It is estimated that by 2050, Africa’s population would have reached almost 2.5 billion. Within the continent’s many countries, the majority of these populations are likely to be concentrated within the business-friendly urban centres – cities.
As Africa enters a technology revolution, particularly within services, the pace of urbanisation will only increase, and the ever-pressing issue of mobility in Africa will increase with it.
With more people comes more road users and a greater need for speedy and efficient means of transportation. And with them comes consumerism and the need for more FMCG goods, to serve their needs, but getting these products to the cities is just as difficult as navigating around them.
Africa is estimated to now be home to 8 of the 15 fastest-growing economies in the world. However, poor infrastructure is one of the biggest barriers to economic growth, and many of those barriers exist at the basic level of adequate roads and ports. In 2014, only a quarter of African road network was paved, and in 2020, poor roads, rail and port facilities continue to delay the social and economic transformation of African societies.
The urban centres have not enjoyed enough infrastructural upgrades to accommodate the influx of people and their need for goods. Some foreign and home-grown tech solutions in the form of ride-hailing, car-sharing, and vehicles-on-demand came to address these very big problems. They are infiltrating the mobility sector, spurring its evolution and addressing the needs that arise as a consequence of rapid urbanisation.
Although Uber dominates the global ride-hailing market since it entered the continent in 2013, the latter half of the previous decade saw the rise of home-grown car-sharing start-ups such as Jekalo and Gozem, making car ownership and cars per capita in Africa amongst the lowest in the world.
However, it was not long before Estonia-based Bolt (formerly Taxify) took the lead in Africa’s ride-hailing market. Its rebranding in 2019 came as a means of signalling their broader focus on covering transport beyond car-sharing.
Where congested roads are the reality in the majority of urban centres, Bolt quickly pivoted to include bike-hailing as part of its offering, firstly in East Africa – a strategic investment to achieve its goal of dominating the African market by entering an additionally prolific means of transportation.
However, it is not the only one to move beyond cars in the transport sector. Lagos witnessed the two-week trial of UberBOAT in October 2019, and while not much more has been seen on this front, there is no doubt that the competition for ride-hailing in Africa is far from over.
[READ MORE: Aviation: A boost to Africa’s development)
Like Bolt, many companies have chosen to combine long-standing transport solutions with tech, with a rise in start-ups focused on Africa’s ride-sharing on two wheels. Max and Gokada are just two mobility challengers within the bike-hailing market, and there are likely to be more to come.
Investors have recognised that having more cars on already poor roads proves a less efficient means of improving transport and have poured funds into navigating city traffic by bike. Yet, regulatory issues have arisen at the same pace as these start-ups, affecting the impact of these solutions.
Notable examples include the ban on motorcycles in Addis Ababa announced in July 2019 by the city Mayor, Takele Uma, citing concerns around the involvement of these vehicles in violent crimes, as well as, Lagos state government’s ban on the activities of commercial motorcycle, effective from February 1st 2020, which will have a significant impact on these start-ups, their contractors who rely on their vehicles and riders as their primary source of income, and of course, commuters.
These solutions have also been leveraged to improve logistics and provide urban populations and businesses with the goods and services required to help their economies function and grow. Companies such as Kobo360 and Lori Systems, winners of the Apps Africa Best Enterprise Solution 2018 and the Apps Africa Best Mobility Solution Award 2019 respectively are providing solutions to inefficient supply chain systems in order for Agriculture and e-Commerce businesses to scale. Both Lori Systems and Kobo360 have expanded across the continent at breakneck speed.
Speaking with Kagure Wamunyu, CEO, African Region at Kobo360, ahead of the Africa Tech Summit, she says, “Using technology, we are providing an efficient solution for all the key elements in the supply chain, while ensuring reliability, transparency and cost savings.”
Swvl, Kobo360 and Lori Systems collectively raised $102 million in 2019, hardly an insignificant number, even if it isn’t fintech. And with the news of East African logistics company, Sendy raising $20 million, 2020 will undoubtedly be another big year for logistics. Where people are looking to inject speed in congested cities, and efficiency into supply chains that are disjointed and opaque, start-ups are providing solutions that help businesses beyond themselves.
Progress in the mobility sector will not only improve transport but access to goods, services, education, employment and overall economic growth. We can expect to see more investment – in terms of infrastructure and technology – into the mobility space, because Africa and Africans, need to move. At scale.
According to McKinsey, the future of eCommerce is huge with the market predicted to be worth $75 billion by 2025. These predictions are contingent on a number of other supporting factors, one being improvements in mobility and delivery infrastructure, resulting in a blurring of boundaries between logistics, mobility and e-commerce.
[READ ALSO: What Iran’s war with America means for Africa)
With the implementation of AfCFTA and the lowering of many customs barriers in Africa on the horizon, we can also expect more demand within the mobility sector. This almost guarantees that there will be more challengers arriving on the tech scene, while many of the current players expand into new cities and countries. These solutions are not only more efficient but greener, safer and more sustainable, and governments will have to take more action in providing the physical and legal infrastructure to support and regulate these innovators.
For further information or to register, visit www.AfricaTechSummit.com/kigali
Analysis: Total Nigeria needs a financial overhaul
Total Nigeria’s Q1’20 results are a testament that some might have it worse than others as it recorded a revenue drop of 9.3% to N70.2 billion
The Oil Industry has had a particularly tough year, owing primarily to the novel pandemic. The International Energy Agency (IEA) predicts that the global oil demand is expected to further decline this year as Covid-19 spreads around the world, constraining travel as well as other economic activities.
Organizations like Total depending on international trade will be forced to scale down operations until restrictions ease off. However, Total Nigeria’s Q1’20 results are a testament that some might have it worse than others.
The period recorded a revenue drop of 9.3% to N70.2 billion in the first quarter of this year compared to Q1 2019. Total earns its revenue from three main sectors namely: Networks, General Trade, and Aviation. Revenue from Aviation fell by 39.5%. The decline in Networks is attributed to the reduced demand as a result of the enforced lockdown and restriction on travel across the nation.
Yet, it is clear that the company had its own challenges pre-COVID-19. In the quarter, it attained a loss after tax of N163 million which was 65.6% better than the loss after tax of the comparative quarter; it is overwhelmed by a myriad of distinct issues.
First off, its revenue has experienced a steady fall over the years; reasons for this is tied largely to its lack of importation of petroleum products.
It is also burdened by inefficiencies in its operations evident in its high operational and direct expenses, as well as its high debt over the past years. The company has carried on huge loans and borrowings in its books: N40.6 billion in 2019 and only a marginal reduction of N2.2 billion in the current year.
Even higher are its expenses after an 8.38% reduction in the just-released results, it arrived at N69.7 billion for Q1 2020. Amongst its high operational expenses is the high and increasing technical fees it pays to its parent company. From N251 million in the first quarter of last year, it incurred around N700m in the year under review. It also has cash flow issues with about N22b in negative cash and cash equivalents. In its 2019 report, it revealed that the year had been tough with its cost of doing business rising exponentially as evident in its interest expense, 395% higher than the previous year as a result of repayment for products and a high level of borrowing.
The company, in its last full year annual report, noted that to make significant savings to both operational and capital expenditure costs, a series of initiatives relating to cost efficiency, process optimization, and significant reduction of working capital requirement and finance costs, were put in place and are in motion for this year.
As Dr. Fatih Birol, IEA’s Executive Director put it “The coronavirus crisis is affecting a wide range of energy markets – including coal, gas, and renewables – but its impact on oil markets is particularly severe because it is stopping people and goods from moving around, dealing a heavy blow to demand transport fuels.”
However, Total’s position goes beyond the impact of the pandemic. Its rebound rests on its ability to carry on with cost control and lower debt commitments, together with the speed of the containment of the virus. That said, the company might need to raise capital soon while also coming up with formidable strategies to strengthen its business model.
Merger, Tax incentive boosts BUA Cement FY 2019 result
BUA Cement Plc recently released financials reveal a 47.5% increase in revenues of N175.52 billion up from N119 billion in 2018.
One of the industries set to experience the downsides of the Covid-19 pandemic is the construction industry. Given the slowdown in construction activities as a result of the lockdowns and constrained economic activities, the reasons are not farfetched.
Prior to the outbreak of the pandemic, Globe Newswire had predicted an accelerated growth pace of the global construction industry from 2.6% in 2019 to 3.1% in 2020. This growth has now been revised to 0.5%. What is even more daunting is that the revised growth rate is based on the assumption that the outbreak will be contained across all major markets by the end of the second quarter of 2020.
It is only after that (including freedom of movement in H2 2020) that events could facilitate reverting to the normal course of activities to foster businesses in the industry like BUA Cement or those that depend on it to restart activities.
Nigeria’s third-largest cement company, BUA Cement Plc, however, still has its 2019 victories in order. Involved in the manufacturing and sales of cement, BUA Cement has 3 major subsidiaries and plants in Northern and Southern Nigeria.
With a market capitalisation of N1.18 trillion ($3.3 billion), BUA is the third most capitalised company on the NSE. Its recently released financials reveal a 47.5% increase in revenues of N175.52 billion up from N119 billion in 2018.
The company’s profits also increased by 69.1% from N39.17 billion in 2018 to N66.24 billion in 2019. Core operating performance was strong, and this was supported by strong cement sales in the domestic market, impairment writes back, and other income.
The main reason for the company’s increased earnings is from the cost synergy and increased revenue as a result of the merger that took place between CCNN Plc and Obu Cement Company Limited.
There was also a striking jump in its income statement on its tax for the year. For FY 2019, it incurred a tax expense of N5.6 billion, in comparison to the N24.9 billion tax credit it received in FY 2018.
This was as a result of a reversal of previous tax provision made on Obu Line 1; it received approvals for an extension of the company’s pioneer status on Obu line-1 and Kalambaina line-2 in February 2020, to leave effective tax rate at just over 8% in 2019. The pioneer status will help the company save funds that will otherwise have been spent on higher taxes.
(READ MORE:Dangote Cement to access more debt funding)
BUA reported an impressive FY’19 result. Its performance shows the growing strength of the company and its increasing market share. On the back of the strong performance, management declared an N1.75 dividend per share that translates to a dividend yield of 5.5% on current prices.
Cash flow position was also robust with a strong closing cash balance – from N2.8 billion in 2018 to N15.6 billion as at year ended 2019. The company’s growth, as well as the impact of its merger, present a great buy opportunity of the highly capitalized, low-cost stock. As of today when the market closed (21st May) its share price stood at N35.60 from a 52-week range of N27.6 and N41.
What we see is a great growth stock further heightened by the population expansion and increased urbanization. However, we expect the impact of the Covid-19 pandemic to be felt from the Q1 results of the company.
The industry could slow down for the year as the level of commercial construction also slows down. Yet the best part of holding stocks like this is that even with stalled operations for a period, a resurgence will always emerge.
Analysis: Airtel Nigeria is winning where it matters
Airtel has left no stones unturned in ensuring that its provisions are top-shelf – subscribers to the network, of course will have their own ideas.
Airtel might have won our hearts over with internet-war adverts starring our favourite tribal in-laws, but its fundamentals are what will make us the bucks that keep us happy. Airtel Africa Ltd is a subsidiary of Indian telecoms group, Bharti Airtel Ltd; the group has left no stones unturned in ensuring that its provision of prepaid plans, credit transfers, mobile internet services, messaging, roaming facilities and more, are top-shelf – subscribers to the network, of course, will have their own ideas.
Since last year when Airtel Nigeria became the second telecommunication company in Nigeria listed on the NSE, the company has experienced a steady level of growth. With a presence in 14 African countries, the group’s strength lies in its diversity with stronger companies mitigating the poor performances of others.
Performance Overview: Airtel Africa
Airtel Africa’s report for the year ended March 2020, revenue jumped by 10.9% from $3.1 billion at the year ended 2019 to $3.4 billion in 2020. The consolidated profit before tax also jumped by 71.8% from $348 million in 2019 to $598 million in 2020. However, profit for the period dropped by 4.23% with earnings of $408 million in 2020 from the $426 million it had earned in 2019. A reason for this is the tax figure that moved from a credit of $78 million in 2019 to tax payments as high as $190 million in 2020. Total assets also jumped by 2.41% from 2019’s value of $9.1 billion to $9.3 billion in 2020 primarily as a result of their acquisition of more property, plant, and equipment (PPE). The total customer base grew by 9.3% to 99.7 million for the year ended.
Full Report here.
Revenue growth of 10.9% was driven by double-digit growth in Nigeria and East Africa. However, the rest of its African operations experienced a decline in revenue. Its success in Nigeria is especially commendable, considering the fact that the company lost more than 100,000 subscribers in Nigeria between December 2019 and January 2020. Raghunath Mandava, Chief Executive Officer, remarked that the results which were in line with the group’s expectations, “are clear evidence of the effectiveness of our strategy across Voice, Data and Mobile Money.”
Behind The Numbers – Nigeria
Airtel Nigeria’s performance indicates the company is making the right calls in a very competitive industry. Nigerians are fickle when it comes to data and voice but will spend if the service is right. The company grew its data revenue by a whopping 58% to $435 million a sign that its strategy to focus on data is working. Voice Revenues for the year was up 15% to $850 million. In total, Airtel Nigeria’s revenue was up 24.4% to $1.37 billion. Ebitda margin, a number closely watched by foreign investors 54.2% from 49% a year earlier. Operating profit for the year ended also jumped by 52.6% for the year from 2019 and 32.4% from Q1 2019. Total customer base in Nigeria also grew by 12.5%.
Nigeria is surely critical to Airtel Africa’s future seeing that it contributes about one-third of its revenue. Recent results thus indicate it is winning where it matters most and it must continue to stay this way if it desires to survive a brutal post-COVID-19 2020. Telcos are expected to be among the winners as Nigerians rely more on data to work remotely but there are other players in this game. Concerning the impact of the pandemic, he explained that at the time of the approval of the Group Financial Statements, the group has not experienced any material impact arising from the impact of COVID-19 on its business.
On cash flows…
The group has also taken measures to enhance its liquidity. The CEO explained that it is moving its focus to enhance liquidity towards meeting possible contingencies.
“Having considered business performance, free cash flows, liquidity expectation for the next 12 months together with its other existing drawn and undrawn facilities, the group cancelled the remaining USD 1.2 billion New Airtel Africa Facility. As part of this evaluation, the group has further considered committed facilities of USD 814 million as of date authorisation of financial statements, which should take care of the group’s cash flow requirement under both base and reasonable worst-case scenarios.”
To this end, they have put in the required strategies to preserve its cash as its cash and cash equivalents, consequently, jumped by 19.1%.
Investors looking at this impressive result will be wondering if this portends a buying opportunity. Airtel Nigeria closed at N298 on Friday and has remained at this price for about a month. The stock is quite illiquid and is not readily available to buy.
It’s the price to earnings ratio of 4.56x makes it quite attractive. Further highlighting this opportunity is its price-to-book ratio which is as low as 0.5273, suggesting that the stock could be undervalued. Whether it is available to be bought, is anyone’s guess.