The Future of Work is Vertical Platforms

Justin Norman: Back in episode 1 of this season, we spoke to the development economist Louise Fox.
Louise Fox: It's a good idea to focus on formal jobs, but we need to understand that not everybody's going to get one.
Justin Norman: We know that in most African countries, the majority of people earn their living in the informal economy. So while, in the context of development, the goal is job creation, there is a limit to the number of formal, salaried jobs that will absorb African talent. 
Louise Fox: Somewhere between 25 and 50 percent of the new entrants, depending on the country and the context, are going to get one. So we need to focus on that.
Justin Norman: As a result of these market conditions, perhaps the largest impact in terms of development and income generation is through interventions that seek to improve the productivity of the informal sector.
In the past few episodes, we've explored the programs training for and connecting talent to jobs on the demand side of the labor marketplace. But these are largely formal and salaried jobs, and as Louise said, not everybody is going to get one. So, our exploration of the future of work needs to span much further than that. Where there are no formal jobs, what does it look like to help stimulate the development of the informal sector and microenterprises? And what role does technology play?
In this context, we hear a lot about platforms and their role in creating jobs or income-generating opportunities. But what are the platforms actually good for? And what is their actual impact across African markets? Let's explore.
Justin Norman: Before we start, we'd like to thank MFS Africa for their sponsorship of the entirety of season 4 of The Flip. 
In this episode, we're going to speak about platforms and microenterprises. Across African markets, some of the largest platforms are agent networks, in which enterprising individuals extend financial services to the last mile. One such agent network in Nigeria is Baxi, which was acquired by MFS Africa in 2021. And I caught up with Baxi's Founder, Dee Abudu, about where the opportunities are, and what it looks like to more appropriately build technology for the last mile. 
Dee Abudu: It's really more around financial inclusion for the mass. So trying to create accounts, wallets, bank accounts for our merchants that we work with, so if they don't have a bank account, we can create a de facto account for them at the agent location. In Nigeria, before you can open a bank account, you need a bank verification number, which is issued by biometric identity verification. We can also do that at agent locations. And then on top of that, we're super excited about some of the things that obviously MFS Africa can bring to the table an dwe see an integration with MFS Africa basically bringing some level of synergies and consolidation. Naturally, there will be synergies for remittances that create inbound and outbound corridors between Nigeria and countries across Africa, and inbound and outbound with China. And those are obviously significant markets that we think we can over the long term generate a lot of value. And then, just to constantly try and create a payment innovation or innovation around ease of payments that suit the last mile. And that comes around using technology just to simplify payments and education and training and awareness that that demographic will need to be able to use technology and be more digitally enabled over time.
Justin Norman: You’re listening to The Flip. The podcast exploring more contextually relevant stories from entrepreneurs around Africa.
Welcome back to The Flip. I'm your host Justin Norman. 
In this episode, we're going to talk about platforms. And while we're going to use the term platform, what we're really talking about are jobtech platforms. Let's start with a definition. 
Chris Maclay: ​​​​The biggest change in the future of work is how work is intermediated and jobtech largely is around platforms that connect people to opportunity.
Justin Norman: That's Chris Maclay, the Program Director of the Jobtech Alliance at Mercy Corps, which is a... 
Chris Maclay: A community for startups, researchers, and different actors interested in the jobtech space to work together to help build scalable solutions and achieve strong employment outcomes with its users. 
Justin Norman: Jobtech has a particular role to play in African markets for many of the reasons we've explored throughout this season. 
Chris Maclay: Jobtech looks different in the African context because the types of jobs that people are doing are different. But I think we see jobtech as being particularly interesting on the African continent because there are so many failures in the labor market system and opportunities for technology to improve the way that labor markets work. 
Justin Norman: The overarching question we're going to explore in this episode is what role these platforms play in creating jobs or income-generating opportunities in African markets. 
Chris Maclay: Now at one level, these platforms are not actually creating new jobs themselves. They're increasing efficiencies, maybe improving quality of work. But at another level, they are creating new jobs. This is largely because they're moving non-consumption into consumption of those services by making it better quality, more convenient, or lower cost. 
Justin Norman: The canonical example here is ride-hailing, where Uber may on one hand be moving some of the demand for taxi services from the analog to the digital. But at the same time, there are believed to be more Uber drivers in these markets than there were taxi drivers, as platforms like Uber have also increased demand for these services. And this is particularly important because much of this gig work can be fulfilled by less skilled talent, as well.
Prior to his current role with Mercy Corps, Chris was the COO at the Kenyan home services platform Lynk, where they'd look at this question of job creation as it related to bookings on their platform. 
Chris Maclay: At Lynk, we used to say that maybe half of the jobs that we delivered on our platform were services that would've been consumed otherwise but people now consume them through the platform. And we still saw that as a good thing, as it was more professional and better paid. But we always guessed that maybe half of our jobs were actually moving non-consumption into consumption. 
Justin Norman: And where consumption is created, it's a function of tech-enabled platforms better-organizing supply and demand, and in doing so, availing a service that is more convenient, transparent, easier to use and pay, safer. So people who wouldn't otherwise ride in a taxi or get their leaky pipe fixed choose to do so. 
But at the same time, the growth opportunities in the African context are still largely constrained by market size and disposable income. 
Chris Maclay: But in all of these platforms for offline work we're limited by the purchasing power of the growing middle class. And we always talk about a growing middle class in Africa, but the vast majority of the growing middle class is at the much lower levels of income. And those that have the disposable income and that are willing to pay more for a higher quality or more convenient service are few. And many of these job tech platforms, by improving efficiency and quality of service delivery, they need to charge a premium for it. And there is probably a limitation on how far such platforms can really grow with a limited addressable market. 
Justin Norman: The particular challenge when building in this context, in addition to the market size question, is the infrastructure question.
Chris Maclay: So building business models around this market is tricky, particularly the traditional, western job tech models of large-scale job matching, which is providing a technology layer that connects supply to demand, is very difficult to replicate on the African continent, where the problem is not just information asymmetry, but many, many different layers. You are often dealing with a skills deficit. You're dealing with a lack of access to assets or financing. You are dealing with all sorts of infrastructure from high-cost transportation to get to gigs to lack of digital connectivity. Platforms tend to need to do a lot more in order to be successful.
Justin Norman: But that's largely the opportunity for jobtech platforms. Much like we've talked about in other sectors on the continent, where the problems are multi-faceted and in which there is a lack of infrastruture, the opportunity is to provide more integrated and full-stack products and services to their users. 
Chris Maclay: The reason that I get excited about a lot of job tech platforms is what they really do is much more than just connecting people to gigs, but providing them with the infrastructure. Everything from the skill building to standardizing the tools and the supply chain that they needed to do jobs well, managing everything, including cultural differences between the service buyer and the service user. A lot of what we did was provide the infrastructure that they needed to thrive in their respective businesses. 
Justin Norman: So what does building that infrastructure look like? It's here that we need to dig a bit deeper and talk about the nature of the work itself.
At the sort of lowest-hanging fruit of opportunity are the gigs. You need a ride or you order food, and a driver shows up.
Sayo Folawiyo: With cleaning and driving a car, it's quite easy to give someone a job because a job looks like a job, looks like a job, looks like a job, there's not that many variables that you have to deal with. 
Justin Norman: That's Sayo Folawiyo - who you'll recognize as The Flip's b-mic. But his main role is as the Co-founder and CEO of Kandua, an operating system for home service providers. 
Sayo Folawiyo: In our environment, we're currently focused on home improvement services and maintenance services, the amount of variables in a job is just insane. So I think what that means is that it often attracts a different kind of provider and generally when you are that kind of provider, you are generally trying to run a business of some sort.
Justin Norman: What we're going to focus on here are digital platforms for microenterprises. In the African context, gig workers still need infrastructure, as Chris alluded to, which in this case, is in providing ride-hailing drivers with vehicle financing, for example, which is made possible by the visibility platforms provide into the drivers' earnings. And this infrastucture for gig platforms is crucially important, particularly when we consider wide range of the types of gig work, and the potential amount of less skilled labor that gig platforms can absorb. 
But as we take this conversation further to microenterprises, often where a higher level of skills or business acumen is required, the thesis here is that microenterprises, with the right tools, can become a multiplier for employment. Vertical platforms generally start with connecting supply and demand, and then in providing other tools and services, are going much deeper into the business of their customers in order to help them grow. 
Kandua started out as a vetted marketplace connecting homeowners to the plumbers or electricians or contractors they needed to fulfill a service. 
Sayo Folawiyo: When we talk to our customers, the biggest barrier to them from their point of view anyway is new customers always. And we actually kind of think of our business that way. We kind of go through the stack of problems and see how we can solve one after the other. So we started with the most important problem to them, which is, how can I get new customers?
Justin Norman: Digital platforms are particularly good at that. 
Sayo Folawiyo: I think the thing people miss a lot of the time when they have these conversations is just like, platforming is not an end in itself, it's a way of doing things. It's a way of organizing information and actors that you can point towards anything that you deem appropriate or important. 
Justin Norman: As we spoke about in prior episodes, this looks like identifying demand and re-orienting existing labor supply accordingly. 
Sayo Folawiyo: When you start to understand where those jobs are coming from and where it's increasing and who can do what and what is the typology of job types - like, okay, this is the kind of job that electricians could be quite easily moved to, if we think about who's going to be good at cell phone repair? What kind of skills do you need for that? Okay, cool. When you have the demand and the supply and you have the platform in the middle that's able to really understand what's going on, I think you can point it towards any kind of skilled job really.
Justin Norman: But in an environment with insufficient infrastructure, you quickly realize that the problems are deeper than that. 
Sayo Folawiyo: And then in doing that, you learn a lot about, Hey, actually what's stopping you from getting new customers is that every time your car breaks down, your whole life is in turmoil and you now let down these next five customers and your reviews are terrible and you start losing jobs, right? So understanding that there is one element, and I think that element is one that always has to continue, right, you always have to be able to do the business development, find service providers work. But you also learn that there's a lot that you can do from the software side, from the digital inclusion, financial inclusion side that helps people be more sustainable. 
Justin Norman: This is where embedded fintech comes into play, and to some extent, where verticalization is important, in terms of the platform's ability to build specifically for the needs of a given vertical.
Sayo Folawiyo: So to give you an example, you might say payments, horizontally, every small business wants to get paid quicker, wants better payment terms with whoever's paying them, all that stuff. But in the built environment, they have to go and buy, you know, the average job on my platform's about $500 and half of that at least is going be materials payments. That was the median, so jobs can go up to a R100,000, and if you have a R100,000 job, R60,000 of it is materials. So now you have to go and pay for that out of your own pocket. Nope, not gonna do that. So the payment flows look slightly different there. That's why you have a lot of this deposit first for my materials, and then my risk is the labor. That's a very common workflow in the home improvement vertical. When someone's coming to paint my nails, I don't need to go through that journey. So payments remain like a horizontal thing, but you verticalize on a workflow basis.
Justin Norman: And that verticalization opportunity exists a level deeper in a category like home services considering the customers it serves. 
Sayo Folawiyo: I think the cool thing about credit in this space is that you're not just only talking to the service providers, you can actually use the service providers as a channel. Really understanding the vertical isn't just about how you serve one side of the marketplace. It's also about how you serve the other or help them serve the other, which actually acts as a channel.
Justin Norman: And so while there are market size questions for gig platforms, for example, vertical platforms can service markets that are deeper than they appear because of the nature of the work. 
Sayo Folawiyo: Let's not just think about how many times you need to clean your house or whatever, think about it from the other perspective. How many times does a plumber, a beautician, a caterer, get up and do something? And what is the value of all those something? That's the actual market. And then you ask, okay, how can we capture that? If I'm able to capture that value of the amount of times people do shit, what does access to that channel allow me to do? So if I have 10,000 active users on my platform right now, they're going to be in probably an average 60,000 homes a month. Not only are they in those homes, they're doing stuff to those homes. What can we sell through that channel? If I'm an insurer, what's the best time to sell somebody some shit? When some shit is broken. My shit is broken, I need to buy a new toilet. What's the best time to sell somebody a toilet? When the toilet's broken? What's the best time to sell somebody a home improvement loan? 
Justin Norman: We can already see how this starts to have impact in terms of helping small services providers grow their businesses. 
Sayo Folawiyo: The thing is to share marketing opportunities with that cohort, which can also make them more sustainable. So now it's like, not only is it helping them convert, so if I can offer you financing, it's helping me convert the job, there's also an opportunity for additional streams of income for them.
Justin Norman: When we come back, we're going to further explore vertical platforms for microenterprises, in one of Africa's largest sectors for employment. But before that, here's another word from our sponsor, MFS Africa. 
Justin Norman: Earlier in the show, we heard from Dee Abudu, the Founder of Baxi, the Nigerian agent network acquired by MFS Africa. Much like we're talking about throughout this episode, a big constraint on the growth of microenterprises is access to credit. It's something Baxi is focused on, as well. 
Dee Abudu: From the lending perspective we now feel like we can aggressively push into micro-lending and finding ways to customize lending for the ecosystem that we think need it the most. That's just creating non-traditional lending products to really sort of drive micro SMEs and SMEs in Nigeria. We have a pretty comprehensive portfolio of products for these SMEs, but I think what really happens next is it helps us to accelerate the breadth and the depth of credit products on our platform that can really support SMEs. My belief is the most important way of empowering SMEs is to provide credit and the way credit is structured currently, isn't really suited for retail last mile. Most of the commercial credit products are structured around more developed, more formal businesses. So you need collateral or you need like really consistent cash flows, whereas nothing is really created or customized for this demographic. So with the partnership with MFS Africa, we'll create a much broader portfolio of credit products that can better suit that demographic and create a lot of value and empowerment.
Justin Norman: Now, the opportunity for job creation or income-generation exists in many sectors across the continent, and the thesis here is that vertical platforms can do a particularly good job at helping microenterprises grow. So let's explore this idea through the lens of another industry - one of the largest industries on the continent. 
Njavwa Mutambo: For context, the restaurant industry is one of the largest industries in Africa. It's around 3 percent of Africa's GDP.
Justin Norman: That's Njavwa Mutambo, the Co-founder and CEO of Caantin, formerly known as Topup Mama, a platform for restaurants to manage the back office operations of managing suppliers and inventory. 
Njavwa Mutambo: It's also one of the largest job creators. Just contrast a small shop and a small restaurant. A small shop you could manage that with one or two people. A restaurant needs somebody in the kitchen, it needs a waiter, it needs somebody to manage it. And so these businesses are very, very, labor intensive. And so what we saw as a potential for impact is by helping these businesses grow. You're effectively creating jobs in an industry that has a higher probability of hiring the current labor pool in the current state of the economy.
Justin Norman: So that raises an important question - how does Caantin help these restaurants grow? Whereas Kandua's wedge into building a network for home service providers was business development, the problems for restaurant owners are a bit different. 
Njavwa Mutambo: The progress that restaurants have made on the front end, being on platforms like Uber Eats and having point of sale systems, their backend and the back office operations are still very much analog. And as a result, they lose a lot of money. And so what we do is we streamline all those back office operations and work very hard to ensure that some of these small businesses have a sustainable way to manage their costs and scale. 
Justin Norman: And managing those costs requires a deeper understanding of the dynamics and payments cycles of the restaurant industry, in particular. 
Njavwa Mutambo: The hospitality industry is notorious for its extremely long receivable cycle. Hotels and restaurants purposely pay suppliers late. The people who are really impacted by that are the small and medium suppliers. Small and medium suppliers are unable to scale and grow primarily because they don't have the liquidity to keep servicing restaurants. It's really important for us to highlight that this liquidity problem is the biggest problem that we found in the restaurant business. It's not that there aren't enough suppliers. It's not that there aren't enough, there's not enough technology. It's that the suppliers that exist have really, really bad liquidity problems.
Justin Norman: And so while the primary problem isn't not enough technology, this liquidity problem is nonetheless one that can be addressed with technology.
Njavwa Mutambo: When we found this problem, we realized it, it goes down to a data problem. There isn't enough data for financers to provide a supplier the invoice factoring that they need because they don't know who that supplier's customers are. And on the other side, as well, you don't really know who the supplier is servicing, what's the history of the specific restaurant's repayment, is this restaurant about to go bankrupt? They don't really have that.
Justin Norman: Back to Sayo's definition of a platform - a way of organizing information and actors on two sides of a market - Caantin providing that layer of data and visibility makes it possible for the two sides to operate more efficiently and unlock growth potential.
Njavwa Mutambo: We build software that enables restaurants and hotels to order, pay, and finance their inventory. We manage the ordering, the payment, and the financing of those specific products. 
Justin Norman: And, much like Kandua, a lot of services can be layered on top. 
Njavwa Mutambo: You start, first and foremost, with fixing the biggest problem. Today it's the cost of sales. And then you just work your way down that P&L, there's a lot you can learn. And so right now, obviously our focus is on working on that cost of goods side, but there's a lot. How do you pay your employees? How do you manage payroll? How do you manage all of these things? We are slowly going to capitalize on that data and provide more and more services. And so, that's what we're excited about.
Justin Norman: So tech-enabled vertical platforms, in better-connecting supply and demand in otherwise fragmented markets, and in layering tools and services, can help microenterprises grow. And when they grow, they become means of job creation. 
But just like not everyone is going to get a formal, salaried job, as we heard from Louise Fox in the opener, not everyone should be a business owner either. African markets benefit from the collective strength of formal industry, and robust gig platforms, and growing microenterprises, with the support of platforms, with a wide set of opportunities for the varying level of skilled talent in the market. 
And this question, about the role of platforms in the equation, and their relationship to different types of talent, is what Sayo and I spoke about in reflection of this episode. Take a listen.
Sayo Folawiyo: I really want to stress that I think what we are talking about when we're talking about small business enablement and digitizing services for small business enablement is two things. It's number one, the acceptance that business is a great way to mobilize people, give people ways to make money and incentivize them that way, that there's not enough formal jobs for that to be true. And the nature of our environment is one that lends itself really well to small businesses being the root to prosperity or whatever.
Justin Norman: This is what the majority of work looks like and so we must build products and services and tools to help them grow. 
Sayo Folawiyo: Exactly  And the like red herring is this like new job, old job, blah blah blah thing. But like both platforms and small businesses are going to be naturally attracted to where there is open space, where it's less competitive, where I can build more. So it's more like, can we find a way to, number one, know what those opportunities are? Number two, find who can do them. And number three, make sure that they are connected to each other as quickly as possible.
Justin Norman: Yeah.
Sayo Folawiyo: And digitizing small business, the thing I keep talking about, it's about information. It's about knowing and understanding demand-supply and how to match it. The mechanisms to match it. 
Justin Norman: Yeah. So everyone likes to talk about this idea also of there's the same, somebody sees somebody opening a pharmacy and then they're gonna open a pharmacy right next door, right? It's a coordination problem. And this idea of, without digital tools and platforms to better organize, everyone's just going to do the same stuff. The subsistence nature is a function of it's not that there's not demand for services, it's just that it's a coordination problem within the market. That's your argument. 
Sayo Folawiyo: Yeah. And that's why digitizing them is so important. And platforming them is so important. 
Justin Norman: And then, you've talked before also about this idea of if given the opportunity, some of your service providers would rather just have a job. 
Sayo Folawiyo: Yeah, I do find that. 
Justin Norman: And, how do we reconcile this idea of like, people would rather have jobs, but we are compelling them to grow their own businesses because there are no jobs for them? 
Sayo Folawiyo: Same way. Let's know who wants a job and then give them to the people that know where the permanent jobs are. 
Justin Norman: Yeah. 
Sayo Folawiyo: You know what I mean? 
Justin Norman: But also I suppose we've talked a lot about like, what does the path to formalization look like, right?  So how many one-person plumbers would be better as an employee of a 10-person… 
Sayo Folawiyo: Of a 10 person… That's like a really cool one that I can't wait to think about in a deep way. I can't say that I've got there yet. 
Justin Norman: But do you think that that is a thing that's going to happen is that the ones who are managerial and can run the business, like there needs to be consolidation? 
Sayo Folawiyo: Yeah, for sure. 
Justin Norman: Across all these categories?
Sayo Folawiyo: Maybe not all, but…
Justin Norman: So this is kind of back to what extent is the sort of like personal nature that you talked about lost in… but that's kind of what we're talking about in the US, right, like there's no small stores anymore. Everything's a Walmart. And it's the US has lost its charm in favor of like efficiencies and capitalism, right? Is that the path? 
Sayo Folawiyo: Perhaps. But I certainly think some consolidation is necessary. Maybe we don't go the whole way. Maybe there's a steady state that is in a different place. And in some industries, in some verticals, it's going look like, yo, let's just employ everybody. Some will be like, okay, let's just have smaller pods that employ lots of people. Some will be like, okay, let's have even smaller pods that employ a few people. Some will be like, okay, actually we just need everybody doing this themselves. And I, I think there's that spectrum that, the only way you work out the steady state of is through doing shit. 
Justin Norman: Yeah. , I suppose it's hard to have a bit of a unilateral conversation around that. That depends on like market by market, sector by sector characteristics.
Sayo Folawiyo: Yeah. A hundred percent
Justin Norman: That's it for this episode of The Flip. Next week we're going to take this conversation one step further, to explore what that standardization and consolidation that we just spoke about might look like. 
Until then, if you enjoyed this episode, we would really appreciate if you shared with a friend or a colleague who you think may enjoy it, as well. For more from The Flip, you can follow us on social media @theflipafrica, and you can subscribe to our newsletter on our website theflip.africa. 
Thanks as always for listening, and we'll see you next time.