that translates into a full cover after 1 year. For one to open this account, the person must be an M‐PESA subscriber.”

Reality Check

As others have pointed out, there have already been links between mobile payment systems like Zain’s Zap and banks like Stanchart. So, this isn’t exactly groundbreaking and new. Why is it big then? It’s big because of who is doing it: the giants of the banking and mobile sector.

Rombo has written a particularly good post about M-Kesho. She asks some hard questions, like who really benefits out of this deal: Equity or Safaricom?

It’s hard to say, but I wonder if the pressure put on by regular banks onto the regulator about how close to a bank Safaricom’s Mpesa really has forced their hand. Did they have to choose a banking partner in order to stave off the regulator, or did they do it to increase market share and positioning?

Finally, I think this move, like the moves made by Safaricom in the past on this mobile banking space are shortsighted. Yes, it gets them more subscribers and it does solidify their grip on the mobile market in Kenya, that is working. However, mobile money and payments are much bigger than just one operator or one bank. Becoming the “Visa of the mobile payments space” all over Africa (the world?), is a much bigger deal than being the biggest fish in Kenya’s small payments pond.

South African, Matthew Buckland, has launched Memeburn a site that tracks emerging technology trends and has opinion pieces by key influencers.

Amheric/Ethiopic translations have been launched within Google’s applications.

Freedom Fone, a free and open source IVR (interactive voice response) system, which started out of Zimbabwe, has now launched. You can download v1.5 now.

Afrinnovator has launched a news aggregator for African tech news.

I was interviewed by CNBC about the iHub and Ushahidi.

Panacea, a South African mobile phone company has the first (legit) bridge between Africa and Paypal live on the continent. Finally, at least one country is able to send/receive payments via PayPal.

Kahenya, from Virn, is launching a new ad platform, called Metro, that distributes ads to all of their sites and affiliate sites. They anticipate to start Web Marketing Campaigns from as little as 500 Kenya shillings (

Maduqa is a fledgling web startup in Nairobi. Their goal: make it simple, fast and easy for any Kenyan business owner to get their own store online in just a few minutes. Surprisingly, there’s nothing else out there quite like this (that I’ve seen), so it’s an excellent example of local entrepreneurs taking ideas from the global stage and localizing them to Kenyan needs.

It’s a simple website, with a focus on two things. First, it’s online shops for ordinary businessmen, whether you operate out of your house, a duka or a business frontage. Second, it’s a classifieds listings site.

There’s a lot of draw in figuring out how to crack the Kenya classifieds market, and the web is littered with a dozen mediocre attempts at this from Craigslist to the Nation Media Group, much less the everyday sites that others throw up. In this case, I think it’s a diversion from what should be the focus: online shops.

We’re starting to see more Kenyans paying attention to the web-side of their business. For most, that just means that they know the internet is out there and might be valuable in attracting customers. Those are your medium and upper-class businesses. The upper-class ones will go out and design their own websites, Maduqa isn’t for them.

Instead, Maduqa is for the businessman doesn’t have any marketing budget to speak of, she might be a hairdresser or a person running their business at night from their home. They don’t have the time, energy or know-how to setup a store on their own, but they could set up a Maduqa site. It’s free too, so the cost of failure is low. Your worst case scenario is that you are finally searchable by name online.

There is a small team of individuals who are going around and trying to sign up new businesses into the site. It’s analog, and not nearly as efficient as if you were running a pure viral or digital marketing campaign, but then their target end-user probably wouldn’t see those anyway. Any other type of marketing is even more expensive and untenable for this bootstrapping startup.

So, let’s say they have three guys walking around town trying and they each aim for 15 new Maduqa shops online each day, that’s 45 shops per day total. Not bad, especially if you extrapolate that out to 20 working days per month with a total of 900 online stores per month added to the website. In three months they would have 2700 online shops.

Now we’re talking some serious mass. Maybe even enough to get on the radars of consumers, especially as all the marketing for the store websites will be done by the store owners themselves, as they tell everyone about their new website.

I met up with Kachwanya, one of the duo behind the site and walked through the site with him, discussing both the pros and cons of this type of service and the site itself. Here is a quick rundown of what I liked/didn’t like, keeping in mind that it’s an early-stage website.

What I like

• Anyone can setup an online shop now. Conceptually, this is very easy to grasp.
• Nice use of javascript and overlays that make the site easier to use.
• There is a team of Maduqa reps going around and signing up new business owners.
• The potential to take over the online stores market in a country.

What could be improved

• Scrap the classifieds, stick to one thing: online shops.
• Let’s see PesaPal (or its equivalent) instituted on this site. I can see no better win-win situation for Maduqa, the end users or PesaPal than this kind of partnership.
• Parts of the site look nice, but it also feels a little cluttered, some design and usability tweaks would help.
• Get more feet on the street, sign up more businesses and get up to critical mass even faster.

I’m impressed by this simple and workable concept. They have the technical acumen to do it, there is no doubting that. Will they have the business acumen to balance? Time will tell if they will pull this off, but I’m optimistic that they can.

Everyone wants to compare any up-and-coming tech city in the world to, “The Next Silicon Valley”. That idea is dead on arrival, yet we’re seeing many a reference to it in the media for places like Nairobi and Cape Town.

Paul Graham’s essay states this best (please, read the whole piece):

“What it takes is the right people. If you could get the right ten thousand people to move from Silicon Valley to Buffalo, Buffalo would become Silicon Valley.”

A model for African startups

Yesterday I spoke at Mindspeak, a monthly meeting in Nairobi where people in the business and tech fields talk about what got them to where they are. During the Q&A session after I spoke there was the recurrent question and comparison between what we’re trying to do with the iHub and how we see the increased critical mass in the Nairobi tech space, and if that was going to make us the next Silicon Valley.

That’s the wrong model for us. Instead, we should look closer at the Israeli model.

“Very often, local high-tech startups can’t find the funding here,” Mr. Glaser said. “They get funding elsewhere and ultimately move their locations from here to be closer to their investors.”

Israel already has a culture of innovation and entrepreneurship, which leads to a strong startup culture. Due to geographical and political constraints, startups that create high-tech products and services are forced to look at their growth strategy early on. When a company starts gaining traction, they spin out their executive and parts of their operations to places like Silicon Valley, New York, Cambridge, etc, while maintaining parts of their operations in Israel.

We’ve seen the same with a South African tech firm. Yola (old name: Synthasite) moved first their executive team, then part of their operations, to San Francisco. Shortly thereafter, they raised an amazing $20m.

Of course, the Israeli Model, requires more than just up and moving half of your startup to Silicon Valley. That’s a simplified formula. However, it does serve as an indicator for what we should be looking at here. Instead of trying to grow the same ecosystem that took decades to develop in California, we should look at what works for us.

Key ingredients needed:

• A network of investors, mentors and connectors in the bigger tech hubs of the world that help incoming African tech companies and help them take the next step. Most of these should be well-placed African diaspora.
• A policy and legal framework in African countries that allow them to build and succeed/fail quickly so that they can take that next step globally.
• Seed capital and incubation options for early stage prototypes and business testing in-country.
• Teach entrepreneurship and leadership within the education system, especially at the university level.

You’ll note that none of these items can be done by just one entity, it takes a concerted effort by multiple parties, including investors, academia and government in order for both a high-tech startup culture to come into being and for success beyond a countries borders to take place.

Certain cities in Africa have the ability to pull this off, including Nairobi, Johannesburg, Cairo, Accra and Lagos. Others have a chance too, but these 5 have the critical mass that makes it more possible, though none of them are there yet.

There has been a lot of talk, especially in East Africa, about business process outsourcing (BPO) as a big way to elevate the technology field. The logic is that while many of these jobs might not be super high-tech (ie, programmers), they’re at least in the tech field thereby allowing people to get comfortable with computers and bringing outside investment into the country.

Kenya has a great number of qualified students leaving university each year that. Enrollment in 2008/09 (public, private, part-time) was 122,847, and my friend Bankelele estimates annual graduation at about 30,000.

Kenya’s BPO strategy is best summarized and detailed by Gathara (read more):

“The general thrust of the report is that coming late to the party, Kenya has no chance of becoming a Tier 1 provider; it lacks the scale to become a global player like India or the Philippines. So the suggestion is that she leverages her relatively small pool of cheap, accent-neutral English-speaking graduates, her strong ties to the US and UK (which together account for nearly 60% of the outsourcing market), improving infrastructure and an already thriving business environment, to create a niche for herself in basic sales and customer-care services and attract large international BPO companies.”

(also, read the Kenya ICT Board’s position on BPO)

It’s a sound business area to put resources into, especially if you’re a government entity focused on growing jobs and investing in seeing the technology sector grow. However, I’ve been troubled by the idea that it’s focused mainly on the KenCall-type outfits – basic call centers. It seems that there’s more opportunity here than this. Let’s not sell East Africa short as a low-cost, low-value BPO region, but look more closely at a strategy for attracting higher margin clients for services by highly qualified BPO firms locally.

Shifting the BPO Paradigm

Beyond cloning what India or the Philippines has done, can we rethink the outsourcing paradigm?

Nairobi, due to location, climate and a number of other reasons ends up being the hub of a lot of major corporations (Google, Microsoft, IBM, Nokia, etc), large non-profit organizations (UNEP, CARE, World Vision, Hivos, etc) and a host of medium-sized companies. These represent businesses with large amounts of revenue which is mostly injected from overseas. Why are their business processes being run out of expensive central offices in regions like the US and Europe?

Earlier this week I discussed this with Wiebe Boer of the Rockefeller Foundation in Kenya, who has given the Kenya ICT Board $500k to drive their BPO strategy. He worked on the original McKinsey team to architect the six pillars of economic growth underpinning Vision 2030, of which BOP was one (and the only one being acted upon currently).

He had some good ideas, stretching the understanding of the traditional BPO definition of East Africa, and leveraging bigger organizations to shift their non-core competency work to Kenya. Instead of just outsourcing customer service, think procurement, basic HR functionality, IT, monitoring and evaluation, and accounting.

Last week the NetHope meeting came to Nairobi, their list of member organizations is impressive as far a “big NGOs” go. They represent a lot of money and a lot of potential for business for BPOs here in Kenya. Their supporters are the likes of Cisco, Intel, Microsoft, CDW and Accenture. Together, both supporters and members represent a vast pool of organizations ripe for this expanded type of BPO.

Business opportunities for seasoned entrepreneurs abound. An example would be to build a strong firm that could focus on a couple of the non-traditional outsourcing needs (think M&E and HR). Many corporations and organizations (internationally and locally) need this and don’t have the in-house capabilities to do it right. Groups like the Rockefeller Foundation are poised to pressure the groups that they support financially into using BPO companies in Kenya, so if real viable firm was available, cash flow would be less of a risk than in other enterprises.

Indian firm Bharti buys up Zain Africa
The biggest news in the African tech space is Bharti’s $10.7 billion purchase of Zain’s African operations, which operates mobile networks in 17 countries in Africa. Apparently, some believe that Africa’s potential makes Zain deal value fair. (Zain’s African countries: Burkina Faso, Chad, Democratic Republic of the Congo, Republic of the Congo, Gabon, Ghana, Kenya, Madagascar, Malawi, Niger, Nigeria, Sierra Leone, Tanzania, Uganda, Zambiaand Morocco.)

Google continues getting Africa on the map

Google Maps was launched in 30 Sub-Saharan African countries. That’s an amazing asset for everyone to use, and it’s also an incredible testament to the number of users using their “My Maps” feature, as this is where this data comes from.

On the growth of tech hubs in Africa
Rebecca Wanjiku wrote an article on IDG about, “Tech labs move beyond corporations in sub-Saharan Africa“. She’s a member of the Nairobi iHub advisory group, and has more insight than most in this space.

South Africa’s Design Indaba
It’s happening right now in Cape Town (Feb 24 – 26, 2010). Great design, and great speakers, but I was really intrigued by their kids program.

Location based service launches in Nigeria
StarTrack is a new location based tracking service in Nigeria, Loy Okezie has a good overview of this new service from Starcomms.