Business Lessons - Afrikan Heroes

How Startup Founders Are Psychologically Different From Everyone Else

September 29, 2019

It takes a certain kind of person to create a startup company. Not everyone can stomach the drought in income, the financial risk that comes with creating a company and the responsibility of hiring employees with an uncertain future. Except, nobody really has a good idea of what kind of person it does take to make an entrepreneur, says William Kerr, a professor at Harvard Business School.

Nimit Sawhney is the co-founder and CEO of Boston-based startup Voatz — Nimit Sawhney, co-founder and CEO of Boston-based startup Voatz

“For a long time, we could only study entrepreneurs through case examples like a Steve Jobs or an Andrew Carnegie. We didn’t really have systematic data that allowed us to understand who entrepreneurs were,” Kerr says.

Then Kerr got an opportunity to study a large set of entrepreneurs — after he met Tim Rowe, the founder of the Cambridge Innovation Center, or the CIC, a startup incubator in Cambridge, Mass.

Rowe let Kerr ask thousands of people at the CIC questions about their attitudes and personalities. “That let us create a very large dataset,” Kerr says, “making headway on connecting [certain] occupations to different types of personality traits.”

Kerr published those results in the journal Proceedings of the National Academy of Sciences last month.

WBUR spoke with Kerr about his research, and what he learned about the people who start startups.

What did you learn about entrepreneurs, and how are they different from everyone else?

The most powerful findings connect to what’s been long suspected but really hard to nail down: the attitudes that entrepreneurs have towards risk. One of the basic beliefs is that entrepreneurs have to be more willing to face uncertainty and put a little bit more on the line than wage workers. So, we asked them if they wanted to collect a five dollar Amazon gift card or enter a lottery for a $2,000 prize.

About 55% of baseline employees entered the lottery, and more than 70% of entrepreneurs entered the lottery. In general terms, entrepreneurs were 20% to 40% more likely to self-report higher risk tolerance or engage in these small gambles relative to company employees.

Entrepreneurs were quite different from other people in another measure: They felt they controlled the outcomes in their lives and felt more capable of delivering certain outcomes to a higher degree.

But when it comes to baseline personality traits like how open you are or how conscientious you are, entrepreneurs interestingly did not have substantial differences.

What does that mean about these people? Entrepreneurs are basically the same as everyone else except they are more confident about their abilities and more willing to swallow risk?

You could say that. It could even go into overconfidence. Just because you have a greater sense of control, that isn’t always a good thing. In some cases, market forces or the weather do, in fact, shape outcomes more than people want to believe they did.

It does suggest that the people that have these beliefs, correctly founded or not, are more willing to strike out on their own, create a business to follow their dreams, and believe they can beat their competitors in whatever market area they’re entering.

I’ve worked with many entrepreneurs coming out of Harvard Business School, and I’ve seen they’re willing to tolerate risk. But they also do everything in their power to reduce risk as quickly as they can. They don’t like risk. They’re not gamblers, but they’re able to operate in an uncertain environment.

I don’t believe there’s a single entrepreneurial type, though. Entrepreneurs begin their businesses for a variety of reasons. You have some that started their business after their kids left home, and you have dropouts from MIT.

Was there anything in the study that showed entrepreneurs were very different from other kinds of company leaders?

One thing we saw in the survey data was that entrepreneurs are still higher than the full-time, long-term CEO of an organization in terms of risk tolerance or belief in oneself.

We often think about Mark Zuckerberg, Bill Gates or Steve Jobs and people who guided their companies through various growth states as examples of entrepreneurs. But that’s actually the exception rather than the rule. Usually the CEO leader of a company is different from the founder.

So, maybe some people are better at stepping in once a business is already created and being able to run that well, grow it, make it more efficient. Others might be better at sparking up new ideas and testing things out.

What does this mean for people who are not yet entrepreneurs but weighing the decision to start a company? Will having these traits make you more likely to succeed?

Yeah, we can’t say something that’s performance related. Is it the ability to tolerate risk or the kind of belief in oneself something that leads people to make poor choices? Or is it something that’s correlated with positive outcomes? I wish I could answer those questions because they’re all, of course, interesting and important to the choices people are making to become entrepreneurs.

This interview has been edited for length and clarity.

Nimit Sawhney is the co-founder and CEO of Boston-based startup Voatz. (Interview led by Zeninjor Enwemeka of the WBUR)

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

How Giraffe Played The VC Game (And Won Funding)

September 26, 2019

Local start-up Giraffe has accomplished what many entrepreneurs would consider impossible: Not only did it win the Seedstars World’s Best Global Startup Award, it has also secured funding from Silicon Valley VC firm Omidyar Network. Here’s how the founders have managed it.

Vital Stats

Players: Anish Shivdasani and Shafin Anwarsha
Company: Giraffe
Established: 2015
Background: Giraffe is a fully-automated mobile recruitment agency service that enables businesses to recruit medium-skilled workers quickly and affordably.
Visit: giraffe.co.za

Most start-ups would kill for the sort of trajectory Giraffe has enjoyed over the last 18 months. Since launching early in 2015, the company has enjoyed solid growth and traction, received some great PR, walked away with an international award and managed to secure funding from a Silicon Valley VC firm.

This is all incredibly impressive, and there’s no doubt that most start-ups would love to emulate Giraffe’s success. So how have company founders Anish Shivdasani and Shafin Anwarsha managed to get the whole world talking about Giraffe? Here’s their advice on attracting VCs to your start-up.

Solve a real problem

“We looked at the South African landscape and identified unemployment as a real problem. Then we asked ourselves how we could use technology to address and remedy the problem in the short term, if not solve it,” says Anish Shivdasani.

“We did this for two reasons: Firstly, we felt that there was a certain obligation to try and solve a real problem that the country was dealing with. Secondly, we realised that by looking at an emerging-market problem, it was not something that Silicon Valley start-ups would be looking at. We wouldn’t be competing with large and well-funded companies.”

So what does Giraffe do? Essentially, it allows jobseekers to upload a CV to the company’s mobi site for free. When employers need to hire, they simply submit a staff request at www.giraffe.co.za and algorithms sort through the thousands of CVs in the database and automatically identify, contact and schedule interviews with relevant candidates.

“We wanted to make the hiring process as easy and hassle-free as possible, both for employers and jobseekers. This meant coming up with an innovative solution. We created a system that allowed a CV to be completed quickly, but that didn’t require a lot of text. The system navigates a jobseeker through various options, ascertaining his or her skills and experience. So you don’t need to deal with hard-to-understand text,” says Shivdasani.

Lesson: Come up with a truly innovative product or service, and you’ll find that funding isn’t nearly as hard to come by as people often say. Build a solid company that addresses a real problem, and funding will find its way to you.

Bootstrap as much as possible

Unless you’re a hot Silicon Valley start-up with unicorn potential, you’re unlikely to attract funding until you’ve shown some traction.

Shivdasani and Anwarsha didn’t even think about funding during the early days of Giraffe. “We were focused on getting the platform and the business going,” says Shivdasani. “We had put our own money into the business and managed to give ourselves 12 months of runway. For that period, we didn’t give any thought to VCs and funding.”

“We also found that VCs will usually be reluctant to invest if you haven’t bootstrapped for a while,” adds Anwarsha. “They want to see that your company has some traction, and they want to see that you’re invested — that you’ve put your own money into the business and that you are committed to making it work.”

Lesson: Bootstrapping your business is a good idea. The best way to build a sustainable company is to spend as little money as possible up-front and get cashflow-positive as quickly as possible. Depending on funding for survival is risky. What if the money falls through? Create a business that can sustain itself. Rely on funding only for scaling.

Let the money come to you

“While we bootstrapped early on, we also met with investors. These were mostly people we had been put in contact with via our own personal networks,” says Shivdasani. “Importantly, we never asked for money. In fact, to this day, we haven’t asked for money. We simply introduced ourselves to investors and placed Giraffe on their radar.”

By introducing potential funders to the company, but not asking for money, the founders of Giraffe let the company’s performance speak for itself.

“We simply stated our intentions when we met with investors. When we saw them again six or twelve months later, we could tell them that we had followed through on our plans. We had attained some real traction, which made us worth investing in,” says Anwarsha.

Lesson: It is a stark reality of the start-up scene that the companies without much of a need for funding are usually the companies that attract it. This is hardly surprising. Investors want to fund companies with growth potential, not start-ups struggling for survival. So, focusing too much on attracting investment can be counter-productive. Instead, get the fundamentals right. Build a sustainable business. If you do that, the money will eventually come to you.

Don’t underestimate the value of PR

“While working together in the boardroom, I received an email from SeedStars to take part in the South African leg of its global start-up competition,” recalls Anwarsha.

“Anish told me to forget about the mail and get back to work. We were very careful not to be distracted from our primary goal of building the company, but I was keen to give it a try. Anish said it was okay, but there was one condition: Make sure you win.” Anwarsha did win, and it had a profound and immediate impact on the company.

“Until that moment, we had underestimated the impact that good PR could have,” says Shivdasani. “I was interviewed by John Robbie on 702 for a few minutes. Suddenly our servers were being overrun with new jobseekers and employers. It made us realise that entering things like start-up competitions is a good idea because of the PR it can generate.”

Lesson: Marketing can be useful, but nothing compares to great PR when trying to introduce your start-up to the world. Winning a start-up competition — of which there are no shortage these days — is a good way to do it. Another is to contact media houses and pitch your story. It’s important, though, to focus on the problem you are solving. Journalists are particularly interested in companies that are either innovative, or working at solving social issues.

Don’t just take the money

It’s very hard to say no to VC money, but before you grab anyone’s cash, it’s worth taking a moment to consider the long-term implications.

“It’s important to get on with the people who will be investing in your company. You need to be able to work with them. We were approached by another investor as well, but we ended up going with Omidyar Network — who had approached us after we won the local SeedStars event — because the firm was asking the right questions. They grilled us hard, but we realised that as an impact investor, they could bring value to the business,” says Anwarsha.

Giraffe has also been careful in how much investment it has actually accepted.

“After winning the local SeedStars competition, I travelled to Switzerland to represent Giraffe in the global event,” says Anwarsha. “To my complete surprise, I won. It was a surreal experience.”

The prize came with a maximum investment from SeedStars of $500 000, but Giraffe was reluctant to take it.“We had already closed a round of funding and had enough runway for at least 18 months,” says Shivdasani.

Lesson: Equity in a start-up can be cheap, and many founders have kicked themselves for giving away too much too soon. That’s why it’s important to keep operating with that bootstrapping mentality, even if you’ve received some investment. You want money to last as long as possible. The less money you need, after all, the less of your company you need to give away.

Take note

If no one is willing to invest in your idea, you should take another careful look at it. Focus on solving a real problem and the money will usually follow.

GG van Rooyen is a Senior Copywriter at PageFreezer Software, Inc.

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

Pushing the boundaries of African hospitality

September 25, 2019

By Filippo Sona.

On the occasion of the Africa Hotel Investment Forum this week, Filippo Sona, Managing Director, Global Hospitality Drees & Sommer, asks whether Sub-Saharan Africa is ready for an iconic hotel asset that will shape the image of African tourism.

According to the annual African Hotel Chain Development Pipeline Survey from W Hospitality Group, there are 75,000 branded rooms in 401 hotels in the pipeline across Africa – a growth of 51% in total pipeline rooms since 2015. The big global chains dominate, with Marriott International representing 81 hotels; Accor 57; Hilton 55; and Radisson Hotel Group 47 hotels. The countries with the largest pipelines are Egypt, Nigeria, Morocco and Ethiopia.

The pipeline is healthy, brand penetration is strong and Africa is without doubt a market on the hospitality industry’s agenda. However, when it comes to hotel development in Sub-Saharan Africa, there are still a number of issues to overcome to bring this pipeline to fruition.

Investors are well versed in feasibility, which is a banking requirement, and they are savvy when it comes to architecture, but there can be major gaps in their understanding of the full process involved in bringing a hotel to life. There’s a significant need to develop expertise around project management, design, compliance, fire and life safety systems, and MEP, or for developers to partner with those that do have this knowledge.

For example, we’ve seen developers begin construction without a project manager or interior designer on board, meaning hotels go up through shell and core, and simply stop. In these cases, owners often attempt to furnish their hotels with below-par design and products, far removed from the brand standards of their partners.

The international brands know the market and what’s required, but too often, they provide technical services remotely, and without the detailed guidance this market requires, leading to a – potentially very costly – disconnect.

Owners need more support at every stage of the journey to realise this exciting pipeline, whether that be through a brand resource on the ground or through partnering with independent consultancies with local expertise, track records and in-depth industry knowledge.

At Drees & Sommer, we believe a more sophisticated way of approaching development could also bring investors a huge opportunity to step up the game and develop bold new hotels that can compete globally – and possibly even change the tourism landscape of Sub-Saharan Africa.

From midmarket to luxury

Much of the current pipeline is focused on the midmarket; hotels with typically 120-140 keys aimed at the business traveller or domestic tourist. Luxury hotels exist in some markets, such as Algeria, Egypt, Morocco and Tunisia in the North, as well as Nigeria, Tanzania and of course, South Africa, but when it comes to sub-Saharan Africa, this segment is largely untapped.

There are reasons for this; funding requires significant equity and interest rates are high, but beyond that, there’s arguably a lack of vision. Hotels are being developed to meet a need now, but in such a rapidly developing marketplace, will this type of properties still be relevant in 10 years’ time? Could it also be time to embrace the luxury segment and build an iconic asset? Is sub-Saharan Africa in need of its own wow or iconic effect, as witnessed in Dubai?

This was one of the questions I put forward to a panel of brand leaders at the Africa Hotel Investment Forum (AHIF) today, as we debated the criteria for assessing new projects on the continent, the potential business models, and the most sought-after profile of local partners.

There’s already one incredibly exciting project underway, extensively covered in local media, that will bring Kenya its tallest building, with an international brand yet to be disclosed. Located on the beach in Watamu near Malindi, Palm Exotica is a 61-floor luxury mixed-use building set to comprise a 270-room five-star hotel, a high-end shopping mall, executive offices and apartments, a casino and restaurants. Designed by Italian architect Lorenzo Pagnini and funded by a group of foreign investors, the project is still in the planning phase but looks set to transform Watamu into a 21^st century tourism destination in Kenya.

With projects like Palm Exotica now on the horizon, sub-Saharan Africa is likely to gain more attention from investors that have previously perceived Africa as offering either wildlife lodges, or mid-market business hotels. Watamu isn’t on the tourism map currently; if all goes ahead, it will be. Where else do opportunities like this lie?

There will be challenges of course; connectivity being the obvious one, as is the need to develop sustainably, enhancing rather than impacting natural assets. But, in such a competitive continent, fuelled by rapid developments in technology and a growing middle class, surely it’s time to push the boundaries of Sub-Saharan Africa’s hotel landscape. The question is; who will be bold enough to do so?

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.

Taking Risk: What African Startup Founders Are Saying

September 22, 2019

Of course, the most crucial moment at Amazon’s re: Mars conference in Las Vegas in June, 2019 would be when Jeff Bezos was asked his greatest piece of advice for anyone still wishing or already running a business.

“Take risk,’’ he was quoted as saying. ‘‘You have to be willing to take risk.’’

Bezos went as far as noting that if you have a business idea with no risk, it’s probably already being done.

“You’ve got to have something that might not work. It will be, in many ways, an experiment,’’ he said. ‘‘Many of those experiments will fail, but “big failures” are a necessary part of the journey toward success.’’

At a time when many African startup founders are increasingly opening themselves up for more funding, letting their doors wide open for equity and debt investors as well as launching bids to scale their operation, risk-taking or dreaming big has almost become inevitable. So, a question may be asked as to what role effective risk-taking plays in growing a startup, from the scratch to the point of a successful exit. A few African startup founders appear to have some suggestions.

Mostafa Kandil, the Egyptian co-founder of Swvl, advises startup founders to consider the path of risk.

‘‘Take risks because what you’re already doing is a risk in its own,’’he said. ‘‘You probably left a job to start a business so you’re already taking it. Make sure you keep doing it onwards a well.’’

Kandil describes the most difficult moment he had ever been faced with to be when he decided to quit Careem, a ride-sharing company similar to his startup. Having spent already spent six months there, it was a big deal to quit.

‘‘When I was leaving Careem, it was quire heartbreaking actually,’’he told MENABytes.‘‘I was in love with Careem. Although my stay at Careem was very short (6 months) but the amount of things I was able to learn in this short time was remarkable.’’

Kandil says it was really a big deal to abandon work for the uncertain terrains of founding a startup.

‘‘To be honest since I started,’’ he notes. ‘‘I have taken quite a few risks. I think the biggest risk was to shift from being Petroleum Engineer to doing something else. It was not easy to study something and then end up doing a completely different thing. Also, your parents could never really understand what you’re doing. When I called my mom to tell her how I made it to Forbes after Careem’s investment. She was like ‘good for you’.’’

Even though the coast may have been clearer for Kandil to predict the outcome of his risk-taking efforts, it leaves a little hint of darkness for Jamila Gordon, the former dish washer born to Somalian parents, who recently raised $3.5 million in a funding round led by the CSIRO-linked venture capital investor Main Sequence for her anti-slavery Australia-based blockchain startup, Lumachain. Gordon has built a culture of dreaming big, a good substitute for risk-taking, over time.

“My father said to me, ‘I might never see you again, but here’s what I would like you to take away,’” Gordon recalls. “The first principle was: ‘Make yourself useful’. For me, in business, that means driving value. The second piece of advice was to remember that wherever I ended up in the world, no-one would know who I was. So I was free to imagine myself as a piece of white cloth on which I could decide what would be written. When I look back now, that meant I should be the best possible version of myself. This has been a core value of mine over the years. The third piece of advice was to dream big. “Throughout my life, I’ve found myself constantly imagining what I can be. It’s a process of dreaming that never ends.”

Dreaming big (and a bit of luck nevertheless) has probably seen Gordon move quickly from escaping his war-torn Somalia to taking a shot at dishwashing in Australia before blossoming fully into a software developer, moving across different continents, and at different times working for the likes of IBM, Deloitte, Qantas as its Group CIO, CIMIC Limited, GetSwift among others.

“Resilience is like a muscle that can be developed over time. And the way to develop it is by consciously putting yourself in situations that stretch you,” she says.

“For example, if someone asks you to do a job you don’t feel fully equipped to do, don’t say no. Take it, and learn it on the job, because by consciously putting yourself in those kinds of situations you will learn so much.”

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

Growing your financial talent as a startup founder

September 21, 2019

One of the key areas to consider when growing a startup organisation is the finance function. As part of the evolution of a company, CEOs and founders have to carefully assess their needs regarding their infrastructure for producing financial information — which is a by-product of the financial and accounting talent.

As a CEO, you need to know how to distinguish between various finance and accounting roles, and understand when and how to employ your talent along your journey.

Like many aspects of building a company, growing your financial talent in a startup or small company is a gradual process — and one that you should start from the very beginning. While there isn’t a one-size-fits-all approach, this article will guide you on when and where specific activities should take place within the structure of your finance department.

Evolution of the finance structure

Long gone are the days when finance just reported numbers; in addition to its governance and oversight roles, the finance function increasingly provides operational and enterprise-wide support.

For more on the modern finance function, check out the basics of financial planning and analysis (FP&A) for startups and the basics of managerial accounting for startups.

The growth of a company essentially depends on people, and building a team from scratch is challenging. But because financial talent is an almost universal need for companies — as, for example, every single company needs to set up a chart of accounts — it’s possible to use different levels of talent in bite-sized pieces to provide different levels of support as the startup grows — it’s an evolutionary process.

You need to plan for this evolution.

Use short-term and temporary solutions to grow your financial capabilities as your business grows. It’s possible to use a part-time bookkeeper or a virtual CFO to provide critical support as the enterprise grows — a CFO shouldn’t be your first financial hire.

As a CEO of a startup company, you are in a constant state of storytelling which dictates the transformation of you as a CEO and your company, and which helps you visualise the outcome you want.

You want to grow an organisation to support the fundamental scale-up of the business. This growth can be operational or marketing or financial — anything on the organisational chart that will need expansion in order to achieve the vision of the venture.

You need to plan for your outcome and break the plan into objectives. Don’t build more infrastructure than you need until it’s necessary. That’s to say, don’t hire a CFO when all you need is a financial controller — usually an accountant who is responsible for financial reports and payroll. However if you can afford it, a good strategy might be to hire the next level of financial talent before you really need it.

Founding and scaling a startup is hard; rarely does the entire initial team scale at the same rate as the company, and training people to grow doesn’t always work. So letting people go is part of building a great team, and executing your startup’s vision.

As a young company with limited resources, hiring the wrong people can be very costly and potentially bring your company down. So you have to be very careful with your hiring decisions, and thoughtful as it relates to cost.

To help you keep your organisation lean and agile, check our these 10 money-saving tips to grow your company with a small budget.

As the company grows in size, complexity, and finance functional maturity, so does the location of your finance activities. As your business grows, your business model evolves and your company becomes international, your finance function will likely be spread throughout different locations (business or geographical units) and likely become somewhat decentralised.

A framework for growth; timing is everything

When the time comes that it’s essential to build a permanent and solid financial infrastructure, you want to build from the bottom up. We’ve entered an era where you can rent and not buy everything, and finance talent is no exception.

As a startup operator, you need to strike a balance at different stages of growth between looking at the past (financial accounting) and looking at the future (financial planning and analysis — FP&A). You need to foresee how the different processes will work together across business units and locations, while interacting with the performance of operations (managerial accounting).

As your company grows and your clients and operations spread out geographically and become more complex, more finance staff may be placed in business units. You might choose to centralise the finance function, migrate it to shared services, or perhaps divide responsibilities between corporate and the embedded finance teams.

A conceptual roadmap

In your early days, if you can’t afford or convince top talent to join you, you will likely have to wear different function hats yourself and/or rely on third-party providers.

At the very beginning — during pre-revenue and pre-seed stage — you should only need a bookkeeper. Doing your own bookkeeping at first can help you get a good handle on the levers that drive your business, and it won’t take more than a few hours a week.

You will need to focus on revenue generation once you begin to grow and raise a seed round of capital, so you should hire a professional bookkeeper and an accountant by then. It’s also at this point that you should hire (rent) a virtual CFO for a few hours a week, to help you lay the foundations of your business model and the finance function that will support it.

The degree of interaction with your bookkeeping and accounting service (and an expense calculation) will let you know when it’s time for more CFO support and even to formally institute a finance department with an in-house bookkeeper(s) and accountant(s).

You will need more time from your on-demand CFO to help you with historical and projected financial statements, unit economics, business model, and to raise additional capital.

And eventually, you’ll need to improve and have more control over financial processes and systems, so you’ll want to hire a controller. Hiring a full-time CFO may also happen around this time, and instituting a FP&A team soon after, depending on the nature of your startup and to further support and strengthen the performance of your operations.

Drivers & Milestones

The increasing magnitude of financial complexity, employee count, revenue, and outside funding are the main drivers of the evolution of the financial infrastructure in the startup.

There are certain milestones that mandate careful attention and consideration from the founder or entrepreneur:

When you want to solicit ‘serious’ funding from a venture capitalist.
When your company grows beyond 20–30 employees.
When you have received venture funding and VCs expect regular financial reporting.
When you achieve product-market-fit and are ready to scale.
When your revenue numbers start to pile in the millions.

Some additional tips

Know that as you grow your internal reporting will become more complex and sophisticated.
You will likely need both financial and managerial accounting, and pay very careful consideration to how you will integrate your performance with your finances.
Documenting everything from day one will save you a lot of time in the long run, this includes how you set up your chart of accounts, revenue recognition, business assumptions, etc.
Seek support to file your taxes and do your payroll from day one — avoid doing it yourself.
Maintain all financial files perfectly organised from day one.

In conclusion

The most important consideration is to be thoughtful and have a good plan to grow the financial capabilities of your startup.

The big lesson is this — grow your financial talent slowly, smoothly and with a bit of cleverness. Don’t just go out there and appoint someone the CFO because you feel like your startup should have one. Again, it’s a gradual process that begins at the beginning.

There is a big, cruel world out there which doesn’t care that you are a cute, adorable startup. Those that compete with you will intend to crush you, so you will have to grow up and learn to operate in a much more sophisticated playing field, which includes embracing the leverage a strong finance function can provide your startup to be more competitive as an organisation.

And finally, it is important to keep in mind that a company depends on people, so acknowledge that the talent you found initially may not be strong enough to grow the company in the mid to long term.Your initial team will rarely be the right mix of people to grow the company to its ultimate size, especially in less-developed entrepreneurial ecosystems like most across Europe. Many of the people you bring on right from the beginning are not going to be able to make the entire trip with you. Some make it, some don’t.

Marte Martin is a Madrid-based Venture Associate doing business as Marte Martin Venture Agency, where he focuses on entrepreneurial finance and accounting.

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

Exponential Innovation: Why tech startups need to re-model their approach to innovation

September 19, 2019

Everyone is talking about it and everyone is promising it. You’re constantly surrounded by it, and sometimes you’re even worried by it — Innovation. In the corporate world, innovation has become one of the most used words of the decade. Sit in any boardroom meeting and industry seminar and you’re likely to hear this term being used repeatedly, and if you’re in the technology space you don’t really have a choice. Innovation is the name of the game.

But what does innovation truly mean? Both for my company and my audiences? This is a question that a lot of leaders today are forgetting to ask. More importantly, what measures do you put in place to guarantee your innovation is successfully driving your company forward, whilst in parallel creating a positive impact on the wider community?
In order to make true change, these questions must be addressed head on. If you do this successfully, not only will your business be at the top of its game, but your workforce will act as a force for good. This is where the concept of exponential innovation comes in.

Exponential innovation: redefining the value chain

When Uber was trying to solve the problem of taxi availability anytime, anywhere, it invented an entirely new concept and caused a paradigm shift. Now, every car on the road can potentially become a taxi, and the industry has changed forever. Airbnb in the hospitality industry, and Spotify and Netflix in the entertainment industry have done the same.

Similarly, in the payments industry, when tokenization technology was introduced, it was a conceptual shift in thinking. Should card data be compromised, the data became useless to fraudsters. This not only helped to protect consumers’ financial data, but also boosted consumer confidencein an industry becoming increasingly more digital.
This is the very definition of exponential innovation: it goes above incremental innovation to reimagine the consumer experience and create efficiencies within the industry’s value chain. It challenges the status quo, looks at pain points with a different set of lenses, with the aim to eliminate them, not just reduce them.

It is necessary to approach your product or service from the viewpoint of the end-consumer. Every organization today is a B2C organization, not a B2B or a B2G, because ultimately the work you do will have considerable impact on individual lives. It is that impact that you must look to positively transform, to achieve exponential innovation.
Three-pronged approach to exponential innovation: Build, Acquire, Collaborate
Build.

This is perhaps the most obvious one: design, invent and innovate. Building the right solutions requires looking internally and investing in those technologies and solutions that aim to disrupt existing technologies. In the era of the Fourth Industrial Revolution, emerging technologies such as Artificial Intelligence, Internet of Things, Machine Learning, Robotic Process Automationand Blockchain are ruling the roost in terms of their use-cases for commercial purposes. Gartner forecasted that the number of things connected to the internet surpassed the number of humans and is expected to reach 20.4 billion by 2020. The boundaries of technologies continue to increase, and there has never been a better time in history for innovators to experiment, build and test new solutions.

Complementing this is the growth of the knowledge economy, in which technology giants no longer work in individual silos, but rather encourage knowledge-sharing with each other in order for the world’s technologies to be able to talk to each other. Egypt recently announced plans to set up a Knowledge City in the new administrative capital that will include branches of foreign universities, research, innovation and entrepreneurship centers, in addition to a science park. The Knowledge City is part of Egypt’s Higher Education and Research Strategy that aims to promote science, technology, and innovation ,indicating that the region is ripe for further invention.

Acquire

Look at your landscape. The rise of fintechs and startups is disrupting virtually every industry, not just the tech sector. 2018 saw a record of 366 startup deals across MENA, amounting to $893m of total funding. Egypt was the fastest growing ecosystem, with 22 percent of deals in the region .Thanks to hyper-digitalization, these startups have far greater access to consumers than was ever possible before.

It is important to view these players not as competition, but as potential strategic partners that can help you achieve exponential innovation. Looking at the positive sentiment that Careem and Souq received this past year after being acquired is a clear indication that the region is increasingly becoming a hotbed of unicorn startups, and it makes business sense to leverage this opportunity.

Image result for exponential innovation — From exponential technologies to exponential innovation

Collaborate

Let me give you a world famous example. When Apple decided they wanted to launch the Apple Card, Mastercard didn’t shy away — we became their global payments network.

Similarly, many technology-based startups and consumer-facing apps only work thanks to established companies partnering with them. For example, popular apps in the region such as Zomato, Uber and Namshi enable consumers to purchase their food, travel and clothing anytime, anywhere simply from their smartphones. For this to happen, several stakeholders need to work together. The app itself needs to ensure that the consumer has an easy-to-understand user experience that allows them to make the purchase seamlessly. The telecom provider needs to ensure that a person has sufficient data capabilities to be able to process this payment via their phone. The payment provider needs to ensure they can seamlessly process the payment safely and securely. Collaboration is thus key in this process.

Overcoming the challenges

Trying to achieve exponential innovation comes with its fair share of challenges. In the payments industry for instance, our biggest concernis around misconceptions around security. Consumers take a lot of time to change behaviors and have concerns regarding cybersecurity and fraud. In 2018, the proportion of organizations in the Middle East reporting that they’ve fallen victim to acts of fraud and economic crime increased to 34%, up from 26% in 2016.

The key to addressing this is three-fold. First, it’s necessary to establish a dialogue involving knowledge-sharing with governments, and banking and technology partners to address these issues in a collaborative way. Second, deploy the technological tools available that minimize fraud concerns, and strengthen authenticity. Tokenization and Artificial Intelligence have been instrumental in achieving these goals. Lastly and most importantly, it is necessary to raise awareness on these issues to gain trust amongst consumers. Trust is the foundation of the digital economy, and consistent efforts must be made to ensure that trust.

Transforming industries, economies and communities

Every company that aims to innovate will have its fair share of challenges while trying to achieve exponential innovation. But keeping the larger picture in mind and addressing these concerns is essential not just for a firm’s growth, but also their sustainability and survival.

By executing a three-pronged approach and leveraging technology to achieve exponential innovation, it is possible to transform industries, benefit economies, and positively impact and enrich communities.

The world today is evolving at an exponential pace — disrupting technologies are changing the way people shop, travel, communicate, pay and much more.Exciting times lie ahead, providing companies are able to approach and harness innovation in the right way.

Gaurang Shah is the Senior Vice President, Product Management, Digital Payments & Labs, Middle East and Africa — Mastercard

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

Small Businesses Bear the Brunt of Nigeria’s Border Closure

September 18, 2019

Nigeria’s indefinite shutdown of its borders is taking its toll on small and medium scale businesses especially those that depend on cross border transactions. This was the findings of our Correspondent who visited two key border towns of Seme and Idiroko over the weekend. Many business people this Correspondent spoke with lamented that the closure has negatively impacted their businesses as what they thought would be just for two weeks or less has become indefinite leaving them in limbo.

Col. Hameed Ali, comptroller general, Nigeria customs service

Nobody seems to know when the border will be reopened even as the ECOWAS Parliament has urged the Nigerian government to reopen them. Speaking on the development, the Comptroller General of Nigeria Customs Service (NCS) Col. Hameed Ali (Rtd) said that Nigeria’s borders will remain closed until the country and its neighbours agree on existing ECOWAS protocol on movement. He stated that there is no specific time for opening the borders adding that “if they agree with us tomorrow on the existing laws, then we sign and update the existing protocol of transit, that’s all”. The Comptroller General informed that there is the likelihood that a meeting would soon take place as efforts are on top gear to have a round table discussion over the sticky issues relating to reasons why Nigeria had to shut its borders.

The Nigeria Customs Service said that it has made tremendous seizures of contraband products in recent times which necessitated government’s decisions to shut down the borders because it felt that efforts at growing the economy through import substitution is being sabotaged by people engaged in nefarious activities using the borders. Noting that by closing the borders, Nigeria was able to completely block the importation of contraband.

Reacting to the claims made by the Customs, some business people who spoke with this Correspondent said that it is a very wrong assumption by the Customs and the Nigerian government to see every product and business transactions across the borders are illegal or contraband because many businesses engage within the ambit of the law. They call on the federal government to resolve as soon as possible, whatever disagreement they have with the neighbouring countries and open the borders for businesses engaged in legal transactions.

Mr. Olufemi Johnson, a licensed customs agent said that what the government should do is to tighten the noose on smugglers while businessmen engaged in legal transactions should be allowed to continue with their businesses instead of such a blanket closure.

The Customs boss however insisted that the closure has helped Nigeria tremendously as it has led to the complete blocking of the influxes of illicit goods, and most importantly, stopped the exportation of petroleum product which is the biggest problem the country has. Also through the measure, the importation of foreign rice has stopped and the market for local varieties has risen.

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.

The four types of investor startups would want to avoid at all costs

September 17, 2019

Ant, shark, sloth and instant return-seeker. Each of these investor types could kill your startup if you are not careful.

I’ve been involved with 12 startups across Europe, the US and even Tunisia, and dealt with a lot of investors. I’ve learned that a lot of things can go wrong. You need to profile your investors to find the ones that best suit you. This is a long term relationship, not unlike a marriage.

Let me give you a few examples of investors you don’t want to ‘marry’:

1) Ant investors

These are the investors who will only put in tiny sums. They seem helpful, but the sheer numbers of them can sap your energy and kill your startup.

There is one biotech company I know, for example, with an incredible breakthrough treatment in vascular health, which can help patients avoid diabetic limb amputations and cardiovascular operations.

It wasn’t taken seriously to begin with, however, or else pharmaceutical companies saw it as a threat. So, after the first positive clinical results, the management opted to raise capital from retail investors, with small investments. This was fine at first, but now the company is raising a $15m series-D round, and has a problem with managing its 1900 individual investors.

So think about not spreading yourself too thin, to not block strategic investors. Have a minimum ticket size, and stick to it. Or at least, if you do crowdsourcing, give people nonvoting shares.

2) Greedy sharks

Another early sector startup got an offer from a principal investor in the food industry. It turned into a nightmare, because it turned out that the investor’s aim was to take over the whole company as cheaply as possible.

The investor demanded to have the chair position and bullied management in a way that every decision approved would go in its favour. I was on the board, as an investor and advisor to the two founders and in the end I had to take over as chairman in order to stop the company from being pushed in a direction it did not want to go.

Be wary of investors’ motivations, particularly of those from your field of operations. And careful with those who push to take control of the boardroom as a prerogative to the investment. Ask yourself, what are they looking for and why would they invest to start with?

Read also: Top Venture Capital Firms And Angel Investors For African Startups

3) Lazy ‘so superwell-connected’ door-openers

When I began work on two startups in Tunisia, I was advised to take influential local partners as shareholders: “Go with them, they will guarantee your business will succeed.” They were supposed to help us make local connections and navigate through the business culture.

These kinds of investors always tell you all the great things they will do for you. But then they don’t do them. In the end, I would never do that again. It was very clear that they expected us to do all the heavy lifting while they sat back waiting for the big returns.

Yes, you may need experts going into an unfamiliar market, but look closely at their track record. Ideally, you should vet your investors are closely as they vet you.

4) Instant return seekers

When you create a startup, you think you have a clear idea of the problem you are solving and how to get there. But things always take unexpected turns.

One hydrodynamics startup I invested in had underestimated how long it would take to make a return. It was taking longer to get ‘normal users’ to adopt the solution than they had expected.

This is pretty common, but unluckily the investors included a number of quick buck people who quickly became frustrated and made the atmosphere very toxic. Every meeting became a struggle between the investors and the leadership team.

It killed new ideas — and very nearly the company. The marriage with these investors turned so bad that they wanted to exit at crazy low valuations destroying the fundraising path, just as milestones were achieved.

Recently, there has been a breakthrough for the company and the wind has turned in its favour. But you need outstanding cardiovascular health to survive such fights and keep the team motivation.

Startups need to look for smart money that gives you the time to rethink and adjust when unexpected things happen. The more breakthrough the tech, the more uncharted is the water. You don’t know what you don’t know.

Stefan Laux has been a startup founder, a corporate executive, an investor, a board member and an advisor over the course of a more than 30-year career. He is currently getting ready to launch a drinktech company, NobleAB.

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

Why California’s New Employment Law Could Return All Logistics, Transport And Similar Startups In Africa To Square One

September 14, 2019

In a perfect world of the gig economy, James should be able to hire a car from a rental service store, present his driving license and other certifications to Uber (a car hailing service, for instance), get registered if he is considered qualified based on a series of paper checks and tests, and take to town helping online car hailers to reach their destinations, at an automated pay rate, and of course, as long as he fully complies with the terms and conditions of his engagement with Uber. In this arrangement, although James uses the Uber hailing service as a vehicle to carry out his business, he is still considered by Uber as an independent contractor who works off the controls and the supervision of Uber, except on occasions where he is skidding off his original rules of engagement. Thus, in a gig economy, James should not be on Uber’s payroll and is not even qualified to be classified as an employee of Uber. But all that has been shaken up, disrupted by the Californian state legislature, in a landmark new bill that has just scaled through the last phase in parliament, pending an assent by the Californian state governor. If other jurisdictions draw inspiration from California’s new standards, then all logistics, transport and other similar startups that have built their business models around independent contracting would be back to square one; that is, to the previous era when there was little or no disruption.

Bradley Tusk, president of Tusk Ventures and Uber’s first political strategist, told The Verge, “A domino effect [is] not just possible, it’s all but guaranteed.”

First Here Is What The New Law Proposes

The bill has changed the criteria for being an independent contractor.
Now, for a company to classify a worker as an independent contractor, it must prove three things (you may hear this being called the “ABC Test”). If they can’t, then the worker is treated as an employee.
First, companies must prove “the worker is free from the control and direction of the hiring entity in connection with the performance of the work.” In other words, companies can’t manage contractors the way they would employees. As an example, if a catering hall contracted a chef to prepare food events, but controlled how the chef prepared the food — giving them custom orders from customers, giving a strict schedule for production, and instituting standard procedures — they would likely not satisfy this part of the test.
Second, companies must prove “the worker performs work that is outside the usual course of the hiring entity’s business.” This means a company like Uber has to prove that driving users from location to location is outside the company’s usual course of business. Uber said as much in a press release, contending that the company is actually a “technology platform for several different types of digital marketplaces.”
Third, the companies must prove “the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.” For example, an electrician doing contract electrical work is still a contractor. It’s unclear if ride sharing or meal delivery companies will be unable to clear this bar.
Consequently, under this new law, all of these independent contractors could earn employee status if the companies can’t satisfy the ABC test — which greatly increases the company’s overhead. Worker’s comp, benefits, tax implications — it would be a serious reshaping of these companies’ finances.

Applying The New Californian Rule To Similar African Startups

There is no specific legislation on independent contractors in two of Africa’s largest economies — Nigeria and South Africa. However, the English common law standards have continued to apply.

The common law recognises a distinction between a contract of service (an employer-employee relationship under which the employee subordinated his or her services to the authority of the employer — a locatio conductio operarum) AND a contract for services (a principal — independent contractor relationship where the former contracts the latter to deliver certain services and there is no subordination by the contractor, who instead is answerable to the service deliverables contracted for — a locatio conductio operis).

Who Therefore Is An Employee Or Independent Contractor In South Africa?

Since there is no express law that draws a distinction on who an independent contractor or employee in South Africa is, courts in the country have often adopted an approach that can best be described as a “reality approach”, which involves assessing the reality of the relationship by taking account all of the relevant factors on a substance-over-form basis, the public interest and the fact that parties have no licence to artificially take themselves out of the scope of important legislation such as the Labour Relations Act 66 of 1995 (“LRA”) the Basic Conditions of Employment Act 75 of 1997 (“BCEA”) and the Employment Equity Act 55 of 1998 (“EEA”) in existence in the country. Consequently, there is currently in place in the country an authoritative judgement on the issue. By the rules, in arriving at whether a person is an independent contractor or not, questions must asked on whether:

The principal has rights of supervision and control over the contractor, i.e. whether the contractor is obliged to follow the instructions of the principal, including whether the principal is able to dictate to the contractor when he/she is required to render their services, the manner in which such services are rendered and generally whether the contractor is at the principal’s ‘beck and call’
Whether the contractor forms an integral part of the principal’s organisation, e.g. whether the contractor participates or is an integral part of the principal’s internal management and/or staff structures; whether the contractor is ‘part and parcel of the organisation’ or whether the work done is for the business but is not integrated into it and is only accessory to it; whether the contractor would appear to an outsider to be an employee of the principal.
The contractor is economically dependent on the principal or whether he/ she is free to derive income from other sources as well. Thus, a person who is truly self-employed cannot be economically dependent on their “employer” when he or she retains his or her ability and power to contract with and render services to other persons or entities.

Read also: From Job To Startup: How African Startup Owners Handled The Dilemma

The above three factors are not exhaustive of all the factors to be taken into consideration when considering whether a person is an independent contractor or not.

The South African parliament has however gone ahead to incorporate these three conditions (considered as presumptions which can be rebuttable) as part of South Africa’s national legislation on employment.

Consequently, under the LRA and BCEA, a person who earns less than an earnings threshold amount determined by the Minister of Labour in terms of the BCEA3, and who works for or renders services to another person, will be presumed — until the contrary is proved and regardless of the form of the contract — to be an employee of the other person if one or more of the following factors are present:

• the manner in which the person works is subject to the control or direction of the other person;
• the person’s hours of work are subject to the control and direction of the other person;
• in the case of a person who works for an organisation, the person is a part of that organisation;
• the person has worked for the other person for an average of at least 40 hours per month over the last 3 months;
• the person is economically dependent on the other person;
• the person is provided with tools of trade or work equipment by the other person; or
• the person only works for or renders services to the other person.

The effect of this classification into the status of an employee or an independent contractor is that in the Fourth Schedule to the South Africna Income Tax Act, only employees and not independent contractors are entitled to earn “remuneration”. That is, a person can only earn ‘remuneration’ if their services or duties are required to be performed mainly at the premises of the client and:

the worker is subject to the control of any other person as to the manner in which his duties are or will be performed, or as to the hours of work; or
the worker is subject to the supervision of any other person as to:
the manner in which his duties are or will be performed; or
the hours of work.

This will also mean that the independent contractor would not be part of certain benefits applicable only to employees such as a working period of not more than 45 ordinary hours in any week, fair termination of employment among others. As opposed to employees, independent contractors are only entitled to such “benefits” and terms as have been agreed to between the independent contractor and his / her client. Again, the termination of independent contracting relationships is governed only by the agreement between the parties.

Who Is An Employee Or Independent Contractor In Nigeria?

Nigeria’s case is very much the same with South Africa’s. Both countries have no legislation that specifically defines who an independent contractor is, except of course the application of the common law principles of contract of service and contract for service. Nigeria’s Supreme Court, in Shena Security Co. Ltd v. Afropak (Nig.) Ltd & 2 Others [2008] 18 NWLR (Pt. 1118) 77 SC; [2008] 4–5 SC (Pt. II) 117 has laid down the some extensive factors that should guide courts in determining which kind of contract the parties entered into –

If payments are made by way of “wages” or “salaries” this is indicative that the contract is one of service. If it is a contract for service, the independent contractor gets his payment by way of “fees”. In like manner, where payment is by way of commission only or on the completion of the job, that indicates that the contract is for service.
Where the employer supplies the tools and other capital equipment there is a strong likelihood that the contract is that of employment or of service. But where the person engaged has to invest and provide capital for the work to progress that indicates that it is a contract for service.
In a contract of service/employment, it is inconsistent for an employer to delegate his duties under the contract. Thus, where a contract allows a person to delegate his duties there under, it becomes a contract for services.
Where the hours of work are not fixed it is not a contract of employment/of service. See Milway (Southern) Ltd v. Willshire [1978] 1 RLR 322.
It is not fatal to the existence of a contract of employment/of service that the work is not carried out on the emjployer’s premises. However, a contract which allows the work to be carried on outside the employer’s premises is more likely to be a contract for service.
Where an office accommodation and a secretary are provided by the employer, it is a contract of service/of employment.

These factors, as in South Africa’s case, would also provide a guide in considering whether the benefits and the responsibilities expected of the independent contractor or the principal as the case may be.

The Implication of The Positions of The Law in the Two Countries In Relation To California’s New Rules

The above explanations are important because in both countries, courts will not usually be bound by the labels that parties chose to attach to their relationship or defer to the declared intent of the parties in this regard, whether in their contract or elsewhere. Thus, stipulating in a contract (or elsewhere) that a relationship is one between independent contractor and principal or referring to the contract as an independent contractor or consultancy agreement, when the relationship between the principal and the contractor is, in reality, one between employee and employer, does not make the relationship any less of an employment relationship, and vice versa.

Comparing South Africa and Nigeria’s case on the one hand and California’s case on the other, it is obvious that California’s case went too far in establishing who an independent contractor is. For instance, apart from the fact that in California’s case, companies must prove “the worker is free from the control and direction of the hiring entity in connection with the performance of the work,” companies must also prove “the worker performs work that is outside the usual course of the hiring entity’s business” and that “the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.”

While the first test, i.e. that of control, appears to still conform to the basic standards used in determining who an independent contractor is, the second and the third tests tend to have looked beyond these basic features of control and supervision to question the need for independent contractors when the engaging companies could as well themselves do the work. This, in all ramifications, is predatory legislation, and which would be very hard to found followership in other jurisdictions.

Do African Startups Need To Re-Adjust In Time?

As a matter of strategy, remodelling the nature of services African startups offer on the basis of this new Californian legislation would, of course be a matter of long-term strategic plans for startups. African government’s demeanour towards this is such that it does not seem that they are very much in a hurry to change the status quo. Unlike, other jurisdictions that have clear-cut definitions of who an independent contractor is, most African countries are yet to come up with even a legislated definition of the term. California’s case cannot be unrelated to the continuing agitations by Uber drivers in the state, of exploitation by the multi-billionaire dollar car hailing company. In March, Uber agreed to pay $20 million to settle a nearly six-year-old lawsuit by California and Massachusetts drivers over their classifications. The case is McRay v Uber Technologies Inc, U.S. District Court, Northern District of California, №19–05723.

Uber, rival Lyft Inc and food delivery service DoorDash, on their own, have pushed for separate legislation to boost driver pay and benefits while preserving their independent contractor status.

African startups with similar business models as Uber, Lyft Inc, DoorDash, Fiverr, Upwork, and others should however, keep this in mind. It not only has the capacity of suddenly bringing to an end the gig economy, it also has the potency of sending all new disruptive business models that rely on public workforce into an abrupt extinction.

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.

Business People Call on Governments to Tackle High Business Risks in Africa

September 9, 2019

Business people across the continent have called on the governments and regional development institutions to join hands in fashioning out ways to help reduce the high business risk in the continent. This call was made against the backdrop of recent findings by global consultancy firm PwC Group which identifies among other things the growing socio-political and economic uncertainties are undermining efforts by African businesses to grow, and by extension contribute to the growth of the continent. Worst hit by this development are small to medium scale businesses and the conglomerates and multinationals have the financial muscle and political connection to push through without much hassles.

An executive of a Lagos based microfinance bank that funds small and medium scale businesses that service the sub region explained that some of the present policies put small businesses that rely on regional markets at a disadvantage whereas big multinationals survive because they have established outposts across the countries which help them to mitigate some of these challenges. He cited example with a very popular household manufacturing conglomerate Unilever Group which he said manufactures some of its products in either Ghana, Cote d’Ivoire of Nigeria— depending on which country provides comparative advantage in manufacturing a particular product–and distribute across the region using its well oiled logistics network. But smaller holdings that do not have such huge capacity are left out in the cold, he said.

The Report captures some of the stumbling blocks businesses face in the face of bureaucratic redtapes across the continent. For example, the Economic Community of West African States (ECOWAS) Protocol mandates free movement of goods and services across the 15 member countries, but this exists only on paper as businesses are made to go through untold hardships at various border posts incurring high demurrage and in some instances, loss due to border thefts and other hazards. Another challenge being faced by businesses is exchange rate volatility between the three major currencies in the region—naira, CFA Franc, and cedi— this has remained a detriment to regional business transactions in the region.

For example a Nigerian businessman who spoke with this Correspondent pointed out that it has become extremely difficult to make estimates of cost of logistics and successfully build it into a business plan because of policy changes along the West African coast. He said that sometimes, between the time it takes to load his goods in Lagos, and offload in Accra Ghana, he may be shocked with three to four different policy changes affecting excise and duties on the goods. He lamented that it is becoming increasingly difficult to operate in the region, doubting the rhetoric of economic integration being parroted by African leaders on a daily basis.

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.