This is a brief from a talk I gave last week to a business club looking for opportunities in Africa. They had asked me to speak on African opportunities and how they could find them. They made the call after one of their members went through some business ideas I noted in my new book.

I divided my presentation into sections: the essence for business, the opportunities and how to unlock them.

Why do we need a business? We need a business because market is not friction-less. If markets have been friction-less, buyers and sellers will not need firms in between them. In other words, if a saver can find a borrower without going through a bank to put that money, and then the bank will go ahead to lend to the borrower from that money, we will not have a need for a bank. In other words, the reason we have a bank is because there is a friction for a saver and a borrower to do business directly. The bank comes in as an intermediary to reduce that level of friction. For doing that, the bank is paid.

This cuts across all industrial sectors. Schools exist because families cannot optimally engage teachers to teach their children, directly. If for any reason we can create a technology that makes that direct engagement possible, removing the friction, we will not have a need for schools.

So to know where the opportunities are, you will need to look for places where people and firms are experiencing frictions in their lives and businesses. Most times, it begins from your own personal experience. What is the friction you are experiencing and how many people do you think are experiencing the same? That can give you an idea of a business opportunity.

You do not have to fix all elements of the friction. You can just reduce the level. For example, instead of Chisco, a luxury bus, driving you from Owerri to Lagos for 10 hours, another company, Peace Airlines, can do same for less than two hours. Peace has reduced the friction of getting you from Owerri to Lagos. Yet, the opportunity could be to reduce the friction that even made it necessarily to travel to Lagos. That is how the thinking behind telepresence technologies is evolving.

If you have gone to a bank to wire money and it is taking three days to send it from Lagos to Gabon, it means that even though it is helping you to manage a friction, it has not done it optimally. A new business idea could be to make a system that cuts the days from three to a day.

Business opportunities exist where there are frictions. You will find them in agriculture, energy and more. As you discover them, you may need to question how the incumbents are fixing the frictions. When you have a really new way of fixing the friction, you can be innovating and potentially disrupting the sector. People used to go to libraries to learn new things. The friction is to accumulate knowledge based on limited time we have. Someone created a library that has no opening and closing times. It is called Wikipedia. Another person now made it possible to aggregate the world of knowledge. That company is called Google. They are essentially fixing a friction on the discovery and acquisition of new knowledge.

In a nutshell, all the business opportunities in Nigeria are in all the areas we are experiencing friction.  Right where you are right now, provided something is broken, and you do not like the experience. You have the opportunities in power, transportation, education, security and more. If you can fix the frictions, you will find your moments. Opportunities are not esoteric. They live with and around us, daily.

Some Ideas To Explore

I provide some business opportunities to explore in our country. Please remember that there are many others around you in Nigeria.

• Agro fintech: creating financial solutions geared for the agriculture sector with the use of technology like apps, web apps, AI, blockchain, etc. These will include agro-lending, agro-insurance, agro-trading, etc. FarmDrive, a Kenyan enterprise, connects unbanked and underserved smallholder farmers to credit, while helping financial institutions cost-effectively increase their agricultural loan portfolios
• Farming ecommerce: expanding farmers’ markets by providing digital platforms for trade of farm produce. This will enable farmers, especially farmers involved in non-perishable crops, find markets outside of their immediate locations. Sokopepe uses SMS and web tools to offer market information and farm record management services to farmers.
• Precision agriculture: deployment of IoT and cloud-based solutions to improve farm yield by helping farmers to make better decisions through precision agriculture. These sensors will provide weather data, soil data, animal health data, and crop health data in real-time. An example is Nigeria-based Zenvus (which I own) which provides deep insights on farms via sensors which capture data like temperature, moisture, humidity and other pertinent farm data.
• Pricing aggregation: facilitating trading through provision of produce price data across cities. The goal is to empower farmers with pricing data so that they can bargain better with middlemen and traders. This will improve the value chain for farmers and provide them the opportunities to earn more. An example is Kenya-based mFarm which aggregates pricing data across cities to help farmers bargain more effectively with merchants.

• Storage: African farmers struggle with storage of produce. Building solutions in this area will be catalytic. Opportunities include warehouses equipped with modern storage systems which farmers can rent. Nigeria-based ColdHubs that helps farmers store produce is an example
• Logistics: there is a huge opportunity to facilitate the delivery of produce from rural areas to urban areas across Africa with our poor road networks. Kobo in Nigeria which operates as an aggregator is working in this area.
• Digitization of transactions: from payment to tracing origins of produce, we have a huge need to digitize farming systems in Africa. This will involve making solutions that can help track farm produce. Also, farmers need digital diaries for recording farming activities, mapping solutions to enable farmland registration and titling. Farmerline which operates from Ghana is an example.
• Commodity trading: besides the top-grade exchanges for trading commodities, there is an opportunity to create mini-exchanges that can facilitate commodity trading at local levels even within states. The goal is to make it easier for cooperatives to create more values for their members through scale.
• Blockchain: blockchain can be deployed in agricultural value chain, insurance, pharmaceutical supplies, peer-to-peer trading and lending, cross-border commerce, banking and other sectors in the continent. This underlining technology that supports Bitcoin, the crypto-currency, offers many capabilities to power new forms of business models owing to its consensus-driven decision architecture and trust networks. Blockchain delivers reliable, quality and verifiable data which enables assured digital identity during transactions. Bankymoon, a blockchain-based smart metering solution provider for power and utility grids, and BitPesa, a startup that enables trading on digital currency, are examples of the applications of blockchain to businesses. Another company, EnLedger, uses blockchain to combat fake drugs besides other applications like energy, law and land management..
• IoT: Efficient monitoring and tracking of water resources and quality. Hello Tractor in Nigeria delivers solutions that help farmers improve yield by renting tractors on demand.
• Artificial Intelligence (AI): opportunities for AI include real-time management of energy distribution, loan syndication, customized online education at individual level, personalized banking and insurance services, peer-to-peer lending, and health analytics.  UjuziKilimo, a Kenyan startup, uses big data and analytics capabilities to transform farmers into a knowledge-based community
• Solar: decentralized and modular energy systems which deliver better value to homes. This could be designed to be Energy as a Service (EaaS) where users pay for the electricity supplied instead of taking ownership of the equipment. SunCulture which sells drip irrigation kits that use solar energy to pump water from any source has made irrigation affordable. Kenya-based mKOPA provides off-grid solution to households.
• Health monitoring: wearable devices could power the ability to monitor, track and deliver care to patients more effectively. Example: Kaa which uses sensors to monitor patients.
• Drones: drones can be used in mapping construction sites, agricultural data collection, and delivery of drugs during natural disasters or conflicts. It can also help to reach rural communities with medicine and other types of supplies. Zipline which operates in East Africa, delivering drug and medical supplies, is a good example
• 3D Printing: the possibilities that 3D could enable decentralized manufacturing will make it easier to make products at the places where they are needed. This will make it easier to support many African cities not linked with good transportation networks. GE has provided 3D equipment in its GE Garages including the one in Lagos.

This month, the Sovereign Wealth Fund of Norway passed $1 trillion. In other words, it exceeded $1,000,000,000,000. That is twelve zeros.

Norway’s giant pension fund is now worth over $1 trillion. Yes, 1 followed by 12 zeros.

The fund’s managers announced Tuesday that currency shifts had helped push its value above $1 trillion for the first time.

“The growth in the fund’s market value has been stunning,” fund chief Yngve Slyngstad said in a statement. “I don’t think anyone expected the fund to ever reach $1 trillion when the first transfer of oil revenue was made in May 1996.”

For comparison: $1 trillion is roughly the size of Mexico’s economy

Simply, it means that Norway has a pension fund that is at least twice the GDP of Nigeria. Nigeria exports crude oil, just as Norway. But Norway has a strategic vision on building and accumulating wealth, Nigeria is a zen-master in wasting value.

Men (and women) build nations. We have not been lucky to have great ones in Nigeria. Norway started this fund in May 1996, and within roughly 20 years, they have $1 trillion in value.

As you dig deeper into that fund, you will notice other great numbers. In the first half of 2017, the fund returned $68 billion (i.e. with b). In other words, Norway could be receiving about $120 billion this year as income, if the second half of the year tracks the first half. That is more than four times the federal budget of Nigeria.

Let me explain, if Nigeria had seeded such a fund when Norway did, our national budget can be 4x as it is today, and that budget funded entirely from the returns arising from the fund. The fund continues to grow, and the returns will continue to accumulate. The future of Norway is secured.

Nigeria does have a sovereign wealth fund, which was seeded in 2011. I know that government has contributed about $1.5 billion into it. But I have no idea the value of the returns, if any.

Nigeria’s sovereign wealth fund stood at $2 billion this month with the investment agency seeking further growth through agriculture and the addition of asset management, its chief executive officer said.

The government’s contribution stands at $1.5 billion, with the rest including funds owned by the institution and those managed for several government agencies, Uche Orji of the Nigeria Sovereign Investment Authority said in an interview on Wednesday in Kazakhstan’s capital, Astana.

The last time I visited Lagos, I spent good time in Oshodi market. I also took a bus to Yaba. I wanted to see Lagos and understand the evolution. The fact is this: nothing has changed that much. You have a higher chance of making money in Nigeria offline than online. In other words, for everything you do, you must have an offline strategy because the customers are still offline. You are not running a business in Nigeria if all you have is internet-based strategy. The customers and most of the richer citizens are not here.

In this video, I explain why you need to think less of what you get from Silicon Valley. UNWIND and be real; Lagos is not New York. No Director General in any government establishment will take you serious if you do not come in person. And I promise you that no one will respond to any email to the info@ unless you have written to congratulate them for doing a great good. In that case, they will respond to thank you. But anything business must be in paper and blood. That is where we are today.

It is irrelevant if your app runs on low bandwidth, your website is pure HTML or you can make the video download faster on a slow network. You are just pursuing a very small percentage of your potential customers.

This is what I suggest: get offline, go and build a business. You can mix it, to serve today’s customers while you plan to serve the evolving digital ones. But being purely digital, for most businesses in Nigeria and expecting to see success, is an illusion.

I have written many times that African ecommerce companies have some severe challenges which work against them when compared with ecommerce companies operating in Continental Europe and the United States. One of those challenges is logistics/shipping. From my well-received Harvard Business Review piece, I explain thus:

Logistics: Amazon.com and eBay are great companies that depend on the U.S. postal system to serve their customers. I sell my own books online in U.S.; once a buyer makes payment, I drop the book off at the post office to close the transaction. In Africa, it’s more complicated with nonfunctioning postal systems. Online businesses operate delivery motorbikes, which increase the cost of doing business there.

This factor has also shaped my perspectives: indeed, anyone running an ecommerce business in Africa should see it as a business that goes beyond web-based digital business to a meatspace one (i.e. physical).

My client had a great marginal cost in the web side of the business, but in the logistics side, the amount goes high. To add an additional customer in a new city will require cost, even though the marginal cost in an already covered city may be low. So, the only way to bound the cost is to narrow the service region. By coming to that conclusion,  the company is no more an Internet business. That scalable advantage has gone and the unconstrained distribution channel which Internet offers has been made meaningless.

At the end, I told the team to go and build a new business model for a logistics company because indeed their success will be largely dominated by logistics and not just on what happens online.  That your business receives customers online does not mean it is a web business. What really matters is where the cost elements are. For this particular ecommerce company, the business is simply a logistics firm, as far as cost is concerned.

So the question is thus: how do we manage this logistical challenge, a big issue that drains our growth capacity and eventual profitability? We do not have a good postal service which means that we are expected to build logistical solutions to drive our ecommerce operations. It is refreshing to note that digital platforms are doing well in payments across the continent. In Nigeria, according to government data, both web and mobile payment channels are growing. This means that people are ready to shop and pay online. The hurdle now is how to cost-efficiently deliver the items to their homes and offices.

What A Startup Can Do?

This is not easy but I do think the best roadmap to deal with the logistics issue is to partner. Partnership will make distribution of items easier. The ride-hailing companies like Uber, Little Cabs, Max Go, and Taxify are good examples for any startup to partner. Walmart already does that with Uber in selected locations in U.S.

Walmart is expanding a test of its grocery delivery service, powered by Uber, the company announced this week. The retailer is now offering grocery delivery in two new markets — Dallas and Orlando — which join Tampa and Phoenix as locations where consumers can shop online for grocery items, then opt to have them come to their home for an additional $9.95 fee.

The advantage is that by modifying your business process, you can work with companies like Uber to make the delivery without necessarily incurring additional costs of buying motorbikes and employing people. It may not be easy to execute this seamlessly. My recommendation will be to start with some selected items and then expand the offering. There are things your own delivery man has to do, and there are items you can use Uber. Working with MAX Go, an on-demand motorcycle transportation company, may even work out better than Uber. An entrepreneur needs strategic partnership in this space to reduce the assets burden associated with logistics while managing a potential customer experience problem.

All Together

The challenge before ecommerce founders is huge with our non functioning postal systems. For us to see growth and profitability, finding a way out of this quagmire will be strategic. I had envisaged the community coming together to share logistical infrastructure to reduce capex. But that may not happen anytime soon. So, the roadmap is simply for any player to find one of these ride-hailing transportation companies like Little Cabs, Uber and Taxify and strike a deal to help deliver some items. That may not be perfect due to potential customer experience problems.

Sure, but I do know that what we are doing today will continue to put pressure on founders to keep raising money in a problem that is a continuum. There is no inherent scalable advantage in the near future that will benefit logistics in major African cities. That you have covered Ikega does not mean that you have fixed Festac (both in Lagos State, Nigeria) when you decide to support customers in Festac. So there is a non-zero marginal cost to expand to serve a new customer in Fastac despite covering all potential customers in Ikeja. It makes the economics harder as growth requires more capital from one city to the other. Outsourcing logistics will free that cash, and that will make your ecommerce business a super asset-light operation.