Cars stuck in high traffic areas on the Woodlands Way or Sandown Road in Parklands, Cape Town or anywhere at all in South Africa can now drive through any nearby Mugg & Bean ‘Move Thru’ store to order one shot of the hottest espresso (coffee), or flat white cappuccino, including the recently launched winter menu items, vegan-friendly hot and cold drinks, loaf cakes and fillers.
Innovation Is Key
With the newly launched ‘move thru’ store, Mugg & Bean is aiming at customers who are on the move. The customers can drive through the shops, and order the best of what they want, pay quickly and drive off without having to come down from their cars.
“More than ten years ago, we partnered with Total and set up our ‘shop in shop’ retail concept with our On The Move stores across the country,” said Chad Manuel, Mug & Bean’s product manager.
“We are not oblivious to the fact that these locations don’t necessarily serve high traffic areas in the Gauteng and Western Cape metropoles, so we have launched the first Move Thru store as a time-sensitive detour that meets the commuter’s on the move coffee and snack demand.”
The shop is a two-way strategy: customers can drive in and drive off. Those who are not in a hurry to go can find a sit-down element inside where they can catch up on emails at an ‘office away from the office’ with free Wi-Fi.
Mugg & Bean
Came to existence in 1996 through Ben Filmalter. Ben after visiting one of the coffee shops in Chicago. That was in early 1990s. He got the inspiration to open such a business in South Africa.
In 2009, Famous Brands bought Mugg and Bean franchise. By 2015, they had already got 184 coffee shops within South Africa and other parts of Africa, including overseas like in the United Arab Emirates and Kuwait.
The total income for the food and beverages industry in 2012 in South Africa was R44 262 million (about $3 million). The largest contributor to the total income was ‘restaurants and coffee shops’ (R21 797 million or 49%), followed by ‘takeaway and fast-food outlets’ (R13 751 million or 31%).
The profit margin for the food and beverages industry was 1.9% in 2012. ‘Restaurants and coffee shops’ had the highest profit margin at 2.3%. ‘Takeaway and fast-food outlets’ and ‘caterers and other catering services’ both had a profit margin of 1.5%.
Charles Rapulu Udoh
Charles Rapulu Udoh, 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 organisations 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.
Private equity firm LeapFrog Investments which has raised $700 million is looking for high impact projects such as healthcare and financial services to invest in, including startups.
Where The Funds Would Go To
The fund is focused on African and Asian economies.
Kenya’s pharmaceutical chain Goodlife is one of the beneficiaries of the fund. Other companies LeapFrog Investments has invested in are: WorldRemit, the money transfer services provider and India’s SME focused financial institution, NeoGrowth.
Leapfrog CEO, John Barbour
Leapfrog will put in equity investments of between $25 million and $30 million in emerging economies such as Kenya, Ghana, Nigeria, South Africa, India, Indonesia, and Sri Lanka.
Leapfrog aimed to raise $600 million from the fund drive but exceeded its target by $100 million.
In the first quarter of 2019, East African economies benefited from Private Equity investments worth $110.9 million as per a report by I&M Burbidge Capital.
Sixty per cent of the funds went into the Financial services sector with notable investments like the $12,000 capital injection into Sidian Bank by Danish firm Investment Fund for Developing Countries (IFU).
The fund’s founder and CEO, the South African Andrew Kuper said:
“It is time for a better kind of capitalism. LeapFrog was founded on a philosophy of profit with purpose. That has proved a winning strategy, driving strong growth and returns while changing tens of millions of lives.”
Charles Rapulu Udoh
Charles Rapulu Udoh, 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 organisations 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.
The Women Entrepreneurs Finance Initiative (We-Fi) has announced its second funding allocations — expected to benefit 70,000 women-led businesses across the world and mobilize nearly a billion dollars of additional public and private sector resources.
The second round allocates $129 million for programs to boost women’s entrepreneurship that will be implemented by four multilateral development banks, expecting to mobilize $990 million of additional funds from other public and private sources.
The African Development Bank received $61.8 million for activities covering 21 African countries; the Asian Development Bank received $20.2 million for activities in Vietnam, Papua New Guinea, and Fiji; the European Bank of Reconstruction and Development received $22.9 million for activities in low-income Central Asian countries; and the Inter-American Development Bank received $24.28 million for activities in countries across Latin America and the Caribbean.
This compliments the first round of We-Fi funds announced in April 2018, which allocated $120 million for projects implemented by the World Bank Group, Asian Development Bank, and Islamic Development Bank to tackle the barriers facing women entrepreneurs across developing countries.
Together, the two allocations aim to reach 115,000 women entrepreneurs and mobilize $2.6 billion in additional public and private sector resources, ten times the resources allocated by We-Fi’s 14 donor governments.
“We-Fi is the first of its kind — a large-scale, multi-stakeholder partnership designed to address obstacles facing women entrepreneurs through comprehensive, sustainable solutions,” said Geoffrey Okamoto, Chair of the We-Fi Governing Committee and Acting Assistant Secretary for International Finance and Development at the United States Department of the Treasury. “The idea is not to fund individual women entrepreneurs, but to fund projects that disrupt the systemic causes of financial obstacles to women’s entrepreneurship.”
Seventy percent of the current We-Fi funding allocation will benefit women entrepreneurs in extremely poor countries and countries affected by wars and conflict.
Under the second round of funding:
The African Development Bank (AfDB) was granted $61.8 million for its program “Affirmative Finance Action for Women in Africa” (AFAWA). The program will offer innovative and tailored financial instruments including a women-focused first loss risk-sharing facility, specialized capacity-building training, and targeted initiatives to dramatically transform the business- enabling environment for women entrepreneurs.
Of 21 economies targeted, AFAWA will mainly service poor and fragile or conflict-affect countries where women are underserved in accessing financing, markets, knowledge, and mentoring programs. These countries include Burundi, Chad, Comoros, Côte d’Ivoire, Democratic Republic of Congo, Ethiopia, Mali, Mauritania, Mozambique, Niger, Senegal, Sierra Leone, Tanzania, Uganda, Zambia and Zimbabwe.
About We-Fi:
Established in 2017 at the G-20 Summit in Hamburg, Germany, We-Fi supports women entrepreneurs with access to finance, markets, technology, mentoring, and other services, while working with governments and the private sector to improve the laws and policies inhibiting women’s businesses in developing countries
We-Fi is supported by the governments of Australia, Canada, China, Denmark, Germany, Japan, the Netherlands, Norway, the Russian Federation, Saudi Arabia, Republic of South Korea, the United Arab Emirates, the United Kingdom, and the United States.
Charles Rapulu Udoh
Charles Rapulu Udoh, 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 organisations 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.
Jobs are going, and are gone for some of Amazon’s workers. The company is bent on making profit. Human costs are being eliminated, and that includes anything that has a human touch to it. The company is rolling out machines that would be boxing up customers’ orders.
Amazon’s strategy is to install automated machines at warehouses which would kill at least job 24 roles previously done by humans at each warehouse. Everything being equal, more than 1,300 job cuts across 55 U.S. warehouses are expected. Amazon expects to recover the costs of installing these machines in these warehouses in two years, at $1 million per machine.
“We are piloting this new technology with the goal of increasing safety, speeding up delivery times and adding efficiency across our network,” an Amazon spokeswoman said in a statement. “We expect the efficiency savings will be re-invested in new services for customers, where new jobs will continue to be created.”
The New Machines Can Pack Four To Five Times Faster Than Humans
Called the CartonWrap and manufactured by the Italian firm CMC Srl, the new machines can pack 600 to 700 boxes per hour making it four to five times faster than humans. All that is needed is one person who loads customer orders and another person who stocks cardboard and glue and a technician who fixes jams on occasion.
Completely Replacing Its Workforce?
Amazon does not have a plan of laying off all its workforce now. However, the game is that one day it will stop recruiting people to package its ordered goods for customers. In fact, Amazon has more workers than Microsoft, Google, and its employee base is one of the largest in the United States, with ranging from an average of $58,578 to $147,825 a year.
Amazon also maintains some hiring deals with governments which often favours it. For instance, for the 1,500 jobs Amazon announced last year in Alabama, the state promised the company $48.7 million over 10 years, its department of commerce said.
Amazon is also asking employees to quit and is offering them help starting their own delivery businesses. Amazon said it would cover up to $10,000 in startup costs, as well as three months’ salary, for employees accepted into the program. So, in many ways, it is still retaining the human touch, but gradually gnawing at its human workforce.
In A Battle To Eliminate Losses And Boost Profit, E-Commerce Companies In The US Are Turning To Automation.
Walmart started 3.5 years ago and has since installed the machines in several U.S. locations.
The boxing machines are already proving helpful to Amazon. The company has installed them in busy warehouses that are driving distance from Seattle, Frankfurt, Milan, Amsterdam, Manchester and elsewhere.
Source: Amazon financial reports and Digital Commerce 360
Interest in boxing technology sheds light on how the e-commerce companies are approaching one of the major problems in the logistics industry today: finding a robotic hand that can grasp diverse items without breaking them.
These machines are not without flaws. The machines can only box so many per year. However, they need a technician on site who can fix problems as they arise, a requirement Amazon would rather go for.
Charles Rapulu Udoh
Charles Rapulu Udoh, 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 organisations 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.
Startups in Ghana will now benefit from one more new investor in town.
Quick Angels Limited is a fully owned Ghanaian angel investor company which provides services, including start-up equity financing, early stage equity financing, business growth equity financing, Small and Medium Enterprises (SME) equity financing and buying and selling of businesses.
Richard Nii-Armah Quaye, Board Chairman of Quick Angels
The company promises to provide more seed capital for startups; to rapidly expand existing businesses by making available the requisite capital and premium management expertise; partner already existing businesses and startups with the aim of providing strong financial returns and creating institutionalized entities over long periods.
For those thinking that there is a new Ponzi Scheme in town, Mr. Richard Nii-Armah Quaye Board Chairman of Quick Angels said:
‘‘Quick Angels Limited has not been established to defraud people but rather, to help young entrepreneurs with brilliant business ideas to thrive.People will think that perhaps, we have also come here to bring a Ponzi scheme. Our mission is to drive innovative commercial Angel Investments that seek to propel Ghanaian start-ups and also restore promising businesses through strategic partnerships that exceed expectations.”
The best way to go about believing them is to do background checks on the company to get dig out more information about who are and their operation, although the CEO of the Ghana Investment Promotion Corporation (GIPC), Yoofi Grant has praised the new company for the initiative.
What The Company Does
“Quick Angels is a God sent company at this time where startups in Ghana need long term financial sources to grow their businesses and to scale it up. They are coming with equity funding and not loans which means that startups can comfortably think about how to scale up their businesses and grow it,’’ the Chief Executive Officer (CEO) of National Entrepreneurship and Innovation Plan in Ghana, Mr John Kumah noted.
The company stated in its website to be providing the following services:
The Startup Equity financing
Early Stage Equity Financing
Business Growth Equity Financing
SME Equity Financing
Buying and selling of Businesses
Startups in Ghana can check up on them to know what difference they are bringing to the table.
Charles Rapulu Udoh
Charles Rapulu Udoh 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 organisations 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.
There is now the fourth board on the Nigerian Stock Exchange meant for small businesses and startups. The board, known as the Growth Board will offer startups and small businesses the opportunity to raise equities for their businesses. All the startups and the SMEs need to do is to obtain approval from the Nigerian Securities and Exchange Commission and then list their shares for public subscription.
The New Framework For Startups, SMEs
The framework for the operation of the new listing platform at the Nigerian Stock Exchange (NSE), to be known as growth board, has been approved by Nigerian apex capital market regulator, Securities and Exchange Commission (SEC).
The framework creates two segments on the growth board for start-ups, micro and small companies and medium-sized companies.
Start-ups and small companies are denoted by market capitalisation of between N50million and N500million while medium-sized enterprises are companies with market capitalisation of between N500million and N4billion.
Start-ups and small companies are expected to be listed on the first segment, known as entry segment, while medium-sized companies will be listed on the second segment, known as standard segment.
The growth board will be the fourth board at the NSE. There are three existing listing boards at the Exchange, including premium board-for large-cap companies that meet additional requirements on dedicated corporate governance assessment, main board- the general board for all companies that meet the specific stringent listing rules and alternative securities market (ASeM), which provides listing for quotable companies that cannot meet or sustain listing requirements for the main board.
Requirements For Listing
For any company to be listed on the growth board, it must be a duly incorporated public limited liability company with at least two years of operations, audited financial statements in line with the International Financial Reporting Standards (IFRS) and must have grown its revenue by a minimum of 20 per cent cumulatively in its last two years of operations.
Also, all companies to be listed on the growth board must undertake that their promoters or directors shall retain a minimum of 50 per cent of their shares for a minimum period of 12 months from date of their listing, and that the directors or promoters shall not directly or indirectly sell or offer to sell such securities during that 12-month period.
The framework meanwhile provides alternative requirements for listing for each segment.
Under the entry segment, a new business may be considered for listing if it can provide evidence of investment in it by a core investor or a strong technical partner that has a minimum of two years’ operating track record, or a majority shareholder, who is either a High Net Worth Individual (HNI) or is a director of a listed company.
Under Nigerian rules, High Net-worth Individual is an individual with net worth of more than N100 million.
Besides, companies heading for the entry segment must have market capitalization of not less than N50 million, a minimum of 10 per cent of its shares available or to be available to minority retail investors and at least 25 shareholders.
Under the standard segment, a new business may be considered for listing if it can provide evidence of a core investor or a strong technical partner who has a minimum of four years operating track record, or a majority shareholder who is a HNI.
The company must also have a minimum market capitalization of N500million, at least 15 per cent of its shares must be held or will be held by minority retail shareholders and it must have a minimum of 51 shareholders.
The NSE stated that it aims to use the growth board for greater global visibility for eligible Nigerian entities and foreign companies in order to engender global capital flows.
The new board is designed to support SMEs’ growth as part of the strategic initiatives by the stock market to enhance its traditional roles as catalyst for economic growth and development.
SMEs and start-ups account for more than 90 per cent of businesses in Nigeria and provide about 85 per cent of employment, according to various national and international data.
Charles Rapulu Udoh
Charles Rapulu Udoh, 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 organisations 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.
International investors interested in expanding their businesses to Egypt now have more strategic reasons to do so. This is because there are now 7 additional free zones for them, making it a total of 16 free zones in Egypt, and placing the country just behind Kenya (which has over 40 free zones) and Nigeria (which has over 22 free zones).
Egypt’s President
Investors in Egypt Doing Business Within the Free Zones Get The Following Benefits:
1) No limitations in transferring profits and investing money.
2) The right to import and export without the need of recording in the Register of Importers.
3) All equipment, machinery, and transportation required for the activities thereof are exempt from customs duties and sales tax (with the exception of cars).
4) Their property and funds shall never be detained, seized, retained in protective custody, frozen or confiscated.
5) No administrative body shall interfere in pricing the companies and establishments’ products, nor in determining their profits.
6) Projects in the free zones are free from custom taxes, Sales Tax, and many other fees.
7) The projects are only subject to annual 1% fee on goods which enter or exit the Zone. However, only 3% annual fee is collected by the government where the projects are in the Service sectors, such as insurance, law, accounting. etc.
Location Of The New Free Zones
The Egyptian government has made it clear that the projects would be located in:
Minya is located South of Cairo, with over four million people. It has large electric light-making industries within the New Minya City; heavy cement factories in Sarareya and Sheikh Fadl Industrial Zones. Other sectors include Food and Beverage,Wood and Furniture, Building Materials, Chemical Industries. Small and Medium enterprises in Minya constitute 6% of the total SME landscape in Egypt, with majority of them engaged in manufacturing activities.
South Sinai
South Sinai is the least populated political division in Egypt, located in the eastern part of the country, with a population of only 104,000 people. The city has a large number of businesses engaged in Building Materials, Chinaware, Porcelain & Refractories, Food, Beverages & Tobacco, Crude oil, its refined products and Natural Gas, Production& Distribution of Electric Light & Power.
New Ismailia
Ismailia is a city in north-eastern Egypt, with a population of 366,669. Business activities in New Ismailia include: manufacturing of ready-made garments; manufacturing of leather products; manufacturing of calculating & electronic machines; manufacturing of software & information systems; manufacturing of chemicals, fertilisers & petroleum services; leasing of petroleum equipment.
Ismailia is considered one of the most suitable suitable tourism investment zones due to its distinguished location on Lake Timsah, the great bitter lakes & the Suez Canal ( considered to be the shortest shipping route between Arab and Asian countries and the West of Europe and America)
Other key locations include:
“El-Herafeyeen”in Giza
Gamasa in Dakahlia famous for a number of old and diverse industries, most important of which are: fertilizers; chemical industries; rice production
Aswan noted for tourism.
KafrEl-Sheikh, located in the northern part of Egypt and noted for cotton-processing factories, rice and fishing.
Investors In Egypt Are Already Smarter
The Egyptian government said the number of projects in the whole of Free Zones in Egypt exceeded 1095 projects, with capital amounting to $12.5 billion, in addition to $2.15 billion in direct foreign investment (FDI) and an investment cost of about $26.3 billion.These projects contributed to the provision of 194,000 jobs.
The new projects would include more than 1,000 projects, which will contribute to the provision of about 120,000 jobs, according to the Egyptian government.
Before this development, there were nine Public Free Zones in Egypt located in Alexandria (Amrya), Cairo (Nasr City), Port Said, Suez, Ismailia, Damietta, Shebeen ALKoum, Qeft, and the MediaZone City.
Charles Rapulu Udoh
Charles Rapulu Udoh, 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 organisations 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.
Any time from June, Airtel Africa is going to the London Stock Exchange to list its shares for subscription. A total of $1bn worth of shares would be open for subscription. The IPO would be one of London’s biggest this year.
A Breakdown Of Facts
Airtel Africa is made up of Airtel Chad;Airtel DRC; Airtel Gabon; AirtelTigo Ghana; Airtel Kenya; Airtel Madagascar; Airtel Malawi; Airtel Niger; Airtel Nigeria; Airtel Congo; Airtel Rwanda; Airtel Seychelles; Airtel Tanzania; Airtel Uganda; Airtel Zambia);
The company had a net profit of $83mn in the fourth quarter of the 2018–19 year to March, driven by its Airtel Money platform, after a loss of $49mn in the year-earlier quarter.
Investors including Warburg Pincus, Temasek, Singtel, SoftBank and the Qatar Investment Authority (QIA) have invested $1.45b in Airtel Africa through primary equity issuance, with the proceeds being used to reduce debt.
India’s Bharti Airtel established its presence in Africa by buying Kuwait-based Zain’s Africa operations for $10.7 billion in 2010. The company has grown to become Africa’s second-largest telecoms company, with over 94 million customers, and is in the top two carriers in most of the countries where it operates.
According to Ovum’s Africa Digital Outlook 2019, mobile revenue in Africa will increase from $54.9b in 2017 to $68b in 2022. Non-SMS mobile data revenue — from mobile broadband access and mobile digital services — is expected to more than double to $32.1bn over that period.
Going On IPO Despite Citron’s Claims Against Jumia
Although market appetite shown for Africa e-commerce company Jumia in its New York IPO in April may mean that the time is right, a report from Citron Research has, however, put a big stain on Jumia’s IPO filing. This is not however expected to affect Airtel’s credibility. Unlike Jumia, Airtel Africa is a profit-making company.
‘‘In theory, the Jumia IPO should not affect demand for Airtel Africa shares because they have different business models,’’ argues Andrew Sekandi, an investment adviser at Alpha Sierra in London. ‘‘Airtel Africa, deserves to be judged on its own merits. But capital markets being what they are, Jumia’s success may draw in some retail investors and maybe even some institutions that would not previously have considered betting on an Africa-focused stock. Some investors will see the Jumia and Airtel IPOs as essentially a bet on the growth of African consumer markets and the middle class, so this could help Airtel,” Sekandi says.
‘‘Airtel Was Saved by Exapansion Into The African Market.’’
Airtel was “Saved by Africa” in the face of falling profit margins in India, according to October 2018 research from Bond Critic published on Smart Karma. Bond Critic argued that Airtel’s expansion into Africa has been credit positive. Motilal Oswal, which rates Bharti Airtel, says the Africa business has been playing a key part in overall growth for the Indian company.
Strong momentum in Africa should continue on the back of potential to increase revenue share in some markets and growth in the use of Airtel Money, Motilal Oswal says.
Charles Rapulu Udoh
Charles Rapulu Udoh, 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 organisations 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.
From being the first successful African startup to list on the New York Stock Exchange, now to the first fraud to ever make its way to the floor of the American Stock Exchange from Africa.
It appears Jumia is in for a big trouble. Citron Research, the American research firm that publishes reports on firms that Citron Research founder, Andrew Edward Left thinks are overvalued or are engaged in fraud is saying, in a twelve-page document, that it has never seen such an obvious fraud as Jumia’s first Initial Public Offering, held from the 11th of April, 2019, in its 18 years of publishing.
‘‘ Jumia is the worst abuse of the IPO system since the Chinese RTO fraud boom almost a decade ago. Worse than being “the most expensive” US listed eCommerce company, Jumia reported financials show us a stagnant business that has burned through $1 billion and has moved the suckers game to the US Markets,’’ the report stated.
As the media in the US is naively anointing Jumia the “Amazon of Africa”, the media in its home country of Nigeria has a plethora of articles discussing the widespread fraud in this Nigerian company. Not even that elusive Nigerian prince can cover this one up.
What Went Wrong?
The deal is that Jumia lied. Not one. But so many times, said Citron. The research firm claimed it has finally laid its hands on Jumia’s most confidential documents before the IPO, and from all indications, Jumia’s equities seem to be the most worthless ever to be sold on the New York Stock Exchange.
‘‘When a company markets to investors ahead of its IPO and then a few months later omits material facts and makes material changes to its key financial metrics to make the business seem viable, this is SECURITIES FRAUD,’’ the report read.
Now These Are What The Firm Claimed To Have Found:
1. ‘‘In order to raise more money from investors, Jumia inflated its active consumers and active merchants figures’’
The inflation came by way of 20–30% increase in the number of Jumia’s active consumers and active merchants, Citron noted.
”The most disturbing disclosure that Jumia removed from its F-1 filing was that 41% of orders were returned, not delivered, or cancelled. This was previously disclosed in the Company’s October 2018 confidential investor presentation. This number is so alarming that it screams fraudulent activities,” the report noted.
”Instead, Jumia disclosed that “orders accounting for 14.4% of our Gross Merchandise Volume were either failed deliveries or returned by our consumers” in 2018. Assuming 41% of orders were returned, not delivered, or cancelled in 2018, this implies that almost 30% of orders were cancelled in 2018. Since Jumia primarily sells consumer electronics, which should not have this high of a cancellation rate, it wreaks of fraud.”
2. ‘‘Just before IPO, a Jumia MD was questioned by Nigerian Police over Allegations of Fraudulent Diversion of Funds’’
It doesn’t look like Citron is out for a joke. The firm claimed Jumia’s fraud starts from the top to the bottom.Jumia Co-CEO, Jeremy Hodara, the firm claimed, has engaged in extremely questionable related party transactions that the SEC should immediately question. It went on to provide a sequence to these questionable transactions.
In February 2016, four of Jumia’s subsidiaries were sold to Jumia’s CEO, Hodara for 1 euro each.
Despite only generating revenue of 238 thousand euro and net losses of over 3 million euro in 2017, Jumia reacquired these businesses in 2018 from Hodara for an undisclosed price.
During the same year, Jumia acquired Jumia Facilities, a payroll and support services operation based in Dubai, from Hodara for an undisclosed price.
”…many top directors of Jumia were engaging in serious acts of fraud including diverting money that was supposed to be used for projects into their own bank accounts and using director owned private companies to accept Jumia orders while receiving advance payments but never fulfilling the orders. In some cases, these fraudsters were relatives of senior management and “the directors would sweep the case under the carpet in order to avoid public scrutiny”.
Jumia’s Stocks Came Tumbling Down On The New York Stock Exchange
Now, it appears Citron Research now has laughed the last and the best laugh. Jumia’s investors are pulling out!
Jumia’s share price has dived sharply since Citron’s report.
In the seven hours of trading on Thursday, Jumia’s shares lost 18% of its value.
The Bottom Line
From all indications, it appeared Citron Research was out to disparage one country — Nigeria — and possibly block further companies there from getting approval to list on the New York Stock Exchange in the future. The firm even went as far as mentioning that Jumia learned the hard way that Nigeria, Jumia’s largest and most important market, is not an easy place to do eCommerce for plenty of reasons including logistics, poverty, and a culture of corruption. It went ahead to cite the recent divestment of Naspers(a South African company), which it described as ‘‘the smartest and largest tech investor in Africa’’ from Konga, another online eCommerce company in Nigeria.
‘‘This was not due to a lack of funds or a short-term investment horizon,[after all,] Naspers has $12 billion of cash on the balance sheet and its original investment in Tencent ([in which it] still owns >30%) dates back to 2001… Rather, this decision was a reflection of Naspers’ bearish view on the Nigerian eCommerce market vs. a bullish view on South African eCommerce. Since its Konga exit, Naspers announced plans to invest over $300 million in South African tech businesses,’’ Citron noted.
No matter how you see it, the report appeared to have gone after Nigeria rather than focus more intensely on Jumia. After all, although Nigeria is Jumia’s biggest market, its S1 filing (which Citron claims to have studied) indicates that Jumia Group is not a Nigerian company as it is led by French founders, incorporated in Germany and headquartered in Dubai.
Citron Research is sending a message to American and international investors that Jumia is not only a fraudulent company which ‘‘not even that elusive Nigerian prince’’ can deny, but also that they are throwing their money into the wrong country where it is ‘‘not easy…to do eCommerce…because of …a culture of corruption.’’ (NB: ‘Nigerian Prince’ is a reference to the notorious Nigerian internet fraudsters, popularly known as Yahoo! boys)
Whether Jumia comes out of this unscathed, only time would tell.
Charles Rapulu Udoh
Charles Rapulu Udoh, 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 organisations 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.
Hard as it may be, Moody’s has just come up with a report on how and why one of Nigeria’s strongest banks, Diamond Bank failed. The global advisory services firm, in an in-depth report analysed factors that brought about the downfall of the bank (a bank that went from making profits of N28.5 billion in 2013 to making losses of around N9 billion in 2017) and its eventual palliative merger with Access Bank.
Here are key insights that led to a bad day for Diamond Bank, according to the report, and what lessons surviving businesses can learn from it.
“Diamond Bank Aimed to Become The Leading Retail Bank in Nigeria, and Took on Excessive Risk as it Pursued This Objective”
Indeed, this is a case of borrowing Peter to pay Paul in bid to become more attractive to Paul while satisfying Peter also. The report said, although Diamond Bank set out to become Nigeria’s leading bank, it banked its hope on achieving that by letting all its taps open, without properly gauging the risk implication of it. It was like a case of everybody come take a loan, we would take care of that. The result: all business owners scampered in that direction, wielding buckets, ready to pluck out some loans to finance their businesses.
Why that idea may not be entirely bad, for a bank that was trying to make businesses in Nigeria love it, most of the businesses were not ready for the loans, had no plan of paying back soon. The bank did not appear, however, from the report, to be strategic enough: while endearing itself to retail businesses in Nigeria by allowing them to cut so much flesh off it in the name of loans. It didn’t turn its eyes to a balancer?
The report said that the bank did not attract enough corporate borrowers who are a major moneymaker for banks and that, well, it loaned out more money to the oil and gas sector than the Central Bank of Nigeria thought was prudent (52% versus 20%). So when oil prices fell in 2015 and 2016, the bank came crashing with it.The result is best captured by this point from Moody’s:
“The bank’s Non-Performing Loans (that is, all loans overdue by more than 90 days) reached 42% of gross loans in 2017 (Diamond has not yet reported its 2018 results). The bank’s provisions against these Non-Performing Loans were low at only 19%, weakening the quality of its capital, while high credit losses eroded its profits, ” Moody wrote
There is still hope for the bank, though, as Moody’s noted that Access Bank with which it has merged, is strong enough to reduce the risk of default for former Diamond Bank creditors.
‘‘Diamond Bank’s Weak Governance Structure Compromised The Board’s Ability to Determine The Bank’s Risk Appetite’’
This point was going to come anyway. Moody’s merely captured what was already in the public domain. In 2018, this letter came from Nigeria’s market research and analysis news site Proshare. The content of the letter simply was that a former chairman of Diamond Bank, Seyi Bickerstheth gave some hints why Diamond Bank’s CEO, Mr. Pascal Dozie, should be replaced. It re-echoed the same demand from Carlyle Group’s Carlyle Sub-Saharan Africa Fund (CSSAF) DBN Holdings who also wanted Mr. Dozie shown the exit door.
“A key shareholder CSSAF DBN Holdings demanded an immediate removal of management principally the CEO but the Board favoured a less drastic approach to minimise disruption and also enable the Board secure new leadership,” Bickerstheth wrote in the letter. “After several discussions, the CEO of the Bank, who is also a representative of the second largest shareholder Kunoch Ltd agreed to resign effective January 3, 2019, but would not tender his letter to confirm his verbal notification.”
The Implication:
You can’t expect a lesser consequence. Moody’s therefore noted that this Diamond Bank’s weak governance structure meant:
A highly compromised board
A board with little ability to assess the bank’s risk exposure and;
And a board that failed to rigorously interrogate management over strategy.
Now watch the follow-up consequence:
The weak governance structure meant the bank’s management would plunge the bank into an unrecoverable loss. There was a sudden decline of profits. After making profits of less than N5 billion in 2016, the bank fell far to losses of N9 billion the following year.
‘‘The CEO’s Family Was The Second Biggest Shareholder In The Bank, Directly Controlling 14% Shareholding’’
It looked like nobody was going to tell the bank the hard truth anyway, and when you don’t have such hard truth tellers in organisations, all boats would be oared to one direction. Moody’s said Diamond failed because it did not have enough independent directors (the objective truth tellers)on its board and this resulted in a lack of effective board oversight.
“By the end of 2017, only one of Diamond’s 13 board members met the Nigerian SEC’s definition of independent (another had retired in August),” Moody’s noted
“We believe Diamond’s board failed to provide an effective check against the bank’s management team. Board independence is important because it makes it more likely that management strategies are subject to rigorous questioning, reducing the risk of directors ‘rubber stamping’ management decisions.”
The implication of this is not far-fetched, Mr. Dozie, whose family was the second biggest shareholder in the bank, directly controlling 5% and another 9% indirectly through its investment firm, Kunoch Ltd (14% in total) was only 4% off the Bank’s biggest shareholder, Carlyle Fund, which controlled 18%. This meant, of course, a huge overbearing influence of one family over how the business of the bank was run. A striking example was the fact that a member of the founding family held the CEO role between November 2014 and March 2019 when it merged with Access Bank. During this period, profits fell by 78% in 2015 and bank deposits shrank by 22% between year-end 2014 and 2017.
“The Board’s High Membership Turnover Hindered Its Oversight Role.”
Indeed, between 2009 and 2019 when it merged with Access Bank, Diamond Bank had three different CEOs and three different board chairmen. This only meant two things:
A continuous erosion of the independence of the Board and;
A badly destabilised board membership
“While new board members can make a positive contribution to a bank’s governance by bringing in fresh insights and experience, the new appointees at Diamond tended to lack sufficient knowledge of the bank. The board’s high membership turnover, therefore, hindered its oversight role.”
As it stands now, it appears Diamond Bank’s fate has been sealed. The merger is merely an official language. Access Bank expects to help Diamond Bank rewrite a different history. But whether the Phoenix rises again is merely a matter of time. The deed has been done and other businesses have to learn their lessons.
Charles Rapulu Udoh
Charles Rapulu Udoh, 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 organisations 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.
