Tony, a startup founder, received an order to procure heating, ventilation, and air conditioning (HVAC) repair equipment for a “big” company based in Nairobi, Kenya, with a parent company in the United Kingdom (UK). The parties agreed on a 30 day delivery period and an invoice was issued in the name of Tony’s company. Few days before delivery date, the parent company in the UK cancelled the order citing irregularities.
“It has been two years of having $80,000 worth of unusable parts as the case drags on,” Tony wailed on a Twitter tread created by Victor Asemota, founder of tech company SwiftaCorp and a well known voice in the African tech ecosystem.
Asemota’s tread on Twitter was highlighting the new headache that small businesses on the continent are facing – unpaid invoices.
“There is nothing more destabilizing to a small business than unpaid invoices,” Asemota who also writes a column for the Guardian Newspaper wrote on his tread. “I have dealt with this all my entrepreneur life in Africa.”
He considers unpaid invoices as the chief factor behind the high failure rate of small businesses and suggests there should be a law that protects them from “deadbeat” big companies.
“I have found that this is very common with small undercapitalized tech companies in services.” He adds. “You can’t bootstrap when the money to buy the boots are held up in accounts payable to one big bank and telco.”
Funding to tech startups have grown but not as expected. The big ticket funding have only gone to a very few tech companies some of whom have deep links to Silicon Valley where most of the investors are coming from. The rest of the startup ecosystem make do with occasional training abroad, a few quid from angel investors or grants or they simply bootstrap. That is not to say that funding in tech has not had its high points. 2018 for instance, has been an outlier year for a couple of startups, but the majority are still grossly underfunded, hence they have to bootstrap.
To bootstrap something means to help oneself without the aid of others. Many startups however depend on patronage from big companies to survive. In doing so, they have to put up with all manner of stories regarding compensation. To be sure, it is a problem almost every startup across the continent of Africa faces.
“It’s why I “pivoted” from the traditional web design process to building readymade websites that one can purchase and go,” @GZAKZA founder of Verbwork. “Here in Kenya a simple web design job can drag on for months and getting paid for it is a hustle.”
“The big businesses in Ghana will have your net 30 days turn into 90 days, then send the invoice back claiming an error in punctuations, and have you start the 90 days all over again” @LeonIzDizzy wrote. “And while you’ve been unpaid for a year, you’ll see their CEO in a magazine taking awards for being business savvy.”
@FNnebe another commentator believes it is a cultural problem rather than a legal issue.
“I say this because I have sold services in the Middle East, France and USA. I only encountered one horrible customer. But Nigeria? SMEs tend to be underfinanced from the get go. Then add in the way large companies screw them over, then they end up wobbling from day one,” he said.
Nvoice a startup that has built a platform to help SMEs get working capital without collateral said it is working on making it easy for startups get paid. It however says collaboration among startups could be the key to finding lasting solutions.
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