As I have written many times, Airtel Africa is doing all to win Africa. With asymmetric Jio success, India is largely out of reach. Yes, the future of Airtel, the Indian telecom giant, cannot be decoupled from Africa. To win that competition, Airtel needs lots of cash. And it has been collecting them after that transformation where it became a quasi financial institution that offers telecom services. Besides the $1.25 billion it picked from many investors including SoftBank and Temasek, in October 2018, it has added another $200 million this year, from Qatar Investment Authority.
Airtel Africa, a subsidiary of Indian telecommunications company Bharti Airtel which services 15 African countries, will receive an investment of USD 200 million from the Qatar Investment Authority (QIA) through a primary equity issuance in the company.
The funds will primarily be used to reduce Airtel Africa’s debt, which currently stands at approximately USD 3.7 bn, and in the process also strengthen Bharti Airtel’s consolidated books.
“We are excited to welcome Qatar Investment Authority as a long-term strategic equity partner. This transaction will not involve any sale of shares by existing shareholders,” said Airtel Africa according to The Economic Times, India. “The QIA said it looks forward to supporting Airtel’s vision in building a world-class business in the African continent.
For Nigerian entrepreneurs, it is a future-proofing strategy in a nation where policies are unpredictable: run multiple businesses at once. Yes, they might have taught you in a foreign business school to develop and accumulate capabilities in specific areas, and then use the concept of core competency to win a specific business category. Those things work in America and Europe; you have no luck in Nigeria if you just depend on them over an extended period of time.
Companies must develop and accumulate capabilities in order to compete in the marketplace. In this video, I explain how any firm can do that and why accumulating capability is very strategic. From Google to Dangote Group, when companies accumulate capabilities, they see themselves operating in the segments of markets with higher value (usually upstream) compared with where their competitors operate (usually downstream). Dangote Group can deploy massive assets and technical know-how in cement production, making it harder for new entrants and rivals.
Here is the deal – it is either you quickly do vertical integration or branch into new areas. Take an example: for years now, solar panel installation has been rising, drawing many players into the sector. Now, government has remembered it for additional revenue, increasing tariff on imports by 5%. But if you check around the world, the trajectory is actually to subsidize and make renewal more affordable for the citizens – not in Nigeria. Largely, I expect some foreign investors to be concerned on that 5% tariff move, possibly cooling the funding effervescence we are witnessing in that space. If you had banked solely on solar, this change should be a concern.
Then enter into rice farming because one government is all in to help rice farmers. Wait for few years, another will come and abandon the plans. From agriculture to education, there is no way you can see stability to actually invest all your energies in one thing. Doing that is sheer stupidity, in Nigeria.
Do what the legends do – they spread across sectors, hoping that no matter how the wind blows, they would be fine. Ovia, Elumelu, Dangote, Rano, Kanu, etc all have businesses that cut across sectors. Yes, they are not conglomerates by choice: they want to hedge risks in a market no one knows its tomorrow. If you hit one sector, they will be fine with another. So, technically, they will always be fine.
Please note that you can be in one sector and still manage your exposure by vertically integrating your business: you bring most of the things others do for you in-house. For example, the Indomie Noodles maker does internally most important things in that business, and using the One Oasis Strategy can make money in most of the supporting investments if they want. Largely, if they open their FMCG academy, it will find more students than most business schools in Nigeria. My point is this – Indomie Noodles maker can sell excess power if necessary to mitigate slow sales during recession because it has one of the largest power generating plants in Nigeria.
The same applies to Dangote Group which commands, independently, at least 50% of the total power distributed in Nigeria. Simply, Dangote Group is the largest distribution company (Disco) in Nigeria; that is another business within a bigger business! As it throws all the risks, it is always ready for any wind that blows in the economy. But if you just do one thing as they do in U.S. and Europe, one policy will knock you out!
Comment: Even though there is merit in this analysis Ndubuisi Ekekwe , i am not really sure if this is unique to Africa and if this approach follows your concept of sustainable and long life companies which Africa needs presently. We have less speciality companies who can compete in the world,because we keep jumping into numerous fields as companies. I would say,its a problem and needs a solution,rather than an acceptance….
My Response: I am not sure how you can solve it; as a business, you work with what you have. At national level, it is an issue. But at personal level, you need to have options. Read our national priorities, they change radically every 4 years depending on who is on seat. But America knows where it wants to be 30 years now and companies can plan into it. While I do not like the multi-hedge, that is the best way to plan. Also, note that most sectors are small which means growths cannot just keep happening. Nothing says you cannot do this and be sustainable! Dangote Group may not see lots of growth in flour. But if it stays #1 there, it can increase revenue via cement. Then rice farming. You may think it may just focus on flour. But 100% of flour market share is simply small for it. Contrast with U.S with bigger markets where even being #3 is a huge deal in some sectors. Until we have an integrated bigger African economy, it makes no sense of getting that over-focus.
NB: Post written for those who have succeeded on something, not for entry-level entrepreneurs who are yet to thrive on anything.
The African Development Bank has published the 2019 African Economic Outlook. The theme for this year’s report is “Integration for Africa’s Economic Prosperity.” The annual report highlights economic prospects and projections for the continent as a whole and for each of the 54 countries. It offers short- and medium-term forecasts on the main socio-economic factors, while at the same time examining the challenges and progress.
African economies have been resilient and gaining momentum. Real output growth is estimated to have increased 3.6 percent in 2017 and to accelerate to 4.1 percent in 2018 and 2019. Overall, the recovery of growth has been faster than envisaged, especially among non-resource–intensive economies.
The world economy is also in better shape, with faster growth and buoyant capital markets. And with more than $100 trillion in assets managed by institutional investors and commercial banks globally and searching for good returns, African countries have an array of options, beyond domestic resources and foreign aid, to support their investments.
[…]
New work by the Bank reveals that Africa’s infrastructure requirements run to $130–170 billion a year. That’s far higher than the long-accepted figure of $93 billion a year. But African countries do not need to solve all their infrastructure problems before they can sustain inclusive growth. They should focus on how best to use their scarce infrastructure budgets to achieve the highest economic and social returns.
The report is the result of the work and analysis of the Bank’s economic experts. It is a tool for policymakers, academics, investors, development and financial industry professionals and the press and is widely used to inform policy dialogue and enhance operational efficiency of institutions.
Yes, if you are in the strategy or policy domain, this is a report for you.
The African Development Bank Group (AfDB) is Africa’s premier development finance institution. It comprises three distinct entities: the African Development Bank (AfDB), the African Development Fund (ADF) and the Nigeria Trust Fund (NTF). On the ground in 44 African countries with an external office in Japan, the AfDB contributes to the economic development and the social progress of its 54 regional member states
Fellow Nigerians and the global business community,
Interesting & progressive days lie ahead in Nigeria’s business space. But I must say, brace up because the days ahead will be tough, very tough and quite tougher than the last few years. You may be wondering what the hell he is saying.
Simple! I was at the Deloitte Nigeria Economic Outlook event held last Thursday where two ministers (Budget & the Finance Minister) were present. Thanks Deloitte!
One positive takeaway was how much work Nigeria is doing in the ease of doing business. While we are yet to get there, a lot of progress has been made; targets top 100 in Global Ease of Doing Business Index.
But I was so worried listening to the two ministers, especially as it relates to the Budget and how to close the Funding.
Gap. Put mildly, “the government is unable to figure out any other way to fund the budget, so be ready to come to their aid”. In other words, expect more taxes!!!
The other balance from actual spend amounting to N6.31 trillion was spent on debt service & recurrent expenditure (Minister-these were largely covered)
2018 Budgeted Fiscal Deficit – N1.95 trillion (Actual deficit – N3.26 trillion – 67% higher; in other words, additional N1.31 trillion was borrowed in excess of budget)
2018 Budgeted Revenue from sale of Crude Oil N2.999 trillion (Actual crude revenue – N2.08 trillion – 69% of budget).
Ok, these are 2018 numbers.
In 2019, proposed budget will be slightly lower than 2018 budget by N294 billion.
Thus, proposed 2019 Expenditure is N8.827 trillion.
Proposed capex spend – N2.86 trillion (considering that only 43% performance was achieved in 2018, what do you expect in 2019?)
Proposed fiscal deficit – N2.45 trillion Did you notice that we borrowed to fund recurrent spend in 2018? And that we had abysmal performance on capex at 43% (in fact, as at 14 Dec 2018, only N820.57 billion was released for capex, in other words, about3 410 billion was released between 14 & 31 Dec 2018 for capex spend.)?
So we are at it again, I can’t foresee the time the government will start investing in critical infrastructure (thanks to the Executive Order No. 007). Even the EO No 007 poses its own challenge. Despite missing Corporate Tax Revenue budget by N134 billion, and the commencement of this new Executive Order, the Government still budgets N150 billion more than actual collections in 2018.
Can you guess where this excess will come from? You and I will pay, simple.
Despite hitting only 69% of crude oil revenue, the proposed 2019 budget projects N3.69 trillion from sale of crude oil; N690 billion more than the 2018 budget and N1.6 trillion more than actual revenue from crude in 2018.
.. another threat… while we hope to produce 2.3 million bpd of crude, OPEC pegged Nigeria’s production at 1.69 million bpd (i.e., without going to town, the core driver of our budget revenue, the production quantity was cut by 36% by our OPEC masters. But the minister says we may have to re-discuss this with OPEC or shore up with concentrates (hope I got this term).
So with all these, what is the point? Our government has lost ideas on how to fund our budget, not just for this year, but for years to come. If you know how best to assist, please do suggest to the FG. But in the mean time, there is a quick fix, the only constant in the equation is you and I…
In brief, please prepare for more taxes, the quickest fix is to raise VAT.
The Honourable Minister of Finance mentioned the carbonated drinks as one area to generate more revenue… So Sugar taxes will come on-board. Taxes on Tobacco and the likes is a given. More taxes will come on the very rich; so if you have private jets & yachts, get ready. Are you a musician? More will come knocking from all angles. Sportsman? Sure, you are not forgotten. I envisage an update on PITAM in few years from now, not sure it will go beyond three years away.
But my biggest concern is that even if VAT revenue increases by 200%, we will be way short of our needs. Even if we raise Corporate tax income by 100% (including a 200% increase in VAT income, we will still be far away). You recall that Customs suggested a reduction of duty on imported cars from 70% to about 45%? Maybe that’s why the 2018 customs budgeted revenue is higher than 2019 by about N22 billion.
Expect the hammer to fall after the elections, true, we can’t run away. I advise that you start stress-testing your numbers against increase of VAT to 10% and see what impact that will have on your price. This will be happening despite our weak buying power due to loss of currency value.
In the midst of all these is the monetary policy issues. Prof Doyin Salami in his presentation said he can’t bet that Naira will get any stronger. In another fora, some experts say that Dollar will head towards N398 while some entities are planning with N440 to a Dollar.
In other words, all indicators show that Naira will lose value post-election, and may be a deliberate devaluation policy (check it, forex reserve, crude price, crude volume, etc)
Even of bigger concern to me at the event was the signal sent to the global community that the days ahead will be tough. But that’s the truth.
So, I implore you to start planning for the rocky days ahead. Hopefully, we will walk through this furnace without much damage.
Satya Nadella, CEO of Microsoft, identified Amazon, Google and Alibaba as the major competitors of Microsoft during a dialogue with media companies. Amazon is there because of AWS which is industry-leading, and ahead of Microsoft Azure. Google G-Suite is eating into Microsoft Office solutions and Alibaba is a juggernaut dominating the Chinese part of the internet with Alibaba Cloud.
To its great good fortune, Microsoft several years ago hit on a replacement to its Windows franchise, the multi-faceted Azure cloud-services business that is No. 2 to Amazon’s market-leading product. (On Tuesday, Microsoft announced its latest cloud services win, signing Walgreens Boots to a multi-year deal.) Azure, in turn, is the center of Microsoft’s “intelligent edge” strategy: Every potential hit device and service leverages and feeds Azure, the company’s growth engine.
Nadella has pulled off the seemingly impossible in making Microsoft the feel-good company of the tech industry. Gone are the days of Steve Ballmer, when devices by competitors were four-letter words in Redmond, Wash. Microsoft now plays nice whenever possible. Nadella identifies only three primary competitors: Amazon, Google, and Alibaba. “All are aggregators with platform businesses,” he says. “We are a platform business with a small aggregation business.” (Asked about Alibaba, a cloud powerhouse in its home country, Nadella replied: “Anyone who is doing well in China can get outside it.”) (Fortune Newsletter)
Interestingly, Apple has moved on and away from Microsoft, as a competitor, as desktop computing fades along with Windows and Mac. But with Apple iOS mobile position insurmountable for Microsoft, the latter has given up there. Thinking that Apple was still a competitor would have been a big mistake for Microsoft. Microsoft does not see its future purely on Windows, and it has just acknowledged that with this disclosure.
But it does think it can still anchor a great future through Azure which is optimized around Windows. So, for Windows to have relevance in the future, Azure must be important today. So, that is where Amazon and Alibaba become competitors. Amazon AWS is industry-leading; Microsoft Azure must own territories to thrive.
On the applications space, I hinted on that few days ago where I reported that Google is already winning the future as schools and kids build on G-Suite. Simply, Windows is losing the future as Google has cornered the computing users of tomorrow with G-Suite for Education. Microsoft has to compete to win that space, and that is where the competition is headed. Without a share of that, Microsoft Office will be disrupted by Google solutions which are already delivered via the cloud.
It is simple: more kids will know about G-Suite applications, created by Google, than Microsoft solutions. Google has invested in schools and kids, and will reap the benefits: “Chromebooks [is] used by 30M students & educators worldwide with 40M Google Classroom users”.
When you see the tech giants investing tons of dollars in education and other community supports, on the surface, you might be tempted to believe it’s a form of CSR, but in reality, that’s not the case.
The giants are busy ‘indoctrinating’ kids, cornering future markets, and crushing competitions before the latter even start. If you don’t see the big picture, keep waiting to reap where you did not sow; you will be shocked when you realise that all the people you want to bring on board are already OWNED!
No one has ever lived in the future before, all the things about future play out in the present; there’s no place called future, just do what you have to do now.
