Banking stocks in Nigeria drive market rally as CBN loosens FX control
Nigeria’s banking stocks have pushed the NGX to positive results this week. Experts believe the suspension of CBN chief Godwin Emefiele and floating of the naira could be responsible. Nigeria’s NGX continued its mini-bull run today in a strong week for the stock exchange. The NGX All Share index gained 3.9% yesterday, and in the early hours of trading today, it was up another 1.8%, driven primarily by the stocks of Nigeria’s Tier 1 banks. Financial markets experts told TechCabal that the market and investors are reacting positively to the suspension of Central Bank chief Godwin Emefiele. The move towards a unified exchange rate in the early hours of today was also well received. Onome Ohwovoriole, an analyst with Money Africa, told TechCabal, “The stock market rally this week has been driven, in my opinion, by two factors: reported unification of the official exchange rates and suspension of the CBN Governor.” Oise Ajayi, the head of investment research at Achoria asset management, also told TechCabal, “Historically, banking stocks have delivered some of the best returns in the market. The general positive mood in the market is because the government is taking steps in the right direction. The removal of subsidy and today’s news about the Naira float has been long coming, but the previous government refused to initiate them for whatever reason. Now that they have come to the fore, the country seems to be moving in the right direction, and investors are showing their confidence by taking a position in the market.” Still early days? The CBN’s latest move in floating the naira and allowing banks to sell forex at market rates would drive a lot of movements. “We might still be seeing more movements later on today or tomorrow,” Samuel Oyekanmi, another researcher, said. Several analysts agree that this bullish run could last five days before investors look to take a profit. “Typically, when prices rise like this, you can expect some profit taking soon. So profit-taking will impede the current bullish run,” Ajayi added. Ultimately, it’s helpful to remember that these are still early days. While these policies are a step in the right direction, naming a cabinet and an economic team will be the litmus test for investor confidence in the coming weeks. Ohwovoriole noted that there still needs to be more clarity around forex policy as the unification of the foreign exchange rates is just the first step.
Read MoreYouTube relaxes monetisation rules, opening the door for smaller creators to earn
YouTube is relaxing the rules for its partner program, so new creators can start earning as early as possible from their video-making careers. However, it is still not rosy for new content creators. YouTube is one of the go-to platforms for video content and has been instrumental in the digital creation era. However, new content creators who mostly have a handful of subscribers do not have access to YouTube’s Partner Program (YPP). This program is a way for creators to earn money from advertisers. This week, YouTube relaxed its eligibility rules for creators, opening the door for these creators to start earning on the platform faster. The partner program also gives creators access to fan funding features like channel memberships, Super Chat, Super Thanks, and more. Lowering the barrier to revenue As of today, creators on YouTube can apply for the partner program once they reach 500 subscribers, upload 3 public videos in the last 90 days, and either accumulate 3000 watch hours in the past year or receive 3 million Shorts views in the last 90 days. Previously, channel owners needed to have either 1,000 subscribers with 4,000 valid public watch hours in the past year or 1,000 subscribers with 10 million valid public Shorts views within the last 90 days to qualify for YPP. “In the U.S., the number of channels that earned a majority of revenue from Fan Funding products in December 2022 saw an increase over 20% compared to the prior year,” YouTube said YouTube in a blog post. “As these creators continue to grow their channel, they’ll automatically become eligible to earn revenue sharing from ads and even more benefits once they reach the existing YPP eligibility criteria without having to go through the full YPP application process again. These existing eligibility requirements to unlock revenue sharing remain unchanged,” adds YouTube. Why is this important to creators? Some local creators are happy about YouTube’s changes to YPP. They can now monetise their content early in their YouTube careers without amassing a big following. However, the content still needs thousands of hours in viewership, and the number set by YouTube is a minimum of 3000 watch hours. According to Dickson Otieno, who runs tech-ish.com and is a video creator, the watch hours are high. Online tech publisher Nixon Kanali, who reviews hardware products for his YouTube channel, told TechCabal, “YouTube should have done this a long time ago. So many young creators have been unable to monetise their content for a long time because the previous requirement was not easily attainable, especially for creators who are just starting. This new requirement is very important as young creators can start earning from their craft early as they build their pages. This is also important because we might now see several creators who are used to sharing their content on platforms like Facebook or any other social now moving their content to YouTube,” said Kanali. YouTube still doesn’t pay much in Kenya Kenyan creators earn as low as KES 1000 (under $10) per 10,000 views from their video viewership and sometimes depend on sponsored content paid for by their clients. The number of views does not solely determine the amount of money earned from YouTube. Even if a video receives 1 million views, only a portion of those viewers may have watched the ads for over 30 seconds, while others may have skipped or used ad blockers. Factors such as niche metrics and geographic location play a role. Science and tech videos, for example, tend to generate higher earnings. These are some of the issues that have been raised by creators, citing that creators in Western countries earn more.
Read MoreConvergence Partners Investments rebrands to Solcon Capital, increasing focus to generative AI investments
Convergence Partners Investments has rebranded to Solcon Capital. The company plans to push into deep tech investments in emerging markets. South Africa-based and pan-African present deep-tech investment firm Convergence Partners Investments is rebranding to “Solcon Capital” and making a push into global deep tech growth “through platform economics”. Founded by South African businessman Andile Ngcaba in 2003, the firm was the first vehicle structured as a permanent capital vehicle in the Convergence Partners stable, which focuses on private equity through its current and future digital infrastructure funds. “Solcon Capital has a 20-year history of innovation and disruption through investments in companies that have built undersea cables, long-haul fibre, Big Data etc. In this new chapter, Solcon Capital will be known as one of the leading global deep-tech investment companies,” Ngcaba said in a statement. Under the new brand, the firm will focus on international deep tech investments in generative AI and large language models (LLM), synthetic data and big data, cybersecurity, and quantum computing across South Africa, India, and Southeast Asia. Additionally, the rebranding also brought some executive changes, with Pramod Venkatesh assuming the position of CEO. Prior to joining Solcon Capital, Pramod was the Group CTO of inq., another Convergence Partners portfolio company. “We are excited to bring on board Pramod Venkatesh, with extensive experience in Silicon Valley and expertise in building deep tech companies. Pramod will execute Solcon Capital’s 2035 strategy. With Pramod at the helm, we will continue to disrupt deep tech and are excited to show what the future holds,” added Ngcaba. In January this year, Solcon Capital’s parent company Convergence Partners announced that it had closed its Convergence Partners Digital Infrastructure Fund (CPDIF) at $296 million, surpassing its initial target by over 18%. The Convergence Partners Digital Infrastructure Fund is the firm’s biggest fund to date and brings its total funds under management to over $600 million.
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CBN floats the Naira as banks offer $1 for N700
Days after President Tinubu spoke about the need to unify Nigeria’s exchange rate, Nigeria’s Central Bank appears to have instituted a managed float . In a move away from a fixed foreign exchange policy, Nigeria’s Central Bank has loosened control of rates in what appears to be a managed float. TechCabal confirmed from one of Nigeria’s leading banks that the USD is now exchanging for N699 (buy rate) and N700 (sell rate). For years, Nigeria maintained a tightly controlled official exchange rate as the country’s forex reserves hit new lows. While the CBN maintained an artificial rate of $1/N462, most people couldn’t get the greenback at those rates. To control demand, the CBN created a list of 43 items for which importers could not access FX at official rates. At some point, it also limited FX access for students traveling abroad access. Yet these workarounds didn’t solve the demand problem, forcing individuals and companies to head to the parallel market where prices rose to as much as $1/N755 this year. It created a massive arbitrage opportunity, with the World Bank advising the Central Bank to merge its exchange rate windows on several occasions. The Buhari administration boasted of improving the exchange rate prices before it was elected, and was reluctant to float the Naira. Instead, it blamed other players for the massive gap between official and black market rates. At its most ridiculous, CBN Governor Godwin Emefiele blamed the rate aggregation site, Aboki Fx and other black-market operators for causing volatility in the FX markets. But pressure continued to mount as airlines and multinationals demanded USD. In 2021, Unilever told Bloomberg that it was compelled to buy USD 9% above the CBN’s rate, and in March 2023, airlines said they had over $700 million trapped in Nigeria. For foreign investors, it meant that whatever profits they made in Nigeria were paper profits as they could not move their monies. It worsened uncertainty and contributed to dwindling foreign direct investments. Foreign investment in Nigeria reached new lows in Q2 2022. Read also: As LagRide drivers push for lower daily repayments, it’s time to ask if vehicle financing is right for Nigeria Will floating the Naira solve FX problems? While it is a step in the right direction, today’s float may not immediately produce any immediate relief. The backlog of FX demand is huge and it is unlikely that the banks will be able to meet it in the short-term. As the banks will be responsible for sourcing their own FX supply moving forward, it will eventually lead to a unification of the rates. In theory, the float should precipitate more supply, and in the interim, the CBN will likely intervene and still supply banks with FX whenever necessary. But one thing is clear, investors will appreciate the clarity and reality that comes with today’s managed float.
Read More10Alytics rewards winners with $1000 in data hackathon
Lagos: May 16, 2023 10Alytics has rewarded three winners with $1000 cash prize in the grand finale of its exclusive Data Analytics Hackathon hosted over the weekend. The Data Analytics Hackathon, which was exclusive to alumni and current students of the academy, was held virtually on Saturday and Sunday, May 13 and 14, respectively, and saw participants from different countries across the world. Founder of 10Alytics, Adeiza Suleman, introduced the judges to include Lead Data Scientist at Lloyds Banking Group, Michelle Conway; Smart Analytics Customer Engineer at Google, Sadeeq Akintola; Head of Data & Analytics at Wema Bank Nigeria, Olamide Jolaoso; and Data Scientist and Ethics Researcher, Sebastian Obeta. He noted that the registered participants were given 10 hours to work on a case study for submission, after which only 10 participants were shortlisted for the finale. Enumerating the rules of the competition, Adeiza stated that five judging criteria were adopted in picking the winners. He said participants were judged based on their understanding of the case study, eloquence, time management in presentations, ability to respond to questions with convictions, and quality of insights generated. Rita Ozoh came first with a score of 89%, followed by Muhammad Suleman in second place with a score of 84%, while Emmanuel Fagbenle and Olayinka Akerekan came third in a tie, scoring 83%. Co-founder of 10Alytics, Efemena Ikpro, while speaking at the event, explained that the hackathon is an international competition that sets a platform for participants to hone their skills. According to him, the main reason for the hackathon is to practically show people how data can be used to make decisions, in addition to helping participants build their confidence and assist them in the classroom-to-work transition. “10Alytics is growing as a business. We started with just our training arm, which primarily aims to help Africans and the black community to transition into tech. Now, we have a consulting arm where we work with businesses across the world,” Efemena stated. He added, “Myself and Adeiza, as co-founders, found it difficult to navigate our way through the world of data analytics when we first started. So, we felt a need to assist people, rather than allow them go through what we went through. “We have noticed a low supply of women in tech and feel the need to bridge that gap. That is why we are offering access to premium tech training to develop skills and make impact in various fields. Our training sessions last for three months, with one month internship upon completion.” In her remark, the top winner, Rita Ozoh, expressed gratitude to the organisers, saying, “I didn’t expect this. I did a night shift on Friday and I planned to participate; but when I joined, I realized that there were a lot of things that I needed to do and my eyes were really heavy. I was contemplating going to sleep and join next time. But I was able to battle it and I became more interested and wanted to finish it. “When the rules of the competition were being read out, it was as if my heart wanted to sink into my stomach. Usually, I invite my Mum for things like this, but I didn’t tell her in case something goes wrong. So, that shows I didn’t see this coming and I’m very happy and I appreciate 10Alytics for giving me this opportunity. I’m very grateful.” Similarly, the third-place winner, Olayinka Akerekan, revealed that being a practicing pharmacist, he was not expecting to get to the final stage. “I currently practice as a pharmacist in a hospital. Yesterday, when I received the data set, I was very sick and on medications; but I had resolved to be a part of the hackathon. As I was using drugs, I was writing my codes. I felt it was better to submit and not be selected, than to not make any effort. I’m better than I was yesterday; I didn’t expect to make it this far,” he said. The judges congratulated the winners and commended all the participants for their efforts. Sadeeq noted that though most of the participants were not in the best shape due to sickness or tiredness, he was impressed with the results and performance. Michelle added that the Lloyds Banking Group would be considering applicants from the hackathon to fill data-related roles, in line with the vision of 10Alytics to help people transition into tech roles. On his part, Olamide advised the contestants to leverage their participation in the hackathon to land tech roles, and not wait till when they get a formal job, while Sebastian appreciated 10Alytics for creating a platform for the participants, adding that he was excited to be a part of the program as one of the judges The Data Analytics hackathon, prior to this, has had three successive editions, with the first edition in October 2021, second edition in May 2022 and third edition in December 2022.
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Eyowo restores interbank transfers through partnership with Providus Bank
Eyowo has restored interbank transfers for its users through a partnership with Providus bank. The fintech has also expressed interest in partnering with more commercial banks but this questions its goal of financial inclusion. Three weeks after the digital bank Eyowo lost its microfinance bank (MFB) licence, it has restored interbank transfer on its platform through a partnership with Providus Bank. Due to the loss of its MFB licence, the startup now relies on Providus for banking services while it will continue to leverage its PSSP licence to process payment for its users. This development has redefined Eyowo’s vision for its future which may now entail partnering with more commercial banks like Providus, but that may weigh heavily on Eyowo’s goal of financial inclusion. Image source: TechCabal/Faith Omoniyi Eyowo users now have a Providus bank account in addition to their Eyowo bank account, and it is gunning to enable similar partnerships with other banks. In a tweet, the company said, “Our long-term vision is now to create a space where accounts from other banks can be connected, enabling a comprehensive financial life management within Eyowo.” Speaking to TechCabal, an Eyowo spokesperson said that even though it all started out with the loss of their MFB license, this development has caused them to accelerate their plans of making Eyowo a financial hub. “Having other banks plugged into our platform has been a part of our plan, as we want to help our users manage and grow their finances in one place. This way, Eyowo users can have access to analytics of their spending, and other information that can improve their finances and enable them grow,” he said on a call with TechCabal. Now you need a bank to use a digital bank Even though, thankfully, customers have regained access to their funds, this current partnership with Providus bank means that Eyowo customers must have a BVN. To have a BVN one needs to have already had an account in a traditional bank. Eyowo categorises its accounts into four tiers based on levels of customer identification (KYC). These tiers are referred to as Tier 0, Tier 1, Tier 2, and Tier 3. Currently, the company has connected all its Tier 2 and Tier 3 users to new Providus bank accounts, and it seems to be because these tiers meet the KYC requirements of traditional banks like Providus. Tier 1 customers currently can’t perform interbank transfers but according to the company’s tweet, they will be able to once they upgrade to tier 2 by verifying their ID with their biometric verification number (BVN). This is a contrast to weeks ago when with just a phone number, anyone could create an account on Eyowo to receive and transfer money to any other Nigerian bank. When the digital bank launched in 2019, former CEO, Tomi Amao, said the company was aiming to reduce the population of the unbanked in the country as Eyowo’s banking services is accessible via any smart or feature phones through a USSD code: *4255#. Months later, co-ceo Yomi Adedeji tweeted, “We have created a bank [Eyowo] on a phone number that enables everyone to access financial services irrespective of who they are and what they have.” But with these changes, people need to have a bank to use the digital bank. Eyowo understands what these changes mean to people who are unable to own accounts in traditional banks. Speaking to TechCabal, a spokesperson said, “Solving for the financially excluded is still a part of our plans at Eyowo. As time goes on we will extend the reach of our services beyond current obstacles to as many as we can. However, the circumstances require that we focus on serving as many customers who have trusted us now. Every other thing that they love about Eyowo still exists, and these new developments are actually progress for many of our customers. ” He told TechCabal that right now, Eyowo is focused on using its Payment and Switching Service Provider (PSSP) license to become a converging point for many commercial banks. “We are also going to quickly become a hub for our users to get real-time financial intelligence and insight as they transact so they make better financial choices,” he concluded.
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No dividends for Multichoice shareholders as company channels funds into Showmax
Multichoice continues to ramp up its bet on streaming platform Showmax, this time denying shareholders dividends to make further investments in the platform’s growth. According to its annual results for the year ended 31 March 2023, Multichoice is doubling down on its streaming bet, Showmax, with the company choosing to not issue shareholders dividends. Instead, it will continue investing in the streaming platform. “In view of the challenging South African market, the uncertain currency outlook, the funding needs of the Rest of Africa business and the investment required to drive Showmax to become the leading streaming platform on the continent, no dividend has been declared for FY23,” the company stated. In April, Multichoice announced a partnership with US media giant COMCAST, owners of NBCUniversal, and its UK counterpart SKY to create “Showmax 2.0” which would be a new platform powered by Peacock and 70% owned by Multichoice and 30% (stake sold for $30 million) owned by the aforementioned UK and US partners. On paper, leveraging Peacock’s “scalable and feature-rich technology”, Multichoice’s wide array of local content combined with global content from its partners, Showmax 2.0 would give top global streaming platforms on the continent like Netflix and Disney+, as well as African platforms like Wi-flix, a run for their money. The platform is slated to go live in the second half of the 2024 financial year. Multichoice’s roadmap for “Showmax 2.0” (Image source: Multichoice) If its results are anything to go by, it looks like Multichoice will be doubling down on that strategy. The company not only explicitly states that it wants to make Showmax the biggest streaming platform on the continent, it also adds more detailed forecasts, including $1 billion revenue in five years, trading profit breakeven by 2027, as well as a 25% EBITDA margin, and 20% free cash flow margins, both at scale. Additionally, Multichoice has also bumped up its growth expectations of the platform by a multiple of three by 2032 and content production by a multiple of 10 by 2033. To support those ambitions, Multichoice has been and will continue to funnel funds towards the Showmax moonshot project for the foreseeable future, a bet which has thus far had a significant impact on the company’s margins, which reduced by 7% this past financial year. “The impact of South African macro challenges, together with the group’s increased investment in Showmax, caused SA margins to contract to 24% from 31% in the prior year,” the company added. A worthy bet or a case of desperation? Multichoice still does not explicitly state the number of Showmax subscribers, a trend they have stuck to since the launch of the platform in 2015. Some experts suggest that this might be because of the platform’s meagre number of subscribers. But according to a metric they do share on their financials, which is the growth rate, the number of paying subscribers grew by 26%. The bet seems to be getting well received by shareholders, though, as evidenced by the marginal increase in the share price after the release of the annual results. The bump, which now means it is trading at 526 cents, takes Multichoice’s share price from the 495 trading price it struck in June, its lowest trading price since June 2020. Taking that marginal price movement into consideration, it appears that shareholders understand why they have to forego their dividends to support the platform’s growth. However, the share price is still down by 38% over the last four months, despite announcing two major products, Showmax 2.0 and Moment, the company’s fintech bet, in that time period. That trend should perhaps have the company executives a bit concerned. An amalgamation of factors, including core offering DStv’s decline, which lost over 100,000 subscribers between January 1st and March 31st, lack of shareholder excitement over new opex-heavy products, as well as tough macroeconomic conditions fuelled by inflation and load shedding in the company’s core market, South Africa, might prove to be enough to induce an existential crisis for the company. The remedy to the crisis, perhaps, might be the company finally giving in to the flirtations by French media giant Canal+ which has been steadily acquiring Multichoice’s ordinary shares over the past year. In February this year, the company had hitherto acquired a 30% stake in the South African-based company, 5% away from the 35% stake which would require Canal+ to make a mandatory offer for Multichoice. On its financial results booklet, Multichoice mentions DStv, its core product, only seven times, compared to the twenty times it mentions Showmax, perhaps pointing to how much the company is betting on the success of the platform as the last straw to keep the company from going under.
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👨🏿🚀TechCabal Daily – MultiChoice records 200% profit plunge
In partnership with Share this newsletter: Lire en Français اقرأ هذا باللغة العربية Good morning ICYMI, we relaunched our referral programme yesterday! Now, we can bribe reward you for saying nice stuff about us to your network. Plus, all sign-ups now have a double-opt-in feature. So if you’re referring someone to TC Daily, please ask them to check their inbox and confirm their email addresses so the referral can count! In today’s edition MultiChoice blames 200% profit plunge on loadshedding Kenya’s content creator tax has been slashed Telkom reports 76.6% plunge in profits Uber increases base fares in Nigeria Equiano is active in Namibia The World Wide Web3 Event: The Moonshot Conference Opportunities Streaming MultiChoice blames 200% profit plunge on loadshedding According to Multichoice Group’s annual financial results for the year, the company’s profits declined by over 200%, going from a R2.8 billion ($150 million) profit in the last financial year to a R2.9 billion($155 million) loss. Apart from the weak rand, the company also blamed the country’s intermittent power cuts, also known as loadshedding, as the leading cause for the turnaround. Image source: MultiChoice Is loadshedding to blame? MultiChoice stated that there was a noticeable increase in churn when loadshedding reached stage 4 and above, even when consumers had disposable income. “This is evidenced by the disconnect between the 290,000 growth in 90-day subscribers (that shows customers still value the group’s products) and the 140,000 decline in the active subscriber base at the end of March (customers are more selective when they sign up to avoid periods of excessive load-shedding),” the company said. There. However, could be other reasons why MultiChoice is losing subscribers. With the influx of streaming services like Netflix and Disney+ on the continent, MultiChoice has lost customers. In 2021, it warned that Netflix could kill DStv’s relevance. Zoom out: Loadshedding has become the constant reason for dire financial performances among South African companies. Telkom, which recorded a 76% plunge in profits for the year ended 31 March 2023, also pointed the finger at loadshedding. Moniepoint ranked 2nd fastest-growing African company Moniepoint is Africa’s second-fastest growing company, as shown in FTs latest report. We also processed 1 billion transactions worth $43 billion in Q1 alone. Read all about it here. Legislation Ruto reduces proposed content creator tax Content creators in Kenya can now breathe. A week after President William Ruto ordered review of Kenya’s proposed content creator tax, the tax has now been reduced to 5%. Per TechTrendsKe, this reduction comes hot on the heels of local bloggers, YouTubers, influencers and other content creators protesting against the tax. Kenyan president William Ruto What bill? A bill was newly proposed to extend taxation to the several ways digital content creators are now earning money. This includes payment gained from advertisements on websites, social media platforms, brand sponsorships, affiliate marketing, and even subscription fees which audiences pay to access content or programs. The Kenya Revenue Authority (KRA) even formed a special unit that will oversee tax collection from digital companies. However, local content creators said the tax was utterly unfair and amounted to a side-splitting case of double taxation. Days after the tax was announced, president Ruto said the bill should be reviewed so that the increased tax doesn’t become a burden that inhibits the digital economy which the country is trying to build. Telecoms Telkom reports 76.6% decline in profits Image source: Telkom Yesterday, Telkom’s annual results showed that the company is experiencing a decline in profit by 76.6% from 575.3 cents to 134.6 cents—in headline earnings per share (HEPS). The company also calculated the headline earnings per share without considering the effect of the restructuring cost of R1,065 million ($74 million) and the tax impact of R288 million ($20 million) on the profit after tax. What is HEPS? It is a financial metric used to measure a company’s profitability and performance. It represents the portion of a company’s net income or profit that is allocated to each outstanding share of its common stock. It is known as a main profit measure in South Africa. Why the decline? According to Telkom, the significant dip in profitability is attributed to a challenging operating environment caused by inflationary pressures and ongoing power issues in South Africa. Zoom out: Eskom, South Africa’s electricity utility, is currently implementing the most severe rolling blackouts, also known as loadshedding. This has resulted in households experiencing extended periods of up to 10 hours per day without electricity, causing disruptions to manufacturing processes and negatively impacting businesses. Experience Viva Technology Tune in to Europe’s biggest Startup and Business event here. Mobility Uber increases base fares in Nigeria Yesterday, TechCabal exclusively reported that Uber, a ride-hailing company, increased its base fare from ₦850 ($1.84) to ₦1200 ($2.62) in Nigeria. The new price adjustment also means customers will now pay ₦25 ($0.054) per minute. Uber’s Country Manager for Nigeria, Tope Akinwumi, told TechCabal in an email that the increase in fare price is due to the current fuel subsidy removal. Image source: Uber ”Following an in-depth review of the current fuel subsidy removal, Uber updated fares on the 3rd and 9th June on the app to reflect existing economic conditions. We believe these changes have helped better support drivers in increasing their earning opportunities. Furthermore, we lowered the service fee in February 2022 from 25% to 20% to help enable better-earning opportunities for drivers,” Akinwumi said. ICYMI: Base fares have been a source of disagreement between drivers and ride-hailing companies in Nigeria in the past week. Last week, the drivers embarked on a nationwide strike that lasted up until Monday, June 12. Zoom out: Although drivers and ride-hailing unions are dissatisfied with these new prices as they say it still does not cover their costs due to the recent hike in fuel prices, the union is also seeking a 50% decrease in commission and an end to the deactivation of drivers who refuse to work due to the low fares and attendant unprofitability. Internet Equaino cable
Read MoreKenya’s ICT regulator lifts the lid on 5G spectrum license fees
Kenya’s 5G network is led by Safaricom. However, the Communications Authority of Kenya, has not been forthcoming about 5G license fees, but there is a reason for that. While Western countries are leading in the adoption of 5G coverage, several African countries have been catching up with the 4G successor. Kenya, Mauritius, Madagascar, Nigeria, Seychelles, South Africa, and many others are among these African countries. In Kenya, for instance, the rollout is spearheaded by Safaricom, which launched in October 2022. However, several questions have been asked about 5G, such as its benefits to the ordinary person and how much the telco paid for a 5G licence from the country’s regulator, the Communications Authority of Kenya (CA). In a media workshop held by the regulator last week, TechCabal sought to understand why the 5G license cost hasn’t been revealed. For context, operators paid KES 2.5 billion ($18 million) for the 4G license, which was acquired first by Safaricom back in 2014. Telkom Kenya acquired it in 2017 and later by Airtel Kenya and Faiba in 2018 and 2019, respectively. According to CA, there are plans to announce the cost of the 5G spectrum license, but that will be done when more Kenyans would be able use the technology gainfully. For now, issues such as access to 5G devices, and their high cost, are barring Kenyans from testing the service. Availability is also limited to select towns and cities in the country. Unlike other spectrums with dedicated bands, the 5G spectrum is sourced from other bands, allowing for higher penetration and compression rates. It offers increased bandwidth capacity, enabling the transmission of large amounts of data quickly and efficiently. However, implementing 5G is challenging as it requires specific access gadgets and transmitters designed for 5G technology. “Other spectrums have a dedicated band. However, the 5G spectrum is sourced from other bands or concentrated bands, allowing for intensive utilization and higher penetration or compression rates,” said Derrick Simiyu, telecom compliance manager at CA, in a statement to TechCabal. “It aims to provide high bandwidth capacity, enabling the transmission of large amounts of data quickly and with clarity. Previously, heavy files that took too much time to transmit on other technologies can now be delivered without limits on 5G due to its heavy compression levels.” Different countries propose various bands for 5G deployment, but the frequency application distinguishes it as the fifth generation. The regulator adds that while initially expensive, as more users adopt 5G, economies of scale are expected to reduce pricing. Currently, 5G pricing in Kenya is based on deployment and charged per link. If the operator chooses to install 5G services in a given area, it will pay the fees for that specific area. However, standardised licenses will be introduced in the future, allowing operators to access 5G at a set fee. CA says it will let Safaricom run the service for a while and plans to announce the license fee in about two years. “5G pricing, for now, is link by link. The amount of deployment is what is charged. At the moment, we have come up with a trial period. In the future, say after Safaricom runs 5G for two years, we will now come up with a standard license, and every other operator will access it at that fee,” Simiyu concluded.
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As LagRide drivers push for lower daily repayments, it’s time to ask if vehicle financing is right for Nigeria
Drivers on the ride-hailing app, LagRide, say the recent rise in weekly repayments makes their lives difficult. Their complaints will raise questions about the suitability of vehicle financing in Nigeria After the car he had used to drive for Bolt for two years broke down, *Akinwunmi moved to LagRide, a government-backed ride-hailing service. LagRide uses a “lease-to-own” model, making it different from Bolt and Uber, which need drivers to have or own their cars. The lease means that LagRide drivers own the vehicle after a ₦700,000 downpayment and subsequent weekly payments. LagRide offers two cars: a GAC mini SUV and a saloon car, and drivers pay ₦10 million over four years to own the cars fully. Unable to afford the downpayment, Akinwunmi took a ‘partner-proxy’ offer, a hire purchase arrangement between partners who make down payments for the LagRide vehicle and lease it out to drivers. The proxy, a.k.a the driver, makes repayments on the car while still paying a commission to the partner. The ownership of the car passes on to the driver after four years. One year into this arrangement, Akinwunmi’s partner abruptly ended their partnership. He told TechCabal, “My partner reneged on our deal, saying that he has spent a lot on the vehicle and would like to claim the vehicle.” It left Akinwunmi without a source of income. *John, another LagRide driver, confirmed that partners often renege on agreements. “Partners don’t follow their word on their agreement; they do this because the vehicle is new and is not available in the market at the same price LagRide is offering it.” LagRide offers its GAC vehicles (a sedan or a mini SUV) for ₦10 million, cheaper than the market price of ₦12-14 million. Tumi Adeyemi, the head of the solutions for LagRide, told TechCabal that because LagRide is not a party to any contracts between partners and proxies, there’s little the company can do. “Whoever LagRide enters an agreement with is the person who gets the car at the end of the four years, and there is a contract to back it up. Most complaints are about contracts LagosRide was not a party to.” However, partners reneging on agreements with proxies is not the only challenge LagRide drivers face. Several drivers told TechCabal about the financial strain and the high costs associated with asset financing. Asset financing model comes under question The asset financing model for ride-hailing has come under scrutiny lately. TechCabal reported in February that drivers who used Moove’s asset financing offering to buy vehicles to drive for Uber protested about the steep repayments. Rest of World also reported that drivers who defaulted on weekly payments had their cars seized. As with most asset financing models, LagRide vehicles remain the service provider’s property until the driver completes payment. Drivers now pay ₦9000 (up from ₦6500) daily for four years to claim vehicle ownership. It’s similar to the price increase Moove instituted in January. A TechCabal report showed that drivers had to complete 12 rides daily for six days a week and remit $20 (₦9,400) every day to Moove while still having to pay a commission to Uber. Eventually, Moove reversed the price increase. LagRide drivers are hoping for a similar outcome. Stephen Mark, a LagRide driver in Ifako Ijaiye, told TechCabal, “It is not convenient, and we have challenges in driving, and when we lodge our complaints, all they care about is making money. Now, the petrol issue is there. There is no empowerment; they are exploiting us.” LagRide’s head of solutions, Adeyemi, disagrees with the drivers. “There is no basis for reducing daily repayments because the pricing model was designed to ensure drivers make about ₦10k daily net, approximately ₦280k monthly, and they are making more than this; we have the records.” A screenshot of the breakdown of a driver’s earnings on the LagRide app. Drivers consider workarounds Some drivers say that their repayments would be easier if they could take interstate trips. “We can’t go offline or work interstate. Abeokuta here, you can’t go; how do you make your money?” says Goddey Christopher. It’s not something LagRide will consider, given the risks involved. Yet, pricing is at the heart of the back and forths between drivers and LagRide. Drivers complain that low fare prices on the app do not match the present realities of fuel hikes. Bolt and Uber recently adjusted their base fares to ₦700 and ₦850, respectively. LagRide maintains a ₦350 base fare, up from ₦300. Adeyemi told TechCabal that LagRide increased fares to match the effect of the fuel hike, but this decision led to a drop in ride demand. “This is because the price points are no longer as affordable,” he said. Several drivers we spoke to claim that LagRide’s 20% commission rate is unbearable and also complained of reduced patronage in select areas of Lagos. “There are some places in Ikorodu that LagRide doesn’t reach—because no one orders you when you are returning. People don’t like going to Ikorodu because you would not see riders coming back,” Christopher shared. As drivers continue to insist that these vehicle financing deals are exploitative, there are still broader questions about the sustainability of driving for these companies as a way to make a living.
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