I'm here for a 3rd term ✊
The 3rd Term bid, Shoprite leaving Nigeria, Recent moves in the Telecommunication Industry
We’d like to correct an error made in last week’s newsletter. International flights haven’t commenced in Nigeria, as mentioned in the first story. Thanks for always spotting errors.
Now to the stories of the week
I'm here for a 3rd term
Source: Jon Tyson (Unsplash)
Another African ruler is doing it again!
Outgoing Ivorian president Alassane Ouattara still has his eyes on the presidency as he has officially announced he would be running again, for the third term come October.
A little detail: Alassane Ouattara, 78 has sparked a protest with his sudden interest to return as the candidate of the ruling party in Ivory Coast. This comes a few months after he announced he won’t be returning to the polls as a candidate, Ouattara has swallowed his own words and will be up against oppositions in the next general elections.
Why the sudden change? His preferred successor and a former Prime Minister Amadou Gon Coulibaly, who was earlier chosen as a presidential candidate by the ruling party, died in July, creating a big gap and Ouattara believes he is the most qualified to fill this gap.
Furious rivals won’t let this slide: Although Ouattara claims his decision to seek a rerun represents a real sacrifice for him and only out of love for the country, activists and oppositions say their constitution forbids a third term. They won’t have it.
He also argues that a 2016 constitutional amendment, which allows a sitting president to run for two more tenures, has automatically nullified his first two mandates so he is fully backed by the constitution.
Another public chaos in view? Perhaps, considering Ivory Coast witnessed a brief civil war in 2010 and 2011, following Ouattara's first election win, where about 3,000 people were killed.
Meanwhile, in Guinea, there is rising tension as President Alpha Conde is being ‘coerced’ by the ruling party to seek a third term election. Ten years after Conde won the general elections, a victory well celebrated and foreseen as an escape from an autocratic government, he is still under pressure from delegates of the ruling party to run for the third term.
What does this say about Africa? An abuse in democracy. Both third term mandates have been perceived as a threat to Guinean and Ivorian democracy and in addition, other African countries including Rwanda and the Congo Republic have in the past altered their constitution to extend two-term limits. This, however, does not speak well of the continent.
Major elections in Africa this year:
Shoprite is pulling out of Nigeria
Shoprite, Africa’s largest retail chain has indicated interest to pull out of Nigeria.
What does this mean?
Shoprite would be selling all or a majority of its stake in Shoprite Nigeria to another set of investors -- they’re many investors waiting to buy it up. Shoprite Nigeria operates about 25 outlets across the country and employs about 2000 employees who are 99% Nigerians. While the Shoprite group is currently in 15 countries (out of 54 African countries) with 2,372 corporate outlets and 470 franchise outlets.
Why pull-out now?
Business Model: Supermarkets like Shoprite which sell commodities at the lowest possible prices operate on thin profit margins. Any unnecessary drop in patronage or increase in cost can erode all that profit margins. Shoprite also relies heavily on physical stores which are capital intensive, whilst facing competition from other similar retail chains and eCommerce stores.
Patronage: Malls and retail chains are often filled with long queues, but the queues don’t paint a true picture of how much patronage goes on as most people are merely ‘visitors’. There was a steep decline in visits last year during the xenophobia response induced attacks on Shoprite stores in Lagos. In that month visits dropped by 59% and have slowly recovered since then, contributing to a 5.9% drop in sales from Nigeria last year.
Government Policies: In the past year, the Nigerian government has focused more on supporting local products by banning the availability of Foreign Currency for the importation of substitutes, this has affected Shoprite. It has also faced difficulties in clearing perishable goods from the ports leading to losses and finally, the devaluation of the Naira had meant the revenue from Nigeria over the years now worth-less.
In one sentence: The stress from Nigeria is just not worth it.
Why it matters
For Nigeria: Where’s the ease of doing business?
Nigeria is ranked 131 among 190 economies (moving up 15 spots) in the ease of doing business, according to the latest World Bank annual ratings. It’s supposed to mean doing business in Nigeria is getting easier but is it?
We wish the new owners good luck because they’d need it.
For Shoprite: Business as usual
For Shoprite, it’s just business as usual, as it’s been pruning its activities in Africa having also left Kenya in September 2019. In 2019, Its non - South African supermarkets contributed 7.3% (R58m) to group supermarket sales, while the South African division accounted for 92.7% (R3,736m) of overall sales.
Shoprite in its recent financial report has said it’s committed to Africa, but not at all cost.
Recent moves in the Telecommunication Industry
Over the last few years, the African telecommunication industry has seen major changes. Increased broadband penetration, growing internet adoption and the displacement of SMS and traditional phone calls by instant messaging and internet-enabled voice and video calls have become the new normal. As we enter the second half of the year, we’ve observed some activities by the major players in this industry.
BreakUps and Financial Reports
Break-ups can be tough. Ask Telecoms giants Airtel Africa Plc and Telkom Kenya Ltd who have decided to cease the completion of their merger plans through a disclosure that was sent to the Nigerian Stock Exchange by Airtel Africa this week. The two players had locked horns in negotiations since February 2019 but were not able to come to an agreement.
On a lighter note, Airtel Africa recently posted an impressive Q1 ending June 2020 financial statement with an operating profit of $210 million up by 12.9%. The report also showed a rise in customers’ base to 111.5 million.
Johannesburg-based MTN Group, Africa’s largest carrier has announced its plans to exit the Middle East. The Group is in advanced talks to sell its 75% stake in MTN Syria to the minority shareholder, TeleInvest, while subsidiaries in Yemen and Afghanistan earmarked to go next. The main reason for this is that this market only contributes about 4% of the group’s earnings.
MTN Group Ltd. is also reportedly planning to sell all or some of its $243 million interest in Jumia Technologies AG. This we find quite surprising because Jumia’s shares surged by 142%, recovering from a dip in 2019.
The Telco superpower has been disposing of non-core assets as part of the company’s strategy to reduce debt and drive future growth.
MTN (again) recently announced that its virtual sim cards are now available in Nigeria. The virtual SIM is a cloud-based approach to phone numbers which are created online, providing the same function as the physical Sim cards. It makes it easier to have multiple telephone numbers on a mobile device without swapping physical SIMs.
While this is a major pioneering move by MTN, there are also possible downsides like the new technology working on only newer devices, leaving out a number of users with older phone models. It could also cause a slowdown in business for telecom companies as the new technology allows consumers to purchase data connectivity from whoever they choose online.
The virtual SIM cards will undergo testing over the next year and it will only be available to 5000 people during this test run.
Big Picture: As the rate of mobile phone and internet penetration in Sub-Saharan Africa (SSA) continues to grow, telcos are adjusting to gain a larger market share in this space.
Worth reading 📚
Quote of the week 💭
“When you undervalue what you do, the world will undervalue who you are.”
Thank you for reading this week’s edition 💙