Blog - Afrikan Heroes

African Energy Chamber visits Famous Slave Hub of Goree Island, Senegal

July 16, 2019

Goree Island which was a huge slave holding facility at the centre of the European slave trade from the sixteenth century until 1848.

The importance of this historical site has made it a Mecca of sorts for those who want to connect with Africa’s past, to understand some of the historical dynamics that brought this continent where it is today.

The recent group to visit the site are businessmen from across the continent of Africa under the auspices of the African Energy Chamber and several oil executives who took time off their conference in Dakar for a symbolic visit to Senegal’s Goree Island today, southeast of the capital Dakar.

Goree Island was a huge slave holding facility and at the centre of the European slave trade from the sixteenth century until 1848, when France abolished slavery. Countless African slaves passed through the island for centuries on their way to the US, Haiti, and Cuba. The oldest building on the island, the House of Slaves, is a reminder of the inhuman conditions in which African slaves were treated for over three centuries. The whole island was inscribed on the Unesco World Heritage list in 1978.

“Slavery was a sin and a crime against humanity. The Chamber is looking forward to working with various African civil society groups to fight issues of modern-day slavery. It starts with us creating an environment where all are treated with fairness, love, and equity,” said NJ Ayuk CEO of Centurion Law Group and Executive Chair of the African Energy Chamber during the visit.

Oil executives were told how slaves were chained at the neck and arms with a heavy iron ball attached. Many of the slaves were released just once a day from their cells which measured just 2.6m by 2.6m, each containing between 15 to 20 men. The ill and the dead were thrown into the sea for the sharks to feed on.

Families were split up with women and children each being kept in a separate part of the slave house. For young women, there was one means of escape. Any that became pregnant by the slave masters were released either on the island or in the town of Saint Louis.

“Visiting Goree Island should remind us that slavery continues when we shrink civic freedoms, encourage legislation that stifles dissent, stand idly by on rising populism that has stirred xenophobia, limit opportunities for Africans and women in oil and gas and put a blind eye on African families that continue to earn unworthy wages,” added Ayuk.

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry.

Facebook: https://web.facebook.com/Afrikanheroes/

Banks In Nigeria Will No Longer Require Separate License To Operate Mobile Banking

Whether it is to reach for more financial inclusion or to open up the heavily regulated Nigerian banking sector, Nigeria’s apex bank is already facing the heat of global digital disruption in the financial services sector. From now on, banks in Nigeria would no longer be required to have a separate license to operate a mobile banking app.

Here Is Why This Change Is Significant

Before now, to operate a mobile money service in Nigeria, the operator shall, among other things be :
(a) Be licensed by the CBN on such terms and conditions as the Central Bank shall desire.

Such terms and conditions usually involve the presentation of evidence of the formation of the Consortium that will deploy the project (Certificate of Incorporation)
The Consortium’s profile and functional contact e-mails and telephone numbers
Securities features that will be put in place
3 years Financial projections for the company
Draft agreements with the following: a. Technical Partners b. Participating banks c. Switching company/(s) 24 d. Merchants e. Telcos f. Any other party
Tax Clearance Certificate for three (3) years of each party in the Consortium
Project Deployment Plan (time, location, operation, etc.)
Payment of non-refundable Application fee of N100,000.00 (One hundred thousand naira) made payable to the CBN
Evidence of Shareholders’ Fund of N2 billion before a license is issued
This document, and may be reviewed from time to time.
Be issued a unique Scheme Code by the NIBSS for managing interoperability.

But all that is about to change

Going forward, once the Central Bank of Nigeria is satisfied that your current license to provide financial services in Nigeria suffices, the need to procure an additional license for your business would be obviated.

“You do not need authorisation from the CBN to go into Wallet services or mobile money schemes. All you need is to notify the CBN your current license suffix,” CBN Department of Banking and Payment System said at the First Bank cross border seminar for Banking and Telecom Regulators from sub-Saharan Africa.

Banks Are Being Reluctant Investing In Mobile Money Because The Heavy Regulations Don’t Make Any Case For Profitability
Many institutions in Nigeria are using prepaid payment cards and the mobile phone as a means of providing financial services to the previously financially excluded.
While not a bank account in the traditional sense, mobile wallets, and prepaid card products provide individuals with a safe electronic store of value and electronically initiated and accepted payment transactions and funds transfers.
In 2015, the CBN published both a Regulatory Framework for Mobile Money Services in Nigeria and Guidelines on Mobile Money Services.
The Regulatory Framework makes provision for only two specific models, namely bank-led, or non-bank led (a corporate organization duly licensed by the CBN).
Mobile money was one of the major segments of the Nigeria e-payment ecosystem primed by the CBN to drive its financial inclusion vision, in which 80 percent of Nigerians will be established in the national banking system by 2020.
However, mobile money operators (MMOs) have had little success in supporting the country’s financial inclusion targets.
This is mostly due to a lack of proper understanding of the conditions of their licenses, limited funds, poor infrastructure in rural areas, and limited customer access due to limited agent network rollouts.
Most of the licensed Mobile Money Operators in Nigeria are believed to have remained inactive and many have yet to officially commence payment platform operations.
Consequently, the CBN took the decision to raise the capital requirements for licenses from N500 million to N1 billion at the end of December 2017 and now to N2 billion, with a caveat that any operator that fails to meet the 1 July 2018 deadline for the new capital requirements will have its licenses revoked, further reducing participation.
The implication of these for Nigerian banks is that from now on, they would no longer be required to have a separate license to operate a mobile banking app.
However, on the other hand, the situation of non-bank led organizations involved in mobile operation remain heavily uncertain, as they may be required to still apply for and obtain licenses.

Cold Feet On Digital Currencies

Expecting Nigeria’s apex bank to adopt cryptocurrencies? This still remains a dream.

The apex bank’s position on the adoption of digital currencies still remains that:

“We [CBN] have not made up our mind on what steps to take but I am not sure or believe that the CBN will ever go crypto.

“We know what they are doing in Sweden and China. We are not running on the same parameter and so based on financial inclusion, adopting digital currency will mean a number of our population will be excluded.”

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.

Facebook: https://web.facebook.com/Afrikanheroes/

News Startup Space in Africa Raises Fund To Expand To Five African Countries

Even in the face of stiff economic situations, startups in Africa are busy sealing rounds of investment. Everything from FinTech to agrictech, to cleantech to newstech. Space in Africa, a news and research startup that covers the rapidly growing African space economy which has already seen eight nations launch 35 satellites in the last two decades — and 15 satellites in just the last 4 years, has successfully completed its seed funding round.

Although the terms were not disclosed, the startup plans to use the funds to hire additional reporters and analysts to expand coverage for its subscription news service and specialized industry reports.

Investor funding into online media upstarts like Buzzfeed, Vox and Business Insider, jumped to over $800M in 2014.

A Look At The Funding

The funding round was led by AC Ventures, the venture capital firm led by Adam B. Cohen, who has previously built and sold other research and news companies.

“I am proud to partner with Temidayo in evangelising the benefits of space applications to solve practical problems and create exciting business opportunities for Africans. As the cost of launch falls and satellites shrink, the most valuable resources now in the NewSpace arena are imagination and passion. Space is for everyone,” said Cohen of why AC Ventures invested in Space in Africa.

AC Ventures is an investment firm led by Adam B. Cohen. The firm invests in early-stage companies involved in the space industry and its enabling technologies. AC Ventures is the trade name of AC Ventures of Florida, LLC.
Cohen previously founded Covenant Review and Fulcrum Financial Data, which were acquired by Fitch Group, a unit of Hearst, in July 2018. Cohen is a serial entrepreneur and has also previously practiced as a lawyer, investment banker, and space and defense consultant. For additional information on AC

The overall surge in funding lifted the first half of 2010 to $11.4 billion in venture funding going into 1,646 deals — a 49 percent increase in dollars and a 23 percent increase in deals from the first half of last year when $7.7 billion was invested in 1,340 deals.

“Many people outside Africa are surprised to hear how significant the African space industry has become, and how the development of the industry has become a real priority for many nations and the African Union,” says Space in Africafounder, Temidayo Oniosun.

The GDP of the African continent has doubled in the last 10 years to over USD 2.2 trillion. Amidst this economic expansion, Temidayo, explains that:

“the African space market is now worth over USD 7 billion in terms of annually generated revenue, and we project that it is likely to grow by over 40% in the next five years to exceed USD 10 billion by 2024. There are thousands of people employed across the African space industry, and our local technology skills set is growing alongside international partners and home-grown NewSpace startups. African engineers are increasingly collaborating on satellite construction, while local innovators are providing new application solutions across communications, natural resources, and public services.”

“We now have reporters in Kenya, Nigeria, South Africa, Rwanda, and Tanzania who travel around the continent to cover all aspects of the market. We typically publish six to eight stories daily, and we just launched our Opportunities platform that lets you in on a wide range of new projects, open jobs, fellowships, and other prospects for gaining business and expertise. We want to be your first and best source for all information pertaining to the African space industry,” he added.

A Look At Space In Africa

Space in Africa is a media startup that focuses on news, data, and market analysis for the African space industry.
The startup is based in Lagos, Nigeria.
Space in Africa provides daily news and data analysis relating to the African space industry, and also offers proprietary research and consulting services.
The startup was founded by Temidayo Oniosun, who has been recognized as one of the World 24 Under 24 Leaders and Innovators in SPACE and STEAM by The Mars Generation and is one of the recipients of the 35 Under 35 Space Industry Recognition Award by the International Institute of Space Commerce.
The Space in Africa offers Space stories in English, French, Swahili, and Arabic.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.

Facebook: https://web.facebook.com/Afrikanheroes/

Facebook, Other Tech Companies May Be Barred Entirely From Offering Financial Services and Digital Currencies

July 15, 2019

The US House of Reps is pushing to ban Facebook and other tech companies from ever having anything to do with financial services or digital currencies.

A bill to prevent big technology companies from functioning as financial institutions or issuing digital currencies is currently being circulated for discussion by the Democratic majority that leads the House Financial Services Committee, according to a copy of the draft legislation.

Here Is What The Bill Is Proposing

In a sign of widening scrutiny after Facebook Inc’s (FB.O) proposed Libra digital coin aroused widespread objection, the bill proposes a fine of $1 million per day for violation of such rules.
Such a sweeping proposal would likely spark opposition from Republican members of the house who are keen on innovation, and would likely struggle to gather enough votes to pass the lower chamber, says Reuters.
Even if it were to pass the full house, it would still have to pass the Senate which would also likely be an uphill struggle.
Nevertheless, the draft proposal sends a strong message to large tech firms increasingly eyeing the financial services space.
The draft legislation, “Keep Big Tech Out Of Finance Act”, describes a large technology firm as a company mainly offering an online platform service with at least $25 billion in annual revenue.

“A large platform utility may not establish, maintain, or operate a digital asset that is intended to be widely used as medium of exchange, unit of account, store of value, or any other similar function, as defined by the Board of Governors of the Federal Reserve System,” it proposes.

Facebook, which would qualify to be such an entity, said last month it would launch its global cryptocurrency in 2020.

Facebook and 28 partners, including Mastercard Inc (MA.N), PayPal Holdings Inc (PYPL.O) and Uber Technologies Inc (UBER.N), would form the Libra Association to govern the new coin. No banks are currently part of the group.
Last week, U.S. President Donald Trump criticized Libra and other cryptocurrencies and demanded that companies seek a banking charter and make themselves subject to the U.S. and global regulations if they wanted to “become a bank.”

His comments came after Federal Reserve Chairman Jerome Powell told lawmakers that Facebook’s plan to build a digital currency called Libra could not move forward unless it addressed concerns over privacy, money laundering, consumer protection, and financial stability.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.

Facebook: https://web.facebook.com/Afrikanheroes/

Top Venture Capital Firms And Angel Investors For African Startups

For startups looking to get funding for their business, there have been histories of venture capital funds and angel investors who have been vibrant in all round funding of startups. One fact from one reports on startup funding so far is that there is plenty of money out there, from plenty of hungry investors.

Knowing who these investors are would help you streamline your search for investors for your startups and cut the long journey short. The most dollars are going into late-stage startups, followed by early-stage funding, then funding for technology growth and angel or seed series rounds.

Now find out who is handing out the cash.

This data shows who the active VCs are now, and who would probably be the best investors to pitch with your deck.

Active Lead Investors

According to data from Crunchbase here are the 10 most active lead investors.

Start-Up Chile

Insight Venture Partners

Tencent Holdings

New Enterprise Associates

Sequoia Capital China

Accel

Sequoia Capital

Higher Ground Labs

Quake Capital Partners

Goldman Sachs

Most Active Seed Stage Investors

When pitching, an important point is to be pitching so as to reach to those who are most likely to fund your type of round. The most active investors in seed rounds during the past 3 months are:

Startup-Chile

Hiventures

Crowdcube

Plug and Play

Innovation Works

500 Startups

Innova Memphis

Entrepreneurs Roundtable

Berkeley SkyDeck Fund

Quake Capital Partners

Top Early Stage Investors

For those, going for early-stage funding, consider these active players:

IDG Capital

New Enterprise Associates

Sequoia Capital China

Accel

Y Combinator

ZhenFund

Sequoia Capital

Matrix Partners China

Intel Capital

Index Ventures

Most Active Late Stage Investors

Interested in looking for a Series B or anything above for a growth stage round, the following firms have been the most active globally.

Sequoia Capital

Tencent Holdings

Insight Venture Partners

Bpifrance

Goldman Sachs

Bessemer Venture Partners

New Enterprise Associates

Khosla Ventures

Andreessen Horowitz

Sequoia Capital China

These Investors Have Been The Most Active In Africa, Whether Early, Middle Or Late Funding

Click here to view the list of good investors in African startups.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.

Facebook: https://web.facebook.com/Afrikanheroes/

Nigerian Banks Fret Over New Directives on Loans

A new directive by the Central Bank of Nigeria (CBN) ordering banks to have a minimum loan to deposit ratio of 60% by the end of September 2019. The directive according to the Apex bank is intended to get the commercial banks to lend more to the real economy and buy fewer government securities.

Observers, however, differ on the impact of this directive with some expressing worries over the timing which they say could have a negative impact on asset quality.

Others are of the view that the move “may unintentionally result in a reduction of banks’ risk management criteria for loan extension and by extension a deterioration in asset quality. With a few calling for new policies designed to increase bank lending to follow.

Loan ratios at Nigerian banks shrank between 2016 and 2018 as slower economic growth and high yields on government securities prompted banks to load up on lower-risk assets.

The new move encourages lending to small and medium-sized businesses (SMEs), mortgages and consumer loans by overweighting these loans at 150%.

That aims to encourage banks to accept the risk of an increase in non-performing loans (NPLs). Consumer lending in Nigeria is hampered by lack of reliable household credit records and weak recovery enforcement, Moody’s says in a note on July 8.

Midsize banks with higher exposure to consumer and SME loans tend to have higher NPL ratios than large banks, according to Moody’s.

Banks that fail to meet the new threshold will have to pay half of the shortfall as an additional cash reserve requirement. Moody’s argues that banks will be forced to diversify their lending, so reducing concentration risk, and says that most have already complied.

On the banks most affected by this development, our findings show that Zenith Bank, United Bank for Africa (UBA), Guaranty Trust Bank (GTB) and Stanbic are most affected as they have loan ratios lower than the threshold.

Ignoring the central bank’s weighting concession for lending to preferred sectors, Abimbola calculates that Zenith and UBA will both have to increase their loan books by over 350bn naira (870m euros, $970m) by September 30.

GTB and Stanbic will have to add 165bn naira and 30bn naira of new loans respectively, he says. That implies absolute quarter-on-quarter loan growth of 20% for Zenith. From experience, it is unusual for banks to increase their loan books by more than 10% in the whole year.

This could see downside risk on NPLs in the short term, which may prompt markets to start to pricing in negative headlines from the banks. Charles Robertson, a global chief economist at Renaissance Capital, says that a market-friendly option would be for the government to close its budget deficit.

This would force banks to lend to someone other than the government, he says. In the longer term, lower inflation would cut interest rates and encourage lending and borrowing, he argues.

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry.

Facebook: https://web.facebook.com/Afrikanheroes/

Multichoice Africa and Real-Time Channels to Collaborate

As part of efforts to bring top quality entertainment programmes to Africa, Multichoice Africa, and Real-Time Channels have entered into an agreement to bring Africa’s Newest Entertainment Channel featuring exciting programmes based on Real Lives, Real Nature, Real Crime, Real Medical. Real Time’s cleverly-curated schedule and dynamic mixture of lifestyle and factual content will ensure audiences get their daily fix of real reality and must-see entertainment all in one channel.

On the DStv platform, Real Time will be available on the Premium, Compact Plus, Compact and Family packages on channel 155; and on the GOtv platform the channel will be available on the GOtv Max package on channel 12 (112 in Ghana and channel 312 in Uganda), allowing for more premium content to reach a wider spectrum of viewers on the continent.

Discovery Inc’s portfolio of channels has been serving passionate fans with content that inspires, informs and entertains with leadership across deeply loved and trusted brands.

“We are incredibly excited to present Real Time to an even wider audience in the market, and further expand and diversify our local portfolio offering,” said Amanda Turnbull, Vice President & General Manager for Discovery in Africa and the Middle East. “With an already successful suite of pay-TV brands, Real Time affords us the chance to bring our world-class content to even more audiences across Africa, in the form of a channel designed to provide much-needed ‘me time’ to the modern African woman and her wider family.”

“Multichoice is excited to welcome this new channel which will give viewers access a wide variety of compelling television shows from Discovery Inc. on our platforms,” said Yolisa Phahle, CEO of General Entertainment at MultiChoice Group. “We work hard to bring the best of what the world has to offer to viewers and plan to keep delivering content that our customers love at a price they can afford. Real Time is a welcome addition to the wide range of content available only on DStv and GOtv.”

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry.

Facebook: https://web.facebook.com/Afrikanheroes/

Market Integration holds the prospect of transforming African economies— Ekra

In this interview, Jean-Louis Ekra, former president of Afreximbank, spoke on the emerging Russia-Africa relations and the benefits of the Africa Continental Free Trade Agreements which was just signed by African leaders in Niamey, Niger, among other issues. Excerpts:

What are the prospects of African Continental Free Trade Area agreement hold for Africa’s development?

You know that Africa is a continent that trades the least with itself. There are benefits trading with your neighbours, like reduced costs and so on. The first thing that African countries will benefit from this agreement is the opportunity to trade with their neighbours by just opening borders. The second is that it will push countries to transform their usual commodities into manufactured goods. You need to have complementary products to trade effectively with your neighbours. So, it will be a good incentive for African economies to enter a process like AfCFTA that will help to transform their economies.

What is your view on the future of Africa-Russia relationship?

Africa needs to diversify its relationships for its own benefit. A diversified relationship protects one if one of many partners falls on bad times. So, it is important for Africa, from that perspective, to diversify its relationship. So the Russia-Africa relationship is welcomed in that context.

How best can Africa leverage on its relationship with Russia to bridge its infrastructural gap?

Russia, as you know, has advanced technology. In infrastructure, Russia is well known for power. It has capabilities in solar and hydropower energy that can be implemented in our continent. So, I think that it will be good for African and Russian private sectors to jointly develop those activities. Some are canvassing that Africa countries should bring home some of their foreign reserves held abroad for investment in Africa.

What is your view? There is an initiative that we launched in Afreximbank when I was there, which is ongoing. Yes, it is correct for Africa to try and use, as much as possible, its own resources, including external reserves. There is no reason the continent should be borrowing money when it has money in deposits in other places. Won’t it have an adverse impact on foreign exchange markets on the continent? No. It won’t. These reserves are backed by strong ratings of an institution like Afreximbank. You have currency in America or in Europe. If you have it in Africa it is still your own, So it should not affect your exchange rate.

On the event that this becomes a reality, which institution will warehouse the foreign reserves?

Foreign exchange reserves have to be held in a strongly rated institution because they are important assets of a country. So, AfDB can hold those reserves likewise the Afreximbank. In my view, these are the two institutions that can hold such a reserve.

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry.

Facebook: https://web.facebook.com/Afrikanheroes/

Denys Denya: One of Africa’s Rising Corporate Titan

When the African Export-Import Bank (Afreximbank) closed the $150 million Korean-focused Club Facility in September, last year, with such resounding success that it realized $160 million due to the overwhelming confidence in its brand and solid ratings, Mr Denys Denya, Afreximbank’s Executive Vice President for Finance, Administration and Banking Services could not be more excited. He told partners and inquisitive media persons at the London venue that the facility would help the Bank to diversify its sources of funding “by geography, instrument and investor base”.

Mr. Denya’s hope that such targeted facilities would become a common feature of Afreximbank’s operations to deliver on its mandate of boosting African trade with itself and the world at large are holding up. About the same time as the Korean deal, the Bank signed a $50 million “cooperation” facility with the National Bank of Uzbekistan (NBU) for Foreign Economic Activity, which envisages cooperation on trade financing as well as credit lines for financing export of goods and services between Egypt and other African countries to the Republic of Uzbekistan.

Mr. Denya’s conviction is that the resounding success achieved by some countries in Asia, in particular, China and Korea, began with the critical role played by intra-regional trade in their development. He believes their experience presents Africa with valuable lessons for positioning intra-African trade as a key pillar for economic growth and sustainable development. According to him, “connecting the host of small and disconnected markets through the deepening of intra-African trade and economic integration would create an environment where firms gained access to hitherto non-existent larger markets.”

An advocate of people power and popular participation, Denya is on a self-imposed task of educating African shareholders of their powers to ensure corporate governance in firms in which they own interests, using his home country of Zimbabwe as a case study.

“The apathy of Zimbabwean shareholders and those in most other countries across the African continent is at odds with developments in the rest of the world, especially in advanced economies, where activist shareholders are increasingly using their power as company owners to examine financial reports, monitor executive remuneration, enforce good corporate governance and push for increased sustainability and transparency,” he laments.

He is certain that the survival of corporate and sovereign entities, which contribute to aggregate output expansion and therefore economic growth at the national level, depends on the quality of corporate governance. Some of his thoughts were laid out in a moving address he gave on August 8, 2018, in Dubai at a roundtable session on the theme “How to Attract Investment in Africa,” organized as part of the Winter University Conference of the Institute of Expert-Accountants of Zimbabwe.

Mr. Denya’s sterling leadership qualities have been largely shaped by his academic-cum-professional background. He holds Bachelor of Accountancy and MBA degrees from the University of Zimbabwe. He is also a member of the Institute of Chartered Accountants of Zimbabwe and of the Institute of Chartered Secretaries and Administrators.

Before joining Afreximbank in 2010, Mr. Denya worked with Flexible Packaging Zimbabwe Limited as Group Finance Manager and TA Holdings as Financial Executive/Company Secretary. He moved to First Merchant Bank of Zimbabwe as Relationship Manager where he rose to be Finance Director and Managing Director. He was at Nedbank Limited as Divisional Managing Director in charge of five Southern African countries from 2006 until April 2010.

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry.

Facebook: https://web.facebook.com/Afrikanheroes/

Prioritize Maintenance, Repair, and Operations (MRO) strategy to manage costs for your company

July 14, 2019

By Brian Andrew

It does not matter if times are good or bad – waste is never welcome at any proactive business. Business is primarily driven by profit and efficiency, and waste is an attack on both. But many businesses, particularly among manufacturers, overlook a major cost hidden among their operations: that of MRO (maintenance, repair, and operations) procurement.

MRO or indirect procurement concerns those many small parts needed to keep equipment running. It’s fundamentally a supply chain/procurement discipline, but not often considered as a cost centre. Individual MRO items – small parts in big machines such as light bulbs, safety switches, connectors, push buttons, power supplies, etc. – tend to be inexpensive and not attract much attention. Yet as a pool, MRO procurement can represent a significant purchase base for companies.

The days of MRO being overlooked are numbered. According to a survey conducted by RS Components and UK-based CIPS (the Chartered Institute of Procurement and Supply), the focus is on to reduce MRO spend. Over half cited pressure on operation budgets or reducing inventory costs, followed by asset performance (42%) and continuous improvement (38%) as motivations.

This message is less apparent in the South African market, but given the current tough economic conditions, it’s well worth discussing. What can local businesses do to curb their MRO spend?

Taming MRO

Many businesses underestimate the amount they spend on MRO products over the course of a year. They also rarely understand the significant hidden costs associated with MRO procurement. In reality, the overall process of procuring a part can be double that of the actual part. Our research shows that an organization spends £2 on the MRO procurement process for every £1 spent on the MRO product itself. Bigger footprints such as multiple locations amplify this effect. South African patterns are unlikely to buck the trend.

What causes such a poor ratio? It may be because too much time is being spent on finding the cheapest product, or using the wrong strategies, for example, category management and contracts negotiated on price alone to manage unplanned indirect spend. This may negate any actual savings made as extra processes and delays accrue costs.

Another reason is that MRO purchases often happen under the radar and tend to ignore official procurement channels. It may seem faster for an engineer on the floor to quickly acquire a spare part and get operations running again, using a convenient supplier. But amplify this over many instances and the purchases can compound into astounding inefficiencies.

Every company can meet this challenge with a good MRO strategy. It requires a new way of thinking and saving: a successful MRO strategy relies on all stakeholders involved in indirect procurement to collaborate. It must focus on improving the whole process of buying parts, involving stakeholders such as engineering, operations and finance functions, with buy-in at the c-suite level.

The strategy itself should aim for several objectives, which may include:

Reducing ‘maverick’ spend, where the user selects vendors outside the agreed supplier framework.

Consolidating suppliers so procurers can make quick decisions without having to consider the bigger MRO picture.

Procurement teams must communicate with users to understand what they need – this ensures suppliers with appropriate catalogues are chosen.

Deploying an integrated eProcurement system to streamline ordering processes, which in turn will help users change their own procurement habits.

Reducing items held in storage by only keeping critical spares and the items that will be used on a regular basis and then using suppliers that deliver on demand. This frees up working capital and space in your premises.

Without MRO, production can grind to a halt. A small part can stop everything for practical, health & safety, compliance or many other reasons. But sometimes the can-do attitude to keep lines going can result in inefficient MRO procurement choices.

Don’t disturb that spirit on the work floor that keeps your business moving. Instead, establish an MRO strategy that compliments proactive workforce attitudes while establishing a framework which pursues efficiency and significant cost savings. Partner with a supplier who can develop these solutions with you and support you on the journey of taming your MRO procurement.

By Brian Andrew, is Managing Director South and Sub-Saharan Africa at RS Components.

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry.