In South Africa, consumers order prepaid services like cell phone airtime or electricity through convenience stores, grocery stores or gas stations. The transaction works like this: the consumer pays the convenience store cashier, the cashier gives the consumer a card that when scratched reveals a code, and the consumer enters that code into a phone or electricity meter. In this transaction, the convenience store takes a cut of the sale, a distributor takes a cut for the scratch card, and the telecom or power company receives the bulk of the payment.
But let’s say the consumer runs out of minutes and the store is closed? Or, even more common, what if the nearest purchase point is hours away? That’s where CEO Vahid Monadjem and his company Nomanini comes in.
The Nomanini terminal is a box-shaped wireless device that sells cell phone airtime. The terminal is marketed to small-time entrepreneurs like food vendors, taxi drivers or convenience store owners, and has seen an explosion of success in South Africa — and especially Kenya. The mobile purchasing industry is expanding around the African continent, and this device — which can cost between $200-$250 — could be the future for airtime sales in Africa. Nomanini has attracted investors from around the world, including renowned angel investor Esther Dyson. AFKInsider chatted with Monadjem — who has his eyes set on global expansion — about his roots, the mobile industry in Africa and the development of his company.
AFKInsider: Could you speak about access problems people may have in purchasing airtime?
Monadjem: One factor is distance. The farther out you go from central urban hubs the more expensive airtimes become. It’s simple supply and demand. In the center of Cape Town right now, if I want to buy one dollar of airtime, it will cost me one dollar. If I go out to Khayelitsha, a township outside of Cape Town, it will cost me $1.10. If I go farther out, I can pay as much as $1.20 for one dollar of airtime. It’s one of those perversities where the people with the least amount of money end up spending the most for their services.
Another thing is time. Let’s say it’s 11 p.m. and your lights go out — what do you do? In Zambia there is pre-paid electricity service and less than 30 points where you can buy electricity, and only one that’s open 24 hours. These are real problems. It blows my mind. When we thought about 2013, we thought we’d be in flying cars.
AFKInsider: So how does the Nomanini terminal work?
Monadjem: In Kenya, let’s say, the consumer may have 20 shillings — 20 U.S. cents — for mobile services. Let’s say that instead of formal points of retail, the consumer purchases through a Nomanini terminal. The consumer shells over the shillings and gets a pin number. That pin number is used for mobile services, but could also be a subscription, a collection of an installment payment or an insurance premium. After many transactions the merchant that collected those 20 shillings takes his wad of money and deposits it into a banking system.
AFKInsider: What types of prepaid services can be sold through the device?
Monadjem: We’re generally focused on mobile services, but we’ve done a proof of concept for an electricity solution as well. What we’re trying to do is match the mobile scratch card in terms of tradability. It always blew our mind that mobile rollout overcame electricity. In Congo, for example, less than 10 percent of households have access to electricity, but about 20 percent of people have mobile devices. We believe that a factor at play is the existence of a viable method to collect very small cash payments — in the mobile sector this is achieved using scratch cards. Electricity does not have a payment collection mechanism as appropriate for the informal trade as the scratch card. We think that ability to collect micro-payments has enabled investments in mobile infrastructure ahead of electricity. Nomanini hopes extend the potential of micro-payments to enable other industries.
AFKInsider: What was your introduction into the tech world?
Monadjem: I was always a little tech kid — I was always dismantling VCRs and toasters. I’m an Iranian-American born in Germany, but spent most of my life in Swaziland, from age 10 to 18. It’s where my interest began in technology and informal design. It was also a recipe for identity issues (laughs). I also had a passion for art, which led to me exploring design and engineering, and I ended up studying electrical engineering. I foolhardily started a business with friends, developing baby toys to micro-sensors for farms to machine monitoring for large-scale photocopiers. That was my intro to tech.
AFKInsider: How did you develop the terminal, and who decided on the color scheme, the size, etc?
Monadjem: It was a bit of a combination of a number of people — I’ll just take you through the history of where we started. I was at McKinsey & Company, so I couldn’t work on this full-time; my brother (Ali Monadjem) was actually the one who was working on it. One day there was a huge mini-bus taxi parade – they’re 14-seater taxis, and 20 million people in South Africa use them weekly. We thought there was a possibility of the taxi drivers driving, and when they’re pulling over they’re selling airtime. That’s where we started. But that constrained our design a lot and made us realize that we needed to create alternatives to the scratch card.
I was an electrical engineer and industrial designer, and in 2010 we pulled together former partners and made a very rough group of concepts. We ran workshops with the taxi drivers, like sticker voting; you’ve got 10 stickers, and you’ve got to vote on features. For example: Do you want to make the size smaller, or make it work faster? I kept pushing the designers to make it smaller, but they didn’t want it smaller at all — it made it easier to steal. It was far more important to increase the battery life and increase the speed of transaction. If you step back and look philosophically, the actual time cost of a transaction is significant. If you’re a merchant and you’re spending 30 seconds to a minute doing an M-Pesa transaction, you could have sold a can of coke, a loaf of bread, or a bottle of milk.
AFKInsider: Please explain which companies you work with and how you got them on board.
Monadjem: We have two main targets: one is the existing pre-paid distributors, and they’re trading scratch cards; the second is the mobile networks themselves. We prefer to focus on the pre-paid distributors. They tend to have well-honed operations of the informal trade.
AFKInsider: Could you speak about the market for this device?
Monadjem: We have three layers, which are the local merchants, the in-country partner and the consumer. The wide base is the consumer that purchases the airtime. And we’re talking about the un-banked consumer — this is a consumer very based on cash and unlikely to have a bank account. If they have an account, it’s likely to be for money transfers. The primary user (of the terminal) is a merchant. These guys could have a shop in Nairobi or Lagos, or they could be street hawkers — they could exclusively be selling [anything] from mobile services to hard-boiled eggs. The third stakeholder is the in-country partner. We’re a platform for them. That terminal we’re talking about, it’s not our terminal, it’s our in-country partner’s terminal.
AFKInsider: Could you give us an example of one of your in-country partners?
Monadjem: Well, across the continent, $60 billion in airtime a year is already being traded by someone. One example is Bamba Kenya, our partners in Kenya. They are now using our system to distribute prepaid mobile airtime instead of using scratch cards. They acquire the prepaid pins that are loaded into the system and administer a cash-collection, whether that be banks, mobile money or an agent network. They’re the ones that define a product that is suitable for their country.
AFKInsider: What is the typical amount of money that a local merchant can make with the device?
Monadjem: Let’s see, at 5 percent… about 500 ZAR a month, which is about $50 a month. Something to bear in mind is that there are two reasons for an informal trader to sell prepaid mobile. The first is, of course, that it earns a profit. The second is a drawcard that attracts footfall to the point of sales and enables a merchant to increase sales of other, usually higher margin goods too. In Nairobi I heard from some informal retailers that their overall sales dropped 40 percent when they had stopped trading airtime. I think it’s important to understand that $50 sounds like very little, but the median income for an entrepreneur in the informal trade in South Africa is about $160 per month overall, so it’s a sizeable jump on a very low base.
AFKInsider: What is your fund-raising status?
Monadjem: We’re actually pretty well funded now. There were three rounds to our fundraising. The first was the normal, you know, friends-family-and-fools type fundraising. The first investor after me was my mother, then my best friend, and people I knew from McKinsey. We did qualify for a government grant in South Africa, and it was very helpful for the startup. The second round was venture capital, and in that Esther Dyson was instrumental. She is a very recognized angel investor within the U.S. and Russia. She hadn’t done deals in Africa, and she said, ‘You have to find another investor and I will co-invest with them.’
But in SA, there isn’t that much capital for start-ups that want to do more than build an app. If you want to build an app, you can do it pretty easily, or if you want to buy a mine you need to raise 20 million dollars. But between there we didn’t find that appetite. We went to Amsterdam, London, New York and San Francisco. In Amsterdam we found eVentures Africa, which fit us perfectly, as they’re Africa focused, tech focused and media focused. All of the partners were former entrepreneurs, they understood the journey, they knew they could understand the pitfalls, they were great thought partners. The third round was a private family fund out of London. So we’re done for fundraising.
AFKInsider: What other markets do you see Nomanini spreading into?
Monadjem: We’re currently active in South Africa and Kenya. We’re starting a deployment in Zambia and we’re very close to starting deployments in Congo and DRC (Democratic Republic of Congo). We’re also looking to Jordan and Brazil, where there are different forms to purchase airtime. Scratch cards are a big form of purchasing airtime in Brazil, and in Jordan it’s printed vouchers in grocery stores. It’s quite exciting, because it’s a story of African-developed technology.