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MSME

When a mature company pivots – A case study of Jumia!

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Again, let me say, I don’t like jargons, but the word “Pivot” is some word we can’t avoid in this tech business. When a business model is not working, sub-optimal or not gaining sufficient traction, the CEO and the team pivot to a plan B. Essentially, pivoting is jettisoning your initial model and transiting to a totally new or similar business with some iterations.

From this description, it is not uncommon for a startup (this time, I mean a new business) to pivot! The founders might have made certain assumptions about the market and the opportunity, until the street teaches them something different. So, in other to survive, it is imperative for the new business to pivot, or adapt its model to suit consumer needs. After all, you are in business for them.

I don’t take pivoting lightly. It is indeed a very delicate process. Much more than the process, when the CEO or a team decides to pivot, and they commit their resources to the process, it shows the mental strength of the team. They are humble enough to correction from the market and tweak their business model. They are not bent on their ways especially when the market or available data is saying something totally different. A lot of businesses have died or become irrelevant because they did not take learnings from the market!

But, when a mature company pivots… I am not sure what to make of that! Please understand the context. A mature company is expected to have figured out the intricacies of its business to a large extent, its niche, pricing, key revenue drivers, efficiencies amongst other. As such, we do not expect any drastic change from the current business model.

I am aware of the frightening speed with which the business environment evolves. Doing business in 2017 is totally different from 1929. In fact, these days, you approach each day as it comes, and you prepared for the next 50 years today. Things are changing really fast, so should businesses. Especially those that want to remain relevant.

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As a consumer, I don’t want to see your business change too frequently. So, how do we expect a mature and growing company adapt to its changing business environment?

Reviewing Jumia’s model…

Jumia started as one of the pioneer online retail outlets in Nigeria. It then pivoted to becoming an online marketplace. The business then scaled to start additional brands to address different market needs – Kaymu, Jovago, Lamudi, Carmudi, and Hellofood (I will write about scaling in my next post). Jumia remained the biggest and most valuable brand, hence the founders and the team decided to ride on this, thus rebranded all the supporting product and platforms. Kaymu became Jumia Market, Jovago – Jumia Travel, Lamudi – Jumia House, Carmudi – Jumia Car, and Hellofood became Jumia Food.

In furtherance of its restructuring effort, it subsumed the Jumia Market (Kaymu) into the larger Jumia brand. Effectively killing the Kaymu brand!

Earlier in the month, there are unconfirmed reports that Jumia might be looking to acquire or partner with a grocery and fresh food ecommerce business (Following after Konga, its Arch rival in this ecommerce business).

Now, Jumia is creating “Jumia One” as a one-stop-shop for most (all) of JUMIA’s e-commerce offerings as well as other day-to-day products such as airtime and payments. Did you guys notice AIRTIME and PAYMENT? Yes. Jumia has now added payment to its service offerings!

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So what’s the catch? Jumia is essentially creating a Super App to address most of consumers’ day to day and frequent need. So take for example, I downloaded the Jumia One App because I needed to rent a house (Jumia House), I can effectively furnish my house from the same App (Jumia Mall), buy my car (Jumia Car) Pay my Eko Disco and Cable TV bills and Subscriptions (Payment).

Jumia is looking to increase its monthly active users, and I guess it has figured out a way to do this!

Potential Challenges

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The Size of the App: The App might be too large for many cheap (I mean Affordable) smartphones that have flooded the Nigerian market. Since the customer only requires 1 or 2 of the services being offered by Jumia One per time, the consumers might be unwilling to download that large App if it will restrict them from downloading other useful Apps. The App might also slow down the performance of the device, thus offering additional incentive for uninstalling it!

Navigation: Jumia One need to ensure that the navigation within the App is smooth and less complicated. If not, potential customers might have a tough time figuring out how to get what they want.

Conclusion

I am sure that the management of Jumia never expected me to download 6 different apps on my phone. Hence Jumia is creating a single access point to all its services. All I need to do now is to download a single app that gives me access to almost everything Jumia has on offer. I think it is a solid approach to creating a sticky product, grow its active monthly user base and probably layer on additional services including savings (Maybe a Save as you Spend type of a thing), Expense Tracking amongst others

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This strategy should be pursued with caution.

Happy Entrepreneuring!

 

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FEATURED

What policy changes, other challenges hold for MSMEs in 2020 – Chief Economist, PwC

The startup companies are valued at over $1 billion because the uncertainties of doing business in Nigeria are quite high.

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Andrew Nevin

It is a given that 2020 has been one of the most trying years for business owners and entrepreneurs. Some businesses have been crushed completely, with some left barely breathing.

The year started with the announcement of the increased VAT rates, moved on to the coronavirus pandemic and its attendant challenges, the global oil crisis and its implications on national revenue, and just after the easing of the lockdown, the recent increase in fuel price. What do all these connote for Micro, Small, and Medium Enterprises that were already groaning under stiff economic policies and trying to survive the hard days? Your guess is as good as mine.

Taxation in the middle of a pandemic

Amid all of these challenges, the government (through its agencies) trying to widen its tax net and improve revenue, with more duties and tax options being imposed on Nigerians. Just recently, as courier and logistics business operators were still trying to grapple with the implications of the increased NIPOST license fees, when NIPOST and FIRS went on a social media war of words over which agency is constitutionally justified to collect the Stamp Duties.

There is also the recent rental tax announced by the government, a move still being protested by unions who have argued that this pandemic period is a time for the government to give out palliatives, not widen its tax net.

What do the multiple changes and challenges in 2020 mean for MSMEs?

In a recent tweet on his handle, Partner & Chief Economist at PwC Nigeria, Andrew Nevin (Ph.D.) noted that the current circumstances will stifle the entire economy and constrain MSMEs from growing, as it is quite difficult to grow in an economy that is not growing.

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“… The complexity and cost of governance and the fiscal crisis is leading to a situation where successful companies in the tax net are subject to more and more taxes, which means they cannot grow and some companies in the formal economy will try to move back to the informal economy, further compounding the issue,” Nevin tweeted.

(READ MORE: CBN lists major constraints affecting businesses, as borrowing rates projected to rise )

Nevin also noted that even though the SMEs employ over 80% of the country’s workforce, the startups in Nigeria hardly get to the point where they are valued at over $1 billion. And this is because the uncertainties of doing business in Nigeria are quite high. Gokada, for instance, had a thriving business environment and was set to break even when the new policy was introduced banning motorcycles across major routes in Lagos. This, he said, shows the uncertainty of the business environment in Nigeria.

In addition, attracting global capital to scale a unicorn requires more money than are readily available for risky companies in Nigeria. The challenging business environment and the ‘reputation’ associated with the Nigerian flag makes it very hard to get sufficient external capital.

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According to him, SMEs entering the formal sector means higher productivity and monitored payment of taxes. Yet, entry into the formal sector is still a choice most small businesses do not want to embrace due to the economic environment.

“… if the cost and complexity of entering the formal sector is too high, then the SME will elect to stay in the informal sector with all the attendant issues, including that they can be subject to harassment by the authorities,” he said.

(READ MORE:Innocent Chukwuma: From selling spare parts to manufacturing an indigenous automobile brand)

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He noted that the large SME sector arises partly from unemployment and people rushing into entrepreneurship as a means of livelihood; as well as the difficulties to grow a large and strong business.

“These type of statistics always tell us the sector is huge but it is huge because it is too difficult to grow big companies, so this is not a sign of strength. The best structure for the economy is to have strong large companies that then create room for SMEs to be part of their ecosystem.

“Large companies raise standards (look at quality of Dangote companies for example) and raise productivity and create opportunities for others so large SME sector is sign that business is too difficult because if Nigeria was functioning correctly, we would have 100+ Dangotes in the Economy,” Nevin tweeted.

Explaining the challenges of MSMEs in Nigeria, Chairman and Managing Partner at Ofuani Maidoh & Co, Clement Ofuani, noted that small businesses in Nigeria have more pressing challenges to deal with than the government-imposed fiscal burdens.

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Ofuani told Nairametrics in an interview, that the harsh and hostile operating environment makes for a more serious challenge for small businesses.

“Epileptic electricity power supply, inefficient transportation system and insecurity impose more operating costs on MSMEs than the fiscal taxes listed,” he stated.

Ofuani, who served as Senior Special Assistant to President Umaru Musa Yar’Adua on Policy, explained that the Finance Act waives income tax for companies with turnover below N25 million, thus granting fiscal reliefs to most small businesses.

(READ MORE: Nigerian firms expect to start employing again in August – CBN survey)

“The stamp duty on rental agreements and other agreements are additional burdens as is the increase of VAT to 7.5% but the below-the-table taxes paid by MSMEs in form of unreceipted ‘taxes’ to the security personnel along the transportation corridors, and to bureaucrats for normal government services are the greatest frustrations that make Nigeria uncompetitive in global commerce and as an investment destination,” Ofuani stated.

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Amid all of these formal and informal challenges, it becomes very difficult for the small start-up to grow beyond its startup stage and become a big company.

The on-going pandemic and recent policies have done little or nothing to address these challenges and despite the palliatives, loans, and support schemes being launched by the government at various levels, most of these small businesses will still find their growth stunted by some of these “unreceipted taxes”.

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MSME

GEEP provides COVID-19 palliative microloans to 87,614 traders

The loans were in line with the government’s policies to reduce poverty and boost productivity.

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GEEP provides COVID-19 palliative microloans to 87,614 traders, Nigeria SME, LAPO, More than 40 SMEs in Lagos shut down due to economic crisis

The Federal Government of Nigeria, through the Government Enterprise and Empowerment Programme (GEEP), has provided a COVID-19 palliative relief loans to about 87,614 traders across twenty states. This was disclosed earlier today through a brief press statement that was made available via the government’s official Twitter handle.

According to the disclosure, the microloans have helped to reduce extreme poverty and encouraged productivity following the easing of the lockdown. Part of the statement said:

In line with the vision of the Nigeria Government to curb poverty and boost productivity in different parts of Nigeria, GEEP has provided palliative microloans to 87,614 petty traders hit by COVID19 pandemic in 20 states of the country in the first phase of disbursement.

These palliative microloans have helped petty traders revive their businesses, as the government eases lockdown measures nationwide. The second phase of the disbursement will target 412,386 petty traders across the country.”

READ ALSO: How Nike rejection birthed sportswear industry in Nigeria

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READ MORE: Alcohol Taxes: Heineken may need to shelve plan to increase beer prices

The Federal Government also announced that the second phase of the loans would be disbursed to a 412,368 trader across the country in a bid to restart economic productivity as the government eases the economic lockdowns that have heavily affected the informal and formal sectors.

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The palliative schemes under the GEEP scheme include FarmerMoni, TraderMoni, and MarketMoni.

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FEATURED

FG releases new details on MSMEs support scheme, budgets N200 billion for loans

The Bank of Industry will also join to coordinate the implementation of the scheme.

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FG releases new details on MSMEs support scheme, budgets N200 billion for loans

The Federal Government has released new details on the Micro Small and Medium Enterprises (MSMEs) support scheme being rolled out under the National Economic Sustainability Programme.

According to estimates provided, the sum of N50 billion will be used to provide payroll support, N200 billion for loans to artisans, and N10 billion support to private transport companies and workers

The government disclosed in a tweet on the official handle of the government, the support scheme will include a Guaranteed Off-take Scheme for priority products, and an MSMEs Survival Fund.

READ ALSO: Covid-19: Timeline of every pronouncement made by Nigeria to support the economy

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Modalities for the take-off scheme

The first track is a Guaranteed Off-take Scheme which will ensure continued local production and safeguard 100,000 existing small businesses to save 300,000 jobs.

Priority products include processed foods, personal protective equipment, hand sanitizers, face-masks, face-shield, shoe-covers and pharmaceuticals.

The implementation committee chaired by Ambassador Mariam Katagum, Minister of the Federal Ministry of Industry Trade and Investment, will collaborate with private sector MSME associations to verify and screen applications from bidding MSMEs, define quantity and price of products required, and also get participants to join in the procurements.

READ MORE: How to access new N75 billion Nigerian Youth Investment Fund

SME survival fund

With a budget of N15 billion, the SME survival fund is expected to sustain 500,000 jobs in 50,000 SMEs.

Major sectors to benefit from the SME survival fund include hotels, restaurants, creative industries, road transport, tourism, private schools and export-related businesses.

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The committee will identify eligible SMEs and screening and verification for this fund will be based on company registration, and tax registration. The implementation committee will approve disbursements through microfinance banks and fin-tech credit providers.

MSMEs that are unregistered will receive support to complete registration with the Corporate Affairs Commission (CAC), and all participants will be expected to make payments based on signed agreements.

The Bank of Industry will also join to coordinate the implementation of the scheme.

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The scheme will last 3 months with Ambassador Mariam Katagum as Chairman, while Ibukun Awosika, Founder of The Chair Centre Limited (TCCL), and First Bank Nigeria will serve as the Vice Chairman.

More details are to be released subsequently from the Implementation Committee.

The Backstory

In July 2020, the Federal Government announced plans to roll out a N2.3 trillion stimulus package and survival fund for Micro Small and Medium Enterprises (MSMEs) to stay afloat amid the economic challenges imposed by the pandemic.

The Vice President Yemi Osinbajo, who also heads the Economic Sustainability Committee, announced it at the 2020 edition of the Micro MSMEs Awards held virtually in July.

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To benefit from the scheme, MSMEs would have to go through a rigorous and painstaking verification process which will be based on certain criteria.

MSMEs that have between 10 to 50 staffs are qualified for this fund. The businesses must make their payroll available to the government for verification while applying for the fund. Once qualified, the MSMEs will be eligible to have their staff salary paid directly from the fund for 3 months.

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