African Corporates Turn to Marketplaces to Control Strategic Spend

When it comes to corporate procurement, managing tail spending — smaller purchases that make up the bulk of transactions but only account for a small fraction of a company’s total expenditure — can be notoriously hard to keep a tab on, especially for large enterprises.

Let’s take the example of Africa’s largest mobile network operator, MTN, which has a presence in over 20 countries across the region.

On one hand, engaging with the handful of suppliers who cater to the company’s billion-dollar direct spend procurement needs can be easily managed in-house. Then there’s indirect spending, which according to Toby Sparrow, CEO at Johannesburg-based marketplace operator Dooka, is where the tail spend challenge lies.

“They’ve got a relatively small amount of [indirect] spend with a vast number of suppliers and that’s a really big headache and has been for a long time,” Sparrow told PYMNTS in an interview.

What’s more, large enterprises like MTN don’t benefit much from existing Africa-focused marketplaces, which Sparrow said are mostly business-to-consumer (B2C) marketplaces designed to meet the needs of small and medium-sized businesses (SMBs).

Moreover, B2C platforms that have branched out into the B2B space are not set up to integrate with large enterprises’ existing procurement procedures such as those required to vet suppliers, for example.

It’s these gaps that Dooka is trying to fill with its digital supply chain solution while working to bring the shopping experience of an eCommerce platform to the world of enterprise-level procurement.

Read more: B2B Marketplaces Digitize Corporate Procurement, Tackle Africa’s Inefficient Supply Chains

As Sparrow explained: “Our model really works when the large buyers who are transacting large sums of money every year move on to our platform. They stand to gain the biggest efficiencies [and] their suppliers stand to gain [a] leap forward in digitalization.”

MTN seems keen to tap into that opportunity and recently became the first large organization to join Dooka’s business-to-business (B2B) platform. The deal is expected to help the pan-African telecoms giant transform its vast supply chain network as well as foster digital transparency and greater efficiency for its suppliers.

In fact, for large enterprises like MTN, using a single platform to manage all supplier relationships and transactions introduces a greater degree of control and eliminates the need for employees to make purchases that they in turn have to claim on their expenses — this is the kind of tail spend inefficiency that Sparrow said Dooka is trying to make redundant.

Helping SMB Suppliers Access Enterprise-Level Deals

According to Sparrow, the current marketplace options available lock out many of Africa’s smaller suppliers from winning enterprise contracts. “We are trying to encourage buyers to buy from smaller, local suppliers that typically they have not bought from [but] it’s very difficult for a large organization to manage […] thousands of very small suppliers,” he argued.

Thanks to its marketplace format, however, Dooka can help equip these local vendors on how to successfully attract large corporate buyers.

“We can teach [SMBs] how to become a good supplier to a large organization. And then once they’ve got that certification [it] makes us a perfect place to showcase the products and services of those smaller companies that large buyers normally wouldn’t see,” he explained.

And as it helps large enterprises transact with local suppliers, Dooka is also setting itself up to be a key enabler of intra-African trade, not just within Africa, but across international borders, Sparrow noted, pointing to initiatives like the African Continental Free Trade Area (AfCFTA).

Learn more: FIs, Startups and Policymakers Drive Intra-African Trade, Payments Within EU-Style Customs Union

This philosophy of inclusion also extends to payments. As Sparrow explained, Dooka can support any payment method to meet buyers’ preference, and to expand its offering the  company is exploring how to introduce invoice financing whereby suppliers get paid faster and Dooka handles payment collection from buyers.

With supply chain financing, “we can inject liquidity into the market, and that is going to drive further growth,” he said.

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