Episode 9: Reflections on Sote
A Business Model for Freight Forwarding
If you’ve listened to more than one episode of The Trajectory Africa’s digital commerce and logistics series, you’ll have heard me name check Samora Kariuki multiple times. And if you listen to my conversation with Samora about logistics fundamentals, you’ll understand why. But let me also explain.
Way back in 2023, I was aggressively ingesting African fintech content so I could learn enough to ask good questions about it. Fortunately, I found Samora’s newsletter, Frontier Fintech. Reading the 50 or so pieces he’d published at the time helped me structure the fintech series—what subsectors to focus on and foundational questions to refine and expand.
The quality of Frontier Fintech is why I invited Samora to open the The Trajectory Africa’s fintech series with an “explainer” episode. In that conversation, he outlined what a digitally-enabled financial system should look like and achieve, and what jobs remained to be done. (Hint: It’s access to credit and cross-border money movement).
Not surprisingly, as the focus of this series shifts from digital commerce to logistics, I’ve invited Samora back to play a similar role. He’s breaking down logistics fundamentals—value chain players, their roles, and their profitability prospects. It’s an incredibly rich conversation worth listening to. But in the meantime, here are a few nuggets to chew on:
💰 1. If trade drives economic opportunity, then freight forwarders play a key role.
Samora outlines a powerful thesis: Africa’s economic development is bottlenecked by inefficient trade. An underlying premise is that big trade volumes mean big economies, and freight forwarders serve as primary partners for trading businesses. By digitizing freight forwarding, players like Sote collect data on the goods they’re moving and use it to improve supply chains and make trade easier to coordinate.
“If you build yourself as a freight forwarder… you have all the data that enables you to make the supply chain much more efficient.”
⚖️ 2. The power dynamics in logistics supply chains matter.
Shipping lines and ports hold oligopolistic and monopolistic power, respectively, which means they also make the most money. In contrast, freight forwarders and transporters operate in fragmented, high-opex, low-margin environments. The bottom line? African players are often stuck in the worst parts of the value chain.
“A lot of the economics is in the shipping lines and the port authorities... Basically, the areas in which Africans are playing [have] very bad economics.”
🔗 3. The coordination problem isn’t really the problem.
Much of the early investment in logistics tech (e.g., "Uber for trucks") assumed that matching supply and demand was the core issue. But Samora argues that coordination isn’t the problem — it's the economics.
“And so this idea of matching cargo is not so much like a real problem in most economies like Nigeria, Kenya, [and] South Africa. Even if it were a problem, you have almost near perfect competition and very aggressive price based competition. So, there's very little margin to pay anyone else.”
👀 4. Visibility has value, but monetization is hard.
Companies like Sote created operational efficiency by solving the “visibility problem” — tracking containers, reducing port storage fees, etc. But while importers valued this, they were often unwilling to pay more for it.
“The problem is that you have a situation where at the end of the day, even if you have improved a manufacturer's supply chain immeasurably, his margins remain the same. So it's very hard to capture the value from that kind of visibility, although it's a very important problem to solve.”
💸 5. Trade finance is a great opportunity if you can exploit it.
Sote’s long-term strategy hinged on leveraging the visibility it had created into the entire supply chain to unlock trade finance. The logic was that freight forwarders produced data that could help originate and underwrite risk. But getting banks to adopt this model was difficult.
“Banks are going to have to change the way they underwrite trade loans. There's a lot of complexity in that based on this new model. And it's just a hard sell.”
That’s all for this week’s rundown. As always, thanks for reading, and see you next week!