Food delivery apps are saving $100,000 yearly by choosing cheap communication apps
Margins are slim in the food delivery business. Whether it’s a cloud kitchen like Food Court, a restaurant aggregator platform like Chowdeck, or a restaurant that handles its delivery, getting food to customers is pricey. To build sustainable businesses, food delivery apps expand revenue streams and keep operational costs low. Startups like Chowdeck, Glovo, and HeyFood have expanded beyond restaurants to onboard malls and local markets. Beyond growing revenue, these companies keep an eye out for cost-saving opportunities. In 2023, one food delivery platform saved over ₦40 million monthly in operational expenses by moving its drivers off the work messaging app Slack. Over 1,000 of the company’s drivers communicated with supervisors on Slack. They’re not copycats, they’re smart iterators While it’s unclear exactly how much the company paid, the cheapest plan on Slack costs $8.75 per user monthly. If the startup used the Pro plan, back-of-the-napkin math suggests a monthly fee of $11,000 and $136,500 annually for the 1,300 drivers it had at the time. “We were adding new drivers by the day,” a rider supervisor at the startup told TechCabal. “I think that is why we moved the drivers off Slack.” Their current rider count nearly tripled, and communication costs on the same plan would have hit over $26,000 monthly and about $315,000 annually. This is a nightmare for a venture-backed startup earning naira revenue. The company eventually moved to Zoho Cliq in mid-2023, one person familiar with the matter said. Zoho Cliq bills ₦864 per user, translating to a monthly cost of ₦1.1 million and ₦13.4 million annually for 1,300 drivers. The change has gone unnoticed among drivers who use the apps to communicate with supervisors. “Now, only rider supervisors are on Slack,” the supervisor said. “[On Zoho] we have channels based on regions, and it works well for communication,” said one delivery rider in the Gbagada area. His channel on Zoho Cliq has about 200 other riders. Riders also use WhatsApp to communicate when app responses are delayed, share problems encountered during delivery, make leave requests, etc. These WhatsApp groups are according to zonal operations, just like their channels on Zoho Cliq. Despite these operational adjustments, the food delivery startup’s driver communication spending dwarfs that of its competitors. For instance, another competitor’s over 2,000 delivery drivers use the free social platform Telegram for communication in addition to the customer support messaging on the delivery app. “If we need to voice personal concerns related to work, we can also speak to our supervisors in person,” Emmanuel, the rider, told TechCabal. Although relatively expensive compared to competing startups, the company boasts that each delivery is profitable. “We are not the cheapest food delivery service, but we are the most efficient,” an executive at the company once boasted.
Read MoreSeychelles, South Africa rule Africa’s blockchain roost with 95% of funding
Seychelles and South Africa accounted for 95% of venture funding in the blockchain industry in Africa in 2023, suggesting that both countries have emerged as hubs for blockchain innovation and investment on the continent. Only five African countries contributed to the total $135 million in funding. Seychelles blockchain startups raised $100 million from six deals while South African startups raised $29 million from 4 deals, according to the CV VC Africa Blockchain report. Seychelles has led blockchain funding in Africa for six consecutive years. “South Africa and Seychelles are two of the six markets where crypto is legal in Africa and regulatory assuredness is important for investment in [blockchain startups],” Brenton Naicker, principal and head of growth of CV VC told TechCabal. Despite the easing of crypto regulations across the continent, crypto is still banned in 12 countries, and 36 more countries have “uncertain” regulatory frameworks, per the CV VC report. Seychelles startups that raised funding in 2023 include Beldex, which raised $28 million, crypto exchange Bitget, which raised $10 million, and Scroll, which raised $83 million. In South Africa, Momint raised $2.7 million, while NFTfi secured $18 million. Despite the dominance of Seychelles and South Africa, other markets, including Nigeria, are on the rise. In H1 2024, Nigerian startups raised $13 million in funding from five deals, accounting for 38% of total funding by African startups. Some funded Nigerian blockchain startups include fiat-to-crypto exchange Zap Africa and real estate tokenisation startup Seso Global which have raised $300,000 and $720,000, respectively.
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Next Wave: AI is not a product
Cet article est aussi disponible en français <!– In partnership with –> <!–TopBanner Join us for TechCabal Battlefield, Moonshot’s startup competition where you can showcase your startup idea to a global audience and an esteemed panel of judges and stand a chance to win up to 2.5 million naira in funding for your business! Click to register for TC Battlefield First Published 14 July, 2024 Artificial intelligence (AI) has captured investors’ imaginations, with funding for generative AI skyrocketing 260% in 2023. Some of these investments are directed towards building or funding “artificial intelligence startups”, an approach that is problematic because it promotes the idea that AI is a standalone product. The investment opportunity in AI—projected to reach $200 billion for AI servers by 2025—indicates a significant shift towards embedding AI into products, rather than developing AI as an isolated product. Critics insist that AI does not offer any special solution to any problem. What, they wonder, is the marked difference between Gemini, ChatGPT or Meta AI, for instance? This article summarises it well: “Unlike previous waves of technology, such as the Internet, which had an immediate and obvious impact on the economy, AI does not actually allow anyone to do things that were not before possible.” Our current AI excitement phase can be likened to the dot-com bubble decades ago, when investors backed internet startups during a period of low-interest rates. When the rates spiked, several of those companies shut down after operating with unsustainable economics. The successes of ChatGPT has generated profound influence not only on tech sectors but in the evolution of AI technology. Many investors, not wanting to miss out, have rushed to fund AI projects. This path will course-correct very soon when investors start withdrawing investments after realities of profitability become clearer. The AI bubble has been foreshadowed to burst before 2026. Partner Content: Read: Kotani Pay obtains a CASP licence in South Africa here. Sam Altman, CEO of OpenAI, owner of ChatGPT, has made remarks setting realistic expectations of the abilities of ChatGPT, describing GPT-4 as “sort of like a brainstorming partner”. A brainstorming partner is getting Google Docs or Grammarly to suggest apt phrases for you. The best use case for this partner is as a feature, add-on or plug-in. All familiar things to us. Till date, several screaming headlines have touted AI as the harbinger of mass unemployment, echoing anxieties that this “new” technology will render human jobs obsolete. A McKinsey report acknowledges this fact. However, AI is unlikely to trigger mass unemployment; product development and service operations are the primary job functions to be affected by AI. The aforementioned McKinsey report also states that several businesses are adopting AI only in one aspect of their operations, not every part. Manufacturing industries like aerospace, automotives, and advanced electronics, are expected to see less disruption. In essence, not everyone’s jobs are at risk. Next Wave continues after this ad. GrowthCon is back bigger & better! Come explore proven strategies, tactics & success stories of growth & innovation in Africa via curated masterclasses, workshops & case studies led by top growth leaders. This year also includes the Executive Track, exclusive to business leaders & senior execs. Get your tickets now! The future can be better when AI streamlines tedious tasks in productivity suites, personalises healthcare recommendations, or even enhances customer service interactions. While these advancements will not dramatically alter daily living, they will at least give it a facelift. Partner Content: Read: Payaza rebrands with a new logo and renewed vision here. Joseph Olaoluwa, Senior Reporter, TechCabal. Feel free to email joseph.olaoluwa[at]bigcabal.com, with your thoughts about this edition of NextWave. Or just click reply to share your thoughts and feedback. We’d love to hear from you Psst! Down here! Thanks for reading today’s Next Wave. Please share. Or subscribe if someone shared it to you here for free to get fresh perspectives on the progress of digital innovation in Africa every Sunday. As always feel free to email a reply or response to this essay. I enjoy reading those emails a lot. TC Daily newsletter is out daily (Mon – Fri) brief of all the technology and business stories you need to know. Get it in your inbox each weekday at 7 AM (WAT). Follow TechCabal on Twitter, Instagram, Facebook, and LinkedIn to stay engaged in our real-time conversations on tech and innovation in Africa. If you liked this edition of Next Wave, please share with your friends. And feel free to reply with thoughts and feedback. We welcome those. 18, Nnobi Street, Surulere, Lagos, Nigeria View in Map You received this email because you signed up on our website or made purchase from us.If you know longer wish to recieve these emails, please unsubscribe
Read MoreThey’re not copycats, they’re smart iterators
This article was contributed to TechCabal by Timothy Motte, through The Realistic Optimist, a paid newsletter covering the globalised startup scene. An ode to simplicity Paul Graham, Y-Combinator’s founder, excels at simplicity. His essays are crisp, his sentences are short and his ideas are clear. A visit to YC’s FAQ page shows that his ethos irrigated the institution he created. Answers are crisp, sentences are short and ideas are clear. Despite the diversity of startups it deals with, YC seems obsessed with simplifying how it accompanies them. Consider this elegant business model categorisation. Distilling complex ideas to the bare minimum is an underrated skill. In many cases, simplification rectifies unnecessary complexity (think financial jargon for simple concepts). In other cases, simplification spots what matters in a sea of mostly irrelevant information. Both paths achieve the same thing: the ability to clearly see what others can only slightly perceive. Seeing stuff clearly is essential to moving in the right direction and avoiding obstacles. It is the difference between crossing the street and getting hit by a car. Simplifying the global startup scene In the past decade, tech startups have sprouted around the world. At first glance, this trend seems awfully difficult to apprehend. Startups in Sudan, Estonia, or Brazil can’t even be compared, right? Surely, political, social, economic, and cultural differences between countries demand a bespoke approach to startup building. That supposed complexity hasn’t really materialised. The tech startup phenomenon has globalised with mundane predictability. Successful startups around the world strongly resemble each other. Shrewd investors are able to predict what startup will function in Geography A by looking at what has worked in Geography B. This isn’t surprising and boils down to a single fact: people’s needs are the same, regardless of where they live. So, logically, the services they need will be the same. It’s actually quite simple. Smart iterators Many successful startups in non-Western markets have embraced that concept. Copy what works abroad and tweak it to local market specificities. Until all successful Western startups have an equivalent in emerging markets (EMs), there’s space for that approach to work. Careem is a great example. Careem essentially started out as the “Uber for the Middle East.” That is, it took a concept that has met clear customer demand in the West and adapting it locally. The macro approach was devilishly simple (copy-paste Uber’s ride-hailing app concept), enabling mental energy to be spent on localising the details. Careem facilitated cash payments for rides, cognisant that the region’s cash usage was high. It adapted its product to local gender dynamics recognising that, for example, Saudi women being barred from driving meant they would make great customers (Saudi women have since gained the right to drive). Careem built an in-house mapping system since the available ones were subpar. That made it hard for the Western competitor, Uber in this case, to compete. They lacked the cultural comprehension Careem had, despite having come up with the original idea. In 2019, Uber acquired Careem for $3.1B. Many if not all of the Middle East’s successful startup exits have followed that model. Souq (an e-commerce marketplace) was acquired by Amason. Maktoub (an email provider) was acquired by Yahoo. Anghami (a music streaming app) IPO’d on the NASDAQ after a rumoured acquisition offer by Spotify. Tech startups’ globalisation follows simple patterns. In the vast majority of cases, startups in young ecosystems can succeed by replicating what has worked abroad and tweaking the details to fit local conditions. Let’s call them “smart iterators”. These smart iterators can, in turn, be copied. Take Fawry, an Egyptian unicorn building (among other things) payment rails for unbanked people. This inspired Cashi to build something very similar in neighbouring Sudan. This is normal and smart. Fawry even invested in Cashi. In the simplest of terms: successful tech startups around the world are locally-relevant replicas of what works elsewhere. There is rarely a need to reinvent the wheel. It’s the same for ecosystems Startup ecosystems follow the same logic. They all have the same goal: to create tech companies that dust off rusty industries, foster new ones, and create high-quality jobs. In that quest, all ecosystems need the same ingredients: adapted legislation, enthusiastic investors, and local talent. Whether in Argentina, Indonesia, or Poland, the equation is the same. Once again, getting these ingredients right is a matter of seeing how others did it. The problem ecosystem A is facing has likely been faced (and solved) by ecosystem B. You might as well copy-paste what ecosystem B did, and refine the details to local conditions. The American model used to be the only available proxy, which was helpful in some aspects but not in others. For one, the American ecosystem has never dealt with the “brain drain” issue plaguing many EM ecosystems. The startup scene’s globalisation has increased the number of proxies young ecosystems can seek inspiration from. Ecosystem builders can now choose which national ecosystem they feel legislatively or economically close to and gain contextually relevant ideas. For example, Senegal’s “La DER” was likely inspired by France’s “Bpi”: an umbrella organisation lobbying for, federating and financing the local startup ecosystem. Senegal has an easier time relating to the French way of doing things than the American one, owing to colonial era-induced legal similarities. Another example. In fostering an angel investor community, Jamaica will gain more inspiration from North Macedonia than from how America did it decades ago. Despite geographical separation, both Jamaican and North Macedonian startups operate in a similar context: small country, severe brain drain and an economy dominated by “old” money. The solutions North Macedonia is coming up with, which themselves may be inspired by another ecosystem such as Estonia, can be hyper-relevant to Jamaica. A final example: Saudi Arabia is looking to turn its small-cap stock market, Nomu, into a hub for local startups to list. While doing so, Saudi might heed warnings from the Japanese ecosystem. Japan made a similar move about two decades ago with its “Mothers”
Read MoreWant your rice with a side of ads? Chowdeck is working on an ad product
For the rollout of Ayra Starr’s album ‘The Year I Turned 21,’ her record label Mavin made an unusual marketing choice: adverts on the food delivery app Chowdeck. “[Mavin] was looking to raise as much awareness for the album as possible,” one person close to the label told TechCabal. “A lot of young people will spend the last of their funds to buy food online and Chowdeck is the most popular [destination.]” anyone ever seen something like this? all my friend wanted to do is order his food ffs and he’s looking at Ayra Starr. pic.twitter.com/ABJxEhfsOF — benny. (@benny7gg) May 31, 2024 Fintechs like Yellow Card and Cenoa have also advertised on Chowdeck, showing that food delivery apps, whose users are typically young and tech-savvy, offer high-quality leads for advertisers. One fintech executive who has previously advertised on the platform described Chowdeck’s users as a “premium target audience.” Feedback like that is driving the development of a “proper ad product,” said one person familiar with the matter. The conversation around a core ad product is still in the early stages, and until then, sales staff are expected to continue pitching the existing ad offering to clients. Chowdeck declined to comment on inquiries about it. In 2022, Chowdeck charged ₦4 million to send push notifications (PN) to its 200,000 users, according to a rate card seen by TechCabal. Having grown its monthly users, those rates have likely increased. Other advertisement options include SMS, in-app banners, blog content, social media posts, and offline marketing such as branded rider t-shirts. “[Adverts on food delivery platforms] work in the same way as advertising with media companies that produce content,” Bolaji Anifowese, Head of partner marketing at Distrobird, a sales automation startup, told TechCabal. The true cost of convenience: Why you pay more when you order food online Like media platforms, the apps take advantage of every surface on their app or web platform to grab the users’ attention. The only difference is food delivery apps immediately have the attention of users looking to spend money. It’s the competitive edge that food delivery apps have over other media advertisers. For years, e-commerce platforms offered in-app advertisements to make extra revenue with comparatively little operating cost. Jumia, which previously boasted of quadrupling the sales of global consumer brand Reckitt Benckiser, on its platform, in one year, charges ₦15,000 for 37,500 impressions on 10 sponsored products. These ad placements have been limited to sellers and brands on the platform—restaurants and malls in the case of food delivery apps like Chowdeck. In emerging markets like Indonesia, leading food delivery platforms like Grab and GoFood hosted in the super app Gojek, offer ad placements. In more mature markets, food delivery platforms have reported that their ad revenues contribute significantly to revenue. If Nigerian food delivery startups ramp up their in-app advertising to get a slice of the in-app advertising market projected to grow to $144.2 million in 2028, there is a risk of bombarding and consequently irritating those who simply want to buy food. “The balance may be in ensuring that [Chowdeck] does not place the ad in ways that seem intrusive for the users,” Anifowese told TechCabal. Well, only a few people would mind eating their amala or rice with a handful of ads if the adverts come with discount codes, as some already do, that make the food cheaper. *Additional reporting by Emmanuel Nwosu.
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Running out of steam? Kenya protests are off to a slow start in fourth week
In its fourth week, Kenya protests started slowly but could pick up steam later today. For now, Ruto will count it as a win. On Tuesday morning, Kangemi, a Nairobi suburb did not look like the epicentre of a crucial protest. While it has hosted thousands of protesters in the past three weeks, only a few hundred protesters were in Nairobi’s chilly streets on Tuesday morning, suggesting public anger may have subsided. In Nairobi, traffic interruption is minimal, and no major roads have been blocked. The situation is similar in other cities and towns like Nakuru and Machakos. Muted protests are also ongoing in Mlolongo and Kitengela, towns on the outskirts of Nairobi. It will count as divine intervention for President William Ruto, who asked for prayers on Sunday as public support for his government reached critical lows. He has made concessions to pacify Kenyans, withdrawing the controversial tax bill, slashing the budget, and firing his cabinet. He will hope the slow start to today’s protest is a sign that the worst is over. On Monday, Ruto claimed the Ford Foundation, an international non-governmental organisation, is sponsoring the protests. “We ask the Ford Foundation to explain to Kenyans its role in the recent protests,” Ruto wrote on X on Monday “We will call out all those who are bent on rolling back our hard-won democracy.” The Ford Foundation denied the allegations and said it did not “fund or sponsor the recent protests against the finance bill and have a strictly non-partisan policy for all of our grantmaking.” The squabble with the Ford Foundation is something Ruto can afford after enduring three weeks that have turned him from media darling to persona non grata. He’ll need more prayers in the coming weeks even if these protests die out because Kenya’s debt crisis still needs a miracle. Have you got your early-bird tickets to the Moonshot Conference? Click this link to grab ’em and check out our fast-growing list of speakers coming to the conference!
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👨🏿🚀TechCabal Daily – Uncovering South Africa’s finfluencers
In partnership with Share this newsletter: Lire en Français اقرأ هذا باللغة العربية Good morning Heads up, Kenya, you may find it impossible to get rides using any of the ride-hailing services like Bolt or Uber. Ride-hailing drivers are on a five-day strike to demand fair pay, and the removal of value-added taxes. This isn’t the first time drivers have driven off the job. Frustrations have been boiling for years. Drivers in Kenya have gone on strike at least once a year since 2016, citing the same demands. These demands have almost always been denied because Bolt and Uber consider them self-employed, not regular employees. One solace came last year when the Kenyan transport authority ordered all ride-hailing services to reduce commission fees to 18%—with Bolt previously charging 20%, and Uber 25%. Will the government step in this time? More in our coverage here. In today’s edition IHS Towers market value dips by $6 billion South Africa to monitor financial social media influencers Skincare marketplace Uncover raises $1.4 million HostAfrica acquires Kenya’s deepAfrica The World Wide Web3 Opportunities Markets IHS Towers market value dips by $6 billion After the fanfare of a company’s public listing event, the lonely work begins. Becoming a public company means more scrutiny and the pressure to deliver impressive quarterly results or risk backlash from impatient shareholders. Publicly listed African companies are familiar with this dance. Jumia and Swvl have had their stumbles and IHS, which was listed on the New York Stock Exchange in 2021 for an opening price of $21, has seen the impatient side of investors in the last three years. Lately, The tower company once valued at $7 billion is now worth $992.5 million. IHS which has 40,000 towers across 10 countries has taken a beating in its biggest market Nigeria. The West African giant’s inflation is at an 18-year high, and a decision to float the naira in 2023 has not brought the price stability policymakers hoped for. According to its financials, IHS recorded loses of $1.9 billion in 2023 alone up from $470 million the previous year. These losses have mounted as alternative electricity sources needed to keep its base stations running in the country have become expensive. The retail price of diesel in Nigeria rose from ₦840.81 per litre in March 2023 to ₦1,341.16 per litre in March 2024. While IHS hopes to turn its fortune around, one company might be able to inspire it to find its footing again. Jumia which initially launched an initial public offering in 2019 at $14.50 a share saw its shares fall to about $3.36 last year. However, the company stock is up 150% this year alone, trading at $13.37 on Monday. Read Moniepoint’s 2024 Informal Economy Report 90% of businesses in Nigeria’s informal economy earn less than N500,000 in monthly profit. Click here to explore the financial profile of Nigeria’s informal economy from Moniepoint’s latest report. Creator Economy South Africa to monitor financial social media influencers Hiring a financial adviser is expensive, so most people settle for the next best thing: finfluencers. Finfluencers (financial influencers) are free, helpful and well, you can listen to them while you do the dishes. There’s just one problem: not all of them are licenced to give financial advice. So South Africa’s financial institutions market regulator, Financial Sector Conduct Authority (FSCA), wants everyone to be careful when taking financial advice from finfluencers. While finfluencers have undoubtedly played a role in boosting financial literacy and market participation—with nearly half of South African households now investing—the FSCA is concerned about the potential for misleading information and harmful investment advice. The play isn’t always profitable: Some finfluencers may prioritise personal gain over the best interests of their followers. This is particularly worrying given the high prevalence of investment scams in South Africa, with nearly seven in ten people either falling victim or narrowly escaping them. And almost half of that number (Gen Zs) take financial advice from these finfluencers. In Nigeria, this has played out many times, with celebrities endorsing fraudulent investments, especially pyramid schemes. One example is Davido’s Racksterli which garnered over 400,000 investors before it crashed in 2021. Enter Big Brother, the FSCA: To address these concerns, the FSCA is stepping up its oversight on finfluencers. By monitoring the content and investment recommendations made by these influential figures on social media, the regulator aims to protect consumers and maintain market integrity. While the FSCA recommends hiring a financial adviser instead to take you through your finances, it is understandable that only a few South Africans can foot the R2,000 ($110) monthly bill for this. Therefore, you should approach financial advice from finfluencers with caution. While they can be a valuable resource, conducting thorough research and considering multiple perspectives before making any financial decisions is crucial. Join Fincra at API Conference on July 20, 2024 Calling all devs!! This is your chance to dive deep into Fincra’s extensive suite of payment APIs and accompanying SDKs. Come and see how you can build your next big idea with easy-to-integrate APIs. Reserve your spot here! Funding Skincare marketplace Uncover raises $1.4 million COVID-19 didn’t just change the way we worked, it also changed the way we approached skin care. As people spend more time at home, skincare routines have become a norm, leading to increased purchases of skincare and beauty products. While women are major users of skincare products, African women often complain of not finding products that suit their skin. Enter Uncover, a Kenyan beauty and skincare company which specialises in formulating tailor-made skincare products for Africans. The startup uses data from users on its app to create personalised skin care products by partnering with top labs across the world. “The industry has represented only a few skin tones in testing and we are one of the first brands testing on women in Africa. What’s exciting is that we are starting in Africa but seeing global demand and opportunity for our solution,” Sneha Mehta, CEO of Uncover tells us. The
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Kenya ride-hailing strike: drivers demand fair pay, pricing power
Ride-hailing drivers in Kenya began a five-day strike on Monday to demand fair pay and the removal of value-added taxes; they marched to the National Transport and Safety Authority (NTSA) office at the end of day one. The strike comes ten months after the Transport Ministry compelled Bolt and Uber to reduce their commission to 18%. The drivers want to be included in Uber and Bolt’s pricing decisions and believe they’re entitled to this inclusion because they handle expenses like insurance and parking fees. “The person who sets the prices doesn’t bear the cost of running the business,” said Zakaria Mwangi, Secretary General of the Digital Taxi Association of Kenya. “Ultimately, the taxi apps determine the cost of each trip, not the driver.” They also criticise the platforms for charging taxes. “The taxi apps take 18% commission from the trip amount and then deduct the tax of this commission on a driver’s income,” said Mwangi. However, those taxes are paid to the government and don’t belong to the mobility companies. In a meeting in Nairobi on Sunday, the drivers said they would no longer shoulder the operational costs of their businesses while “the app companies continue to take their guaranteed income.” They called it an unfair business practice.” Bolt said it was “aware of the drivers’ strike and respects their right to peaceful demonstrations.” “We are committed to continuous engagement and collaboration with driver partners,” Bolt told TechCabal in a statement, side-stepping questions on commissions. Uber acknowledged the strike, and said it is “closely monitoring the situation and making every effort to minimise disruptions for users.” With the strike in place, only a handful of drivers are accepting rides, leading to surge pricing. The trouble with the ride-hailing apps and drivers comes down to an important detail: these drivers are not Uber or Bolt employees but “driver partners.” That partnership leaves the bargaining power in the hands of the companies who insist they only provide a platform for the drivers to earn and take a commission. The drivers are learning that this is the gag in gig work. Have you got your early-bird tickets to the Moonshot Conference? Click this link to grab ’em and check out our fast-growing list of speakers coming to the conference!
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IHS Towers market value dips by $6 billion since 2021 NYSE debut
When IHS Towers began life as a public company on the New York Stock Exchange ($IHS) in 2021, it was valued at $7 billion, making it Africa’s most valuable technology company. It has suffered a reversal of fortunes with losses increasing twenty-fold to $470 million in 2022 and climbing again to $1.9 billion by 2023 as operational and finance costs soared. While a significant portion of those losses is unrealised and linked to naira devaluation, skittish investors have reacted negatively, sending share price tumbling and wiping out $6 billion in market value. $IHS closed at $2.98 on July 14, 2024($992.5 million market value) continuing a downward trend that has persisted since its listing at $21 per share in 2021. In 2023, its second full year on the NYSE, the share price fell below $4.5. IHS Towers did not respond to a request for comments. The company’s attractiveness to investors depends on macroeconomic conditions in Nigeria, its primary market. IHS Towers is Africa’s largest infrastructure company with over 40,000 towers across 10 countries and three regions. Nigeria, where it counts MTN Nigeria–which owns a 26% stake in the tower company—and Airtel as clients, accounts for half of its revenue. Headline inflation in Nigeria is at an 18-year high and unstable FX prices have increased operational costs. IHS spent $88.8 million to power its towers across all its markets in Q1 2024; power is the company’s largest operating cost. Why IHS Towers is facing a shareholder revolt “Every base station you see in Nigeria is powered 24 hours a day by diesel generators,” said a telecom expert who asked not to be named. The average retail price of diesel in Nigeria rose from ₦840.81 per litre in March 2023 to ₦1,341.16 per litre in March 2024. According to a 2023 sustainability report, IHS began moving to solar and grid electricity, saving $20.2 million in power costs and maintenance. “As of December 31, 2023, in our African markets (excluding South Africa), 48% of our sites were powered with hybrid power systems (a combination of diesel generators with solar and/or battery systems), 12% with only generators and 32% with grid connectivity and back-up generators,” the company said in a corporate filing. Sam Darwish, the chairman and CEO said in a June 2024 Annual General Meeting that the company achieved commercial growth after renewing contracts with MTN and Airtel. “With MTN Rwanda MLA just signed, we have now completed all contact renewals and extensions with MTN outside Nigeria covering the five countries of Cameroon, Côte d’Ivoire, Zambia, Rwanda, and South Africa—a total of over 12,200 tenancies renewed or extended into the next decade,” Darwish said. However, shareholders want to see more revenue growth and lower operating costs, which may point to another problem for IHS: many of its shareholders have no patience with the complexity of the tower business.
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Nigeria’s inflation quickens in June as pressure to cut interest rates mounts
Headline inflation, a measure that tracks consumer prices in an economy, increased in Nigeria in June 2024 as people paid more for food, transportation, and energy. Data from the Bureau of Statistics showed inflation accelerated to 34.19% in June 2024 from 33.95% in May. It will worry policymakers counting on inflation to stall as talks of a nationwide protest gain ground. On Friday, the government suspended taxes and import duties on food items like maize and wheat for 150 days, one year after acknowledging a food emergency. It will likely lower food costs for the first time in over two years and ease political pressure on the CBN to lower rates. Despite this, a month-on-month increase in inflation between May and June will put talks of an interest rate increase on the table in the short term. Nigerian billionaire Aliko Dangote told reporters on July 3 that no growth could happen while interest rates remained at 30%. It’s a position held by many government insiders who believe CBN governor Cardoso—who has raised interest rates twice this year—should backpedal. So far, Cardoso has remained unmoved. The discussion will be back on the table at next week’s Monetary Policy Meeting (MPC). Empty wallets, empty bellies: Food inflation grips Nigerians Have you got your early-bird tickets to the Moonshot Conference? Click this link to grab ’em and check out our fast-growing list of speakers coming to the conference!
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