Tuesday 06 March 2018 24 BUSINESS DAY INTERVIEW ‘At the moment Nigeria is still within 5% formalized retail development which is introduction stage’ Between 2005, when The Palms Mall was opened as Nigeria’s first formal retail outlet, and 2015, the retail market in Nigeria witnessed what could be termed a revolution with an estimated $3 billion investment by both local and foreign investors who developed malls in various parts of the country. But MICHAEL CHU’DI EJEKAM, CEO, Atreos (retail investment holding platform), in this interview, says with what has been done so far coupled with huge household spend on food and beverages, the retail market, especially formalized retail, is still at early stage of development in the country. He also highlights the challenges militating against the growth and development of this market. He speaks with CHUKA UROKO, Property Editor. Excerpts: Nigeria is out of recession now and the economy is improving. But the impact of this improvement is not seen in real estate. Why? Sometimes, the impact of economic growth on real estate can be delayed. This is because real estate can be sticky. Though there is improvement in economy that could encourage investors to develop assets to take advantage of the improvement, it will still take a while to do that. Typical large commercial projects will take about 24 months to develop and deliver. Investors have to prepare to supply stock. If it is said that there is going to be improvement in the market, they will develop assets in advance and anticipation that there is going to be an improvement. There is always a time lag before real estate comes around. But one of the key issues that I consider a challenge in this market is lack of patience. Developers must have the ability to ride out down cycle; there should also be the ability to anticipate both up cycle and down cycle and developments have to be able to accommodate all that. Currently, the market does not seem to excite investors unlike before when much of investment discussions centred on real estate. What is happening? Overall one is still very optimistic about Nigeria because given where we are in real estate development, we are still at the very early stage. In retail, for instance, if you have 20 percent of retail in the market that is formalized, that means you have just an introduction into the market and Nigeria is way below that level. If the market goes between 20 and 40 percent, it is said to be in acceleration stage. At the moment, Nigeria is still within 5 percent formalized retail and that is just the introduction stage. We are still far away from between 40 and 60 percent of formalized retail when the market is said to be at maturing stage. At 60 percent and beyond, the market is at consolidation stage and that is what we have in America or UK. For the sake of clarity, what do you mean by formalised retail? This is the kind of retail that is away from the informal retail with modern trade such as Shoprite as against informal market where you have a lot of things put out for sale. About 95 percent of retail in Nigeria is informal. In South Africa, about 70 percent of their retail is formailsed. This is because they have been investing in building the physical structures and they also have the capital. They have long term capital to draw from to build those structures. They have *Ejekam come through those investment, development, and formalization of retail over a decade but Nigeria is still starting. It seems many Nigerian investors don’t understand the economics of retail development. Much of what we have today are owned by foreign interests. Why is it so? A lot of people doubted that The Palms Mall which was Nigeria’s first formalized retail outlet built in 2005 would succeed. The completion of the mall was a practical demonstration that the idea was possible. After that, came the Ikeja City Mall in 2011 which showed that a lot of things were possible. Part of the problems in this market is that people are not aware and they don’t understand. Before developing Ikeja City Mall, Actis and their local partners sat down and did their home work. They found out that within the eight kilometers radius of the mall, there were 4million people. Just compare this to Johannesburg where you have only 5million people. The 4million There is the need for enabling environment which government needs to provide for investors; they also need clarity in policies because no one wants to invest in an economy where policies are not stable people in Ikeja came from close to 1million households, giving you four persons per household. Each of the household had robust spend which gave the developers the confidence that it was going to succeed. So, at the initial stage of mall development, there were the Ikeja City Mall, the Polo Park Mall in Enugu, and the Abuja Lake Mall. Subsequent years saw other major developers like RMB Westport, Novare come into the market to develop and deliver assets. All these improved confidence in the market on the development of formalized retail. After these came the recession in 2015 and so some of the underpinnings of commercial retail were challenged. Apart from capital, what are those other problems that a potential investors should be typically looking out for in this market? There are three pockets of problems. One is understanding the nature of the Nigerian consumer. Second is understanding the issues that investors face while pocket three has to do with understanding the nature of retailers. The reality of the Nigerian consumer is that an average Nigerian household spends 60-70 percent of its monthly spend on food and beverage consumed at home. This spend is estimated at $211 billion annually. You can imagine what is left for education, heath, family relationships, etc. This is way above their counterparts in other jurisdictions where the monthly spend on similar items is just 8 percent. This tells you that Nigeria has a large consumer base. But because of the challenge of power, people cannot afford to go out there and buy large quantity and store with refrigeration. This means that they have to go out frequently to buy their stock. The nature of the consumer therefore, is that he cannot store for long period because of power failure. Again, there is low car ownership rate in Nigeria which means that shoppers cannot go far for their shopping. They want to be able to work short distances to do their shopping. All these have to influence the kind of mall that the developer has to put on the market. He has to do something within the neightbourhood. For the investor, the challenge is that he has to have long term outlook because he has to ride out down cycles bearing in mind that the market has great potential. In the long run, Nigeria presents the biggest retail opportunities in the whole of Africa. But the investor has to have patience in the long term outlook. Again, getting the right amount of land could be very challenging in this market. Land could be very scarce and expensive in this market, especially in Lagos which almost is built up. There is also the issue of high construction cost. It costs 2.5 more to build here than what it costs to develop a mall in South Africa. What this means is that a $40 million mall in South Africa will cost 2.5 more in Nigeria. This is because over 70 percent of construction materials are imported. This high cost is a major issue to both the retailer and the consumer because it affects product pricing. To reduce this cost will involve playing with the design in a way that will reduce the size. Not going multi-storeys is also another way of reducing cost. The third pocket of consideration is the retailer. Because the investor has incurred high cost in developing the mall, this has to trickle down in terms of rents charged. Another challenge for the retailer is importation because he has to import almost everything he sells and with the devaluation of the local currency, he is squeezed. He is also challenged by the pricing because he doesn’t have to charge too high. He does not have to charge so much that the consumer may not be able to afford. How would the government come in to ensure that this market grows and develops? Sadly, government is not encouraging the growth of this business. When some foreign investors wanted to come in and invest, government was not listening and came up with all manner of regulations. Some of us thought that government should have encouraged them, especially coming at a time when there was scarcity of dollars in the market. When Nigeria was in deep recession, savvy investors were interested in the economy because the country has great potential—growing population and a substantial consuming class estimated at 41. 6 percent of the population. It has high urbanization rate of about 4 percent. All these need residential real estate to live in and commercial real estate for their business. These are the attractions that made investors come in even during recession. What exactly do investors want the government to do for them? There is the need for enabling environment which government needs to provide for investors. They also need clarity in policies because no one wants to invest in an economy where policies are not stable. If investors bring in capital, they need to convert same with 24 hours. If they convert at the rate of say N200/$ and in the next 24 hours, the rate jumps to N400/$, it makes nonsense of their investment plans. So, it is important for the government to create an environment that is stable and predictable. During recession, it was also a big issue for investors getting out their money back home. There was so much uncertainty and that discouraged new investors from coming in.
Tuesday 06 March 2018 BDTECH In association with BUSINESS DAY 25 ‘Leadership principles are pivotal in the ever changing IT world’ Stories by JUMOKE AKIYODE LAWANSON Femi Adeoti, managing director/chief executive officer, Africa operations at Inlaks, has emphasized the importance of leaders empowering and coaching team members in order to enable growth in today’s ever evolving technology environment. Adeoti who spoke at the Information Technology (IT) Merit Award and Investiture ceremony organised by the Nigeria Computer Society, Ogun State Chapter in Abeokuta said that ‘Information Technology is at the center of everything we do in the world today and it is important for leaders to have the right leadership skills to survive in the ever changing ICT industry.’ Delivering a keynote address at the event on the theme: ‘Leadership, Attitude and Success in IT profession’, the ICT expert said that successful leaders have the ability to inspire, motivate and act as mentors to the people they are leading. ‘The essence of leadership is to have a clear vision, establish goals and provide team members with the knowledge and tools necessary to achieve those goals,’ he said. According to him, integrity is one of the top attributes of a great leader and this entails consistency of actions and a deep commitment to do the right thing for the right reason, regardless of the circumstance. Integrity, according to him, is what establishes the leader on a solid ground. He cited the Law of the Lid, Law of influence and the law of empowerment by John Maxwell as some of the leadership principles that every leader must embrace to become effective. ‘I commend the outgoing executives for their service and leadership to the Nigeria Computer Society Ogun State Chapter and urge the incoming executives to consolidate on the efforts of their predecessors. I also congratulate the awardees who have been recognised for their contributions to the ICT industry. We must all play our part as individuals and as a community to ensure that Nigeria becomes the country of our dreams,’ Adeoti emphasised. The Ogun IT Merit Award and Investiture ceremony, attracted Government officials, academicians and professionals from the ICT industry, including: ‘Bunmi Adebayo, Special Adviser, ICT, Ogun State and representative of the Ogun State Governor, ‘Dayo Adeneye, Commissioner of Information and Strategy, Ogun State, Adebayo Dada Akinde, Professor of Computer Science and past president of the Nigeria Computer Society , Femi Williams, GMD, Chams Plc, Jonathan Nwosu, Registrar, Babcock University, and ‘Bukola Onashoga, HOD, Computer Science, Federal University of Agriculture, Abeokuta; amongst others. Inlaks is a leading system integrator in Sub-Saharan Africa. The company partners the leading OEMs in the technology industry to provide world class information technology solutions that exceed the needs of customers. Over the years, Inlaks has built a reputation as the foremost ICT and Infrastructure Solutions Provider, helping customers effectively seize new market and service opportunities. Mastercard leverages Facebook Messenger to help SMEs go digital Mastercard’s plan to use Facebook Messenger to provide technology to small businesses in Africa and Asia in order to drive affordable acceptance of electronic and mobile payments will help these businesses expand to new markets, and unlock financial services and products. It was revealed at the Mobile World Congress in Barcelona Spain, that this Messenger experience will launch in Nigeria, where Mastercard will pilot a new Masterpass QR bot to help business owner’s move beyond cash transactions to accepting QR payments. The company says that Ecobank and Zenith Bank will support this inaugural program. The pilot in Nigeria is the beginning of a larger plan by the two companies to include more businesses into the digital economy. According to research done by The Fletcher School and Mastercard Center for Inclusive Growth, of the $301 billion of funds flows from consumers to businesses in Nigeria, 98 percent is still based on cash. ‘Every business owner is looking for ways to increase sales and draw new customers into their stores. By offering QR-based digital payments, smaller retailers can achieve these goals and create greater customer stickiness with little to no investment beyond the phone they already have,’ said Jorn Lambert, executive vice president, Digital Channels and Regions, Mastercard. Smile wins the 2018 telecom leadership excellence prize Another feather has been added to the cap of leading 4GLTE telecommunications network service provider, Smile Nigeria, as the fourth generation long term evolution (4G LTE) company was honoured with the Telecom Leadership Excellence Prize 2018 by The African Institute for Innovation Leadership, in Lagos on Wednesday 28th February, 2018. According to the organisers, the award is in recognition of Smile’s excellence in leadership innovation and customer satisfaction. Lotanna Anajemba, Head, Brands and Communications, Smile Nigeria who receive d the award on behalf of the company assured that Smile communications will remain steadfast to the noble ideals that have informed its unending quest for excellence. Anajemba avowed that the award would help in energizing the company to continue to deliver the best in terms of service and products. He said that Smile will not relent in her quest to offering consistent service delivery, super fast and reliable broadband internet services to customers and Nigerians at large. Reaffirming the company’s commitment to speed, quality and reliable 4G LTE mobile broadband services, Smile Communications Nigeria recently secured additional capacity on IRU basis with one of the leading telecommunications operators in Nigeria, to improve its service quality and customer experience across Smile coverage areas. The company received commendation for keeping to its promise and sustenance of high-speed 4G LTE broadband internet and clear voice services, which it provides consumers in major cities across the country. The organisers also noted Smile’s contribution to the development of Nigeria and indeed Africa’s economy by providing a platform that enables its citizens achieve more both in their personal and business lives. Lotanna Anajemba dedicated the award, very deservedly, to Smile customers, trade partners and staff. The company was previously adjudged the ‘Best Premium Quality Super Fast 4GLTE mobile broad- band service provider of the year 2016’, ‘The Most Innovative Broadband Service Provider of the Year’ at the 2016 Titans of Tech Awards, ICT Investment Award and Leadership Newspaper ICT/Telecoms Company of the year 2016 among others. This latest recognition, like the others before it, aligns with Smile’s global vision and mission to be the telecommunications services provider of choice in all its markets and enable its customers achieve more and enjoy the best broadband internet services available.