Many questions on why iROKOtv may be pausing efforts to grow in Nigeria and Africa. This is part of our course in Tekedia Mini-MBA. As Jason Njoku noted, it comes down to unit economics and marginal cost. Sorry, I cannot share the class note. But this video will help many.
Strategic Objectives and Technology Investments
The Group CEO of Weco Systems, Nnamdi Onyebuchi, a Tekedia Institute Faculty and excitingly my undergraduate classmate in FUTO shared this. One of our members was moved to send this note to him. Nnamdi (trying not to use his nickname, you do not mess up with CEOs!) developed a course on aligning technology investments and strategic business objectives. After his class, I received a note from a Kenyan businessman who joined us.
The man wrote: “Professor, I made a change in my company today; the Head IT now goes to my Head Strategy for direction unlike what we had before”. That change may seem simple but it is a big call, and it is right.
Tekedia Mini-MBA continues to advance business communities.
Enterprise Marketing in Tekedia Mini-MBA
Good People, we are very happy to announce that the General Manager, Enterprise Marketing of MTN Nigeria, Onyinye Ikenna-Emeka, has joined the Faculty of Tekedia Institute. She has developed a course on Enterprise Marketing for Tekedia Mini-MBA, a community learning service. Onyinye is a graduate of the University of Calabar (BSc) and University of Manchester Business School (MBA).
Kelechi Madu, Akinwunmi Adesina, keep the Nigerian flag high on the global stage with appointment, re-election
Nigeria was at her best again in the closing week as her citizens made her proud across the globe with historic appointments and strategic re-election outside of her shores. Two days were spectacular for the country -26th and 27th August, 2020.
On Wednesday 26th August, news filtered in that Nigerian-born Canadian Lawyer, Kelechi Madu popularly known as Kaycee Madu had been appointed as the Justice Minister and Solicitor General for the province of Alberta in Canada. The appointment was outstanding because Madu is the first black man to be so appointed to occupy justice positions at the Provincial or Federal level in Canada.
Madu, born and raised in Southwest, is an alumnus of the University of Lagos. He bagged a degree in Law in 2001. He left with his family for Canada in 2005. He has served in different capacities working for Legal Aid Alberta, Edmonton Community Legal Center and the Referral Programme of the Law Society of Alberta. He was elected as member of the Legislative Assembly of Alberta in 2019 which saw him later appointed as Minister of Municipal Affairs.
In his congratulatory message, President Muhammadu Buhari described the appointment of the 47-year-old lawyer as a testimony to the go-getting spirit of people Nigerians descent who have distinguished themselves in different walks of life. The message signed by his Special Adviser on Media and Publicity, Femi Adesina, described Madu’s appointment as landmark and historic.
On Thursday 27th August, another great news also came in as Dr. Akinwunmi Adesina was returned for a second term as President of the African Development Bank. In a statement on the bank’s website, Adesina recorded a hundred percent of votes of all regional and non-regional members of the Bank. By this election, Dr. Adesina, a former Nigerian Minister of Agriculture, has secured a second term which begins on September 1, 2020. While announcing the result of the election that took place on the final day of the 2020 Annual Meetings of the AfDB Group, the Chairperson of the Board of Governors, Mrs Niale Kaba said “I am delighted that the Board of Governors have re-elected Dr. Adesina for a second term in office as President. As shareholders, we strongly support the Bank and will give him all the necessary support to carry forward and implement his compelling vision for the Bank over the next five years.”
In his own acceptance speech, Adesina said, “I am deeply grateful for the collective trust, strong confidence and support of our shareholders for electing me for a second term as President. It is yet another call for selfless service to Africa and the African Development Bank, to which I will passionately devote myself.” He further said “The future beckons us for a more developed Africa and a much stronger and resilient African Development Bank Group. We will build on the strong foundations of success in the past five years, while further strengthening the institution, for greater effectiveness and impacts”
While congratulating Dr. Adesina, President Muhammadu Buhari has affirmed his belief that the globally renowned development economist deserved the re-election. In a statement signed by Femi Adesina, the Special Adviser to the President on Media and Publicity, President Buhari “extends appreciation to the African Union for its endorsement of the AfDB President much earlier, and to shareholders of the bank who worked tirelessly to ensure the return of the hardworking visionary leader.”
Adesina’s first term, which began in 2015, had focused on five development priorities known as the High 5s: Light up and Power Africa; Feed Africa; Industrialize Africa; Integrate Africa; and Improve the Quality of Life for the People of Africa. It had also recorded impactful results on the lives of 335 million Africans, including: 18 million people with access to electricity; 141 million people benefiting from improved agricultural technologies for food security; 15 million people benefiting from access to finance from private investments; 101 million people provided with access to improved transport; and 60 million people gaining access to water and sanitation according to the Bank’s website.
Adesina, who is a World Food Prize Laureate and Sunhak Peace Prize Laureate, earlier had his second term ambition threatened by allegations of corruption, high handedness in recruitment and contract awards. He, however, was cleared by an independent investigative panel headed by the former President of the Republic of Ireland, Mary Johnson.
iROKOtv Gives Up on Nigeria and Africa!
It should not come as a surprise to anyone: selling video streaming products in Africa is a hard business. It is a double whammy for most potential customers: pay subscription fees and then cover the broadband costs. So, it was not entirely unexpected when iROTOtv announced that it was refocusing out of Africa: “Over the next week, IROKO will be defocusing our Africa growth efforts and we will revert to focusing on higher ARPU customers in North America and Western Europe. Even after pushing incredibly hard in Africa for the last 5 years, our international business represents 80% of our revenue today…” This is really a smart move as now the company can focus where it can earn U.S. dollars; I made that case a few days ago when I explained how Nollywood producers are focusing on international markets.
Between the COVID-19 fallout, rapidly devaluing currency and hostile regulatory environment, it’s time to pause the burn. It’s time to hunker down and see what the next 18 months brings. Over the next week, IROKO will be defocusing our Africa growth efforts and we will revert to focusing on higher ARPU customers in North America and Western Europe. Even after pushing incredibly hard in Africa for the last 5 years, our international business represents 80% of our revenue today, so by taking out Africa growth-related costs, we cut our $300k/month burn to <$50k/month. Still high, but once things normalise we should have a clear path to free cash flow + profits in 2021. This will unfortunately lead to a pretty dramatic change in the size of our Africa teams. There will be around 150 job losses. We are still working on the numbers, and in order to soften the blow we are speaking with a number of companies who have taken an interest in our highly trained telesales agents. The ambition in this terrible jobs market is to try and give our departing teams the best odds of success in what is unfortunately one of the worst job markets in decades. We wish them well on their adventures, it is no fault of their own. They definitely tried their best. We all did.
We still believe in Nigeria, We still believe Ghana, We still believe in Africa. It’s a strange thing to realise that even after almost 9 years with IROKOtv, 5 exclusively focused in Africa, we still may be too early for Africa. That in itself says so much about the current Internet opportunity in Africa. Many models have attempted to crack the consumer economy in Africa. Classifieds didn’t work. Lead generation didn’t work. E-commerce didn’t work. Free didn’t work. If we only had the Africa market (like so many before us who failed) then this post would be RIP IROKOtv. Thankfully we have an international business to fall back upon. For Africa, we are currently compelled in the short term to find a more efficient model to growing our paid membership here. We are introducing new products which we hope to move us up the ARPU chain and broaden our services beyond just entertainment. It’s still super early and we are veterans of experimental building of consumer Internet in Africa. For now we can only focus on cash flow. We will be waiting patiently, keenly, for the key signals to jump right back in to growth mode. We are still on ground.
You may decide to read that piece by Jason Njoku, the CEO of IROKO. He dropped some lines, “Many models have attempted to crack the consumer economy in Africa. Classifieds didn’t work. Lead generation didn’t work. E-commerce didn’t work. Free didn’t work. If we only had the Africa market (like so many before us who failed) then this post would be RIP IROKOtv. Thankfully we have an international business to fall back upon.”
Yes, one of the hardest things to do in business is to extract revenue from people that do not have money; Africa does not have purchasing power for broad entertainment. And as I have noted, Nigeria has only about 30 million people that earn income. Just about 5 million of those earn decent income to get into paid entertainment of any kind.
With this strategic refocusing, the National Broadcasting Commission which just introduced a new broadcasting code will have one less company to worry about on enforcement and compliance!
It is what it is: your playbook must NOT be 100% localized in this age of falling currency, in Africa, if any part of your raw materials is imported. And because all digital startups have foreign raw materials (Amazon AWS, Microsoft Azure, etc), your revenue must extend beyond Africa these days if you want to thrive.