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Business News

Age of Start-ups: Familiar path of companies that failed test of time in Nigerian market

There has been significant growth with respect to investment and business development in the country, and this cuts across all areas of the economy

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The Age of the Start-ups: The familiar Path of Companies that have Failed the Test of Time in the Nigerian Market
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Africa, specifically Nigeria has become a center of attraction for both investors and new businesses, irrespective of the failures by several Startups in the country

There has been significant growth with respect to investment and business development in the country, and this cuts across all areas of the Nigerian economy; E-commerce, mobile technology, fintech startups among others.

Despite the many possibilities and potentials in the Nigerian market, not so many new businesses are able to scale through the fundamental stage, and as such are either forced to relocate or perhaps fold up if they don ’t end up been purchased by a third party company.

Some of the companies of the internet era that have failed the test of time in Nigeria at the fundamental stage include a couple of prominent businesses and/or brands who came in with bold statements such as OLX (classified forum), Efritin, Fero, Wiko, Wechat, Tambo Mobile, Easy Taxi, among several others.

While some of these businesses were able to scale through for years before going pear-shaped, others could barely scale through beyond a year. It’s interesting to note that many of these businesses share similar key issues that led to their respective failures, including a lack of proper research before entering the market, spending investor funds and never hitting the profitability mark, misappropriation of resources, lack of employee confidence, etc.

Sadly, a couple of existing Start-ups with seemingly great potential are still towing this familiar path to failure. This article aims to look at some of these businesses, past and existent, and shed light on key issues leading to their eventual failure.

Efritin

Owned by Swedish company– Saltside Technologies, Efritin officially launched as a classified advertisement website in Nigeria back in August 2015, however, could not scale past the second year of establishment in the country due to many reasons, with mismanagement of funds and high cost of data being the most prominent.

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(READ MORE: Twinpine celebrates seven years of data driven mobile advertising

According to the CEO, Nils Hammar, Efritinhad suffered greatly from the lack of excellent internet penetration and adoption. Nils also emphasized on how the high cost of data, as well as the unfavorable economic condition during that time, had impacted negatively on the business.“We have a long list of KPIs to evaluate how things are performing. Compared to other markets, we didn’t see the same progress in Nigeria” Nils told the media.

“I think the data cost in Nigeria is very high. In comparison to other parts of West Africa, Africa and the rest of the world, it is very expensive to use the internet for the vast majority of the people. It is very difficult for e-commerce and classifieds because they are quite late in the evolution of the internet industry,” Nils added.

Stanbic 728 x 90

With no much doubt, Efritin’s exit from the Nigerian market points to the fact that their business strives in Nigeria was a non-profitable one.

While Nils’ reasons for the closure are justifiable, insiders also have it that the main reasons for the company’s inability to survive in Nigeria are major because of funds mismanagement. Recall back to 2016, Efritin former MD, Zakaria Hersi was accused of stealing thousands of dollars, while turning a blind eye to the internal crises that played a major role in their demise, especially as they were not able to raise more funding to scale the business any further.

Another key issue would be the lack of proper market survey, considering that other online classified platforms like OLX were not doing fantastically great as at the time of establishment in Nigeria.

Easy Taxi

Easy Taxi is another business/startup that failed at the point of debut in Nigeria, or better still let me say could not survive the test of time. Following the reception of a seed-funding valued at $10 million, the ride-hailing service which started off in Brazil back in 2011 expanded to Africa among other regions, launching in Nigeria sometime in 2013 and commencing operations in Abuja. 3 years down the line, however, the company hit the halt button and exited Nigeria.

(READ MORE: WHO warns countries against rushing to lift coronavirus restrictions)

Easy Taxi Nigeria is a subsidiary of Africa Internet Group who had the likes of Rocket Internet, MTN, Millicom, among others as Shareholders. It was hard to believe they wouldn’t survive the Nigerian economy for that long given all the major stakes in the business, however, as with most businesses that have failed in the past, Easy Taxi was not immune to the harsh realities of market penetration in a challenging market as Nigeria’s, hence its exit.

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As for the reasons for their failure in Nigeria, it is still very unclear as all effort to lay hands on actual information has been to no avail. For the obvious, Easy Taxi had to struggle with proper penetration into the Nigerian market.

OPay

Talking about OPay, the story is a bit different as it is not a case of exiting the country. Instead, the fintech and multi-service company has been struggling with profitability since it arrived in Lagos, Nigeria back in August 2018. Here, there are several key issues that may lead to a bad ending for the Chinese company if care is not properly taken.

One of those many key concerns about OPay’s business in Nigeria is the over-reliance on financing to become profitable. While it is not news that Africa, and Nigeria as a whole, has become a focal point for foreign investors; OPay has keyed itself into the enormous opportunity therein, investing millions of dollars to pivot its multi-service platform which has been more of a liability than an asset. Why? You may like to ask; so far, the company has rather focused on spending, even when it is obvious that a lot of their business module is not sustainable, or perhaps, requires an overhauling in other cases.

(READ MORE: Beware of sites offering free internet plans, NCC warns Nigerians)

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As much as funding for a startup is very vital, working with a module that is sustainable or viable is as important. Sometimes, it is not all about spending money; a sustainable strategy sometimes cost less spending. It is even worse when a startup such as OPay fails to gather (despite having reasonable funding) the required expertise and knowledge to run the business, especially in this part of Africa where you have to go the extra mile to achieve significant success.

OPay’s services include ORide, OTrike, OFood, OLoan , and the recently launched OCar among others. Here, it is obvious that a lot of activities are taking place simultaneously, however, how many of them are properly been managed? How many of the business are properly been accounted for by their respective management team?

While you are trying to figure that out, the Chinese company’s inability to turn a profit yet could also be blamed on external stakeholder impact – the Lagos State Government has influenced some policy that may have impacted a vital operation of OPay negatively.

In a recent development, the State government placed a ban on the use of Okada on major roads within the state, and as a result, OPay has had to shut down its bikes operation not only in Lagos State but also in other states where its bike operation is functional, including Kwara State (although the company hasn’t released any official statement to that regards; insiders informed of how a majority of OPay staff was laid off in Ilorin following the okada an in Lagos).

(READ MORE: Naira under pressure as Nigeria records poor export earnings)

The OPay bike-hailing service was meant to be the business module to lay the golden egg, but now what happens? In my opinion, it simply shows the extent to which OPay lacks an understanding of the environment with respect to the engagement of stakeholders and policymakers.

Also, in a recent report by a research website- Hindenberg, Opera was found guilty of several misconducts in its operations across the board. The company was not only linked to what was tagged as ‘exploitative loans’, but also misappropriation in the company’s operational cost, poor management, as well as certain corruption crisis specifically tied to the company’s current  CEO, Yahui Zhou.

According to an insider whose name will be withheld for privacy reasons; she shared an insight on what the internal management looks like, and just like the rumors that have been making rounds on the internet, it wasn’t a fantastic one. According to her, the company has employed a lot of resourceful talents, while offering juicy benefits; however, fast-forward to date, the company has been landing a lot of slash on employees’ benefits including salaries.

Additionally, Opay was recently accused of falsifying numbers, which according to a reliable source, was from fake orders, and was intended to ‘promote’ or possibly increase its app usage. Whether this worked well for them or not, it isn’t the best approach for a startup that ordinarily should be after leaving behind a good first-time impression. What also happens to gain people’s trust? I didn’t mention investors because, to them, it’s all about Return on Investment (ROI).

(READ MORE: External reserves decline by over 8%, despite lower FX demand)

It is also worthy of note; OPay’s latest venture into the mobile business. The Chinese company named its mobile brand- OLLA, and you are most likely not aware of what that means, I guess? This is only possible because the new devices have recorded low sales (near-zero in some cases) in over 80% of the shops they are been sold at the moment. That’s also aside from the fact that the devices are of low quality, forcing a lot of phone dealers to quit doing business with them.

There are more than a dozen, perhaps hundreds of startups who are most likely threading in this similar path. It is only advisable to stick to the most important things in starting a business, and two of them are sticking to a sustainable plan and recruiting efficiency over numbers, (or both simultaneously).

This article is brought to you by Askifa.ng

Askifa.ng is a Technology-focused news website, and its primary aim is to demystify the ideology behind the technology, an alternative to saying simplifying technology. While our primary focus is to dish out tech stories and breaking news; we also have a keen interest in Startups across respective fields, and we won’t hesitate to put up stories about the latest development in the space

 

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    Business

    Hyundai and Kia to set up an assembly plants in Ghana by 2022

    The automobile giants will join Toyota-Suzuki, Nissan, Kantanka, Volkswagen, and Sinotruck who already have plants in Ghana.

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    Hyundai to invest $87 billion into producing 44 new electric vehicles, Hyundai partners Kia to invest €100m in electric vehicles 
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    Few weeks after Twitter announced its plans to open its first African office in Ghana, Hyundai and Kia have also concluded plans to set up an assembly plants in Ghana by 2022. The automobile giants will join Toyota-Suzuki, Nissan, Kantanka, Volkswagen, and Sinotruck who already have plants.

    Ghana’s Minister for Trade and Industry, Alan Kyerematen announced this on Twitter.

    READ: This is the New Tarrif Structure For Importing Tokunbo & Brand New Cars

    Pleased to announce that Hyundai & KIA are set to establish assembly plants in Ghana by the end of 2022 to join Toyota-Suzuki, Nissan, Kantanka, Volkswagen & Sinotruck. The Ghana Auto Development program = 3,600 assemblies & 6,600 manufacturing parts jobs in Ghana.

    The local assembly of vehicles, 3,600 direct and indirect jobs would be created in Ghana, and the addition of components and parts manufacturing will also add about 6,600 direct and indirect jobs.”

    READ: Toyota snubs Nigeria as it moves to establish assembly plants in Ghana, Ivory Coast 

    Why this matters

    More foreign companies are shunning Nigeria in favour of Ghana. Recently, Nairametrics reported that Amazon is set to situate its African Headquarters in South Africa, a multi-billion dollar investment that is projected to create over 20,000 jobs both directly and indirectly.

    Following its move to Ghana, Twitter CEO, Jack Dorsey cited a number of human rights-related reasons for the choice of Ghana over Nigeria. Added to this are rising insecurity, stifling government regulations and the gapping infrastructural deficit bedevilling Nigeria. Consequently, our nation is steadily losing opportunities to attract foreign companies that could be very instrumental in bridging its unemployment gap which is currently over 30%.

    SSKOHN

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    Business

    Passports: Backlog of undelievered passports to be fixed before May 31st – Minister

    The government also announced the launch of a new passport application system, which would be aided by fast track services nationwide.

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    +1

    The Federal Government disclosed that all backlogs of undelivered passport requests would be fixed before May 31st, and announced the launch of a new passport application system, which would be aided by fast track services nationwide.

    This was disclosed by Minister of Interior, Rauf Aregbesola, in a press briefing with newsmen on Thursday.

    What the Minister said

    “On or before May 31st, all backlogs of undelivered requests for passports will be totally met, unless such applications have a problem,” he said.

    “But before the deadline, the problematic application would be contacted, so that we know what’s wrong with the applications. Assuming there would be no problem, every successful application for a passport would be given a passport on or before May 31st,” he added.

    READ: Canada invites 3,900 new PR candidates, introduces new programme to attract Nigerians

    The new passport process

    The Minister disclosed that the FG will launch a new passport application process which would come into effect soon.

    “When you finish your application process, there would be a waiting period of six weeks to collect your passport, however, if you want an express service, there would be fast track centres nationwide, to meet requests for express passport users,” he said.

    What you should know 

    • Recall Nairametrics reported last month that the Federal Government inaugurated the Nigeria Immigration Service Passport Express Centre, which is a partnership with the private sector to enable the government offer passport services to Nigerians and make passports available in a maximum of 72 hours of a successful application.
    • The FG also launched the Electronic Temporary Passport to cater for Nigerians desirous of returning home but whose national passport is not available.

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