Dear colleagues and friends,
Writing each new edition of HUSTLE & FLOW these days feels like sending dispatches from a vastly different world every week as the ground continues to shift underneath our feet.
Last week, several countries in Africa started implementing confinement measures as reported cases rose above 1,000. But it’s easier said than done in places such as Lagos where local culture, behaviors, and the powerful influence of religion go against the very idea of social distancing.
In addition to the human toll, the global economy is now facing a particularly cold winter - one that is likely to last 18 months, according to London’s Imperial College. Many African countries will be triply hit by the combination of the general slowdown, local currency devaluations, and capital drying up as international investors turn away from the continent to worry about problems at home.
However, as we all know, in every crisis lie opportunities. For example, content consumption - for news, communication, education and entertainment - is at a peak right now. In fact, for millions of people trapped in their homes around the world, digital content is the only escape. For investors, the expected currency devaluations, especially when it comes to entertainment market leader Nigeria, will make certain deals particularly affordable.
In this special edition of HUSTLE & FLOW, I will take a pragmatic approach and focus on what we CAN do as entrepreneurs and investors in the African Entertainment space to protect our businesses and prepare for the future, even though we can only guess at what this future will look like. African markets will react differently than developed ones to this crisis. Also, African entrepreneurs will not be able to rely on the same generous rescue packages that many western governments have started implementing. They can only count on themselves, their creativity and resilience (and perhaps on the support of a few international partners).
Before we get into this, an apology: the link I gave you last week for the HUSTLE & FLOW archives was incorrect. The right one is https://restless.global/hustleflow, and the password remains hardouthereforapimp.
Continue to send me comments and questions, as well as subscription requests, at marie@restless.global. Also, if you are an entrepreneur or investor in need of strategic advice in these uncertain times, hit me up and I will give you a free 30 min session. We will work together to find some solutions for your business.
Happy reading to all,
Marie
INTERNET AND MOBILE INFRASTRUCTURE
Crises have the advantage to clarify what truly matters, and we can give Coronavirus credit for settling the debate on whether the internet should be considered a utility or a luxury. As millions of people shifted to WFH (work from home) over the past couple weeks, networks quickly started showing signs of saturation, prompting YouTube, Netflix, Amazon Prime and others to reduce streaming quality in Europe to prevent the internet from breaking.
In Africa, which is still far from universal internet coverage, network saturation is an everyday occurrence even in non-Corona times. Safaricom was the first African operator to react last week by announcing it would double its home fiber speeds to encourage WFH. It also waived M-Pesa fees, and was promptly followed in this by competitor Airtel Kenya. MTN South Africa has announced that it will cut data prices for its 30-day bundles by up to 50% starting from mid-April and offer each of its subscribers 20MB of free data daily. Zimbabwe’s TelOne announced a discounted Home Intense Package to encourage its subscribers to “effectively work and learn from home”. It will be interesting to see what the impact of these Corona packages will be on consumer behavior.
In any case and as we’ve already discussed in this newsletter, increasing coverage and capacity through investments in high speed cables, data centers, and mobile infrastructure (including 5G) is a great bet on the future, no matter what shape it takes. Just a few days ago, pan-African internet service provider Liquid Telecom announced that it had secured a $4.8 million deal to manage Togo’s Carrier Hotel data center as well as the country’s primary internet exchange point. Opportunities are out there.
E-COMMERCE
The impact of Coronavirus on e-commerce worldwide has been two-fold: although platforms face supply chain disruptions, they also report a 50% increase in online sales as people avoid physical stores. Will Coronavirus force similar behavioral changes in Africa and contribute to a wider, faster adoption of e-commerce on the continent? I believe that the logistical challenges are still too important for us to see a global, long-lasting shift, except in the most advanced markets such as Tunisia, where sales on Founa.com, the country’s leading online store, have quadrupled in the past couple weeks. Nevertheless, it is definitely an opportunity for African e-commerce platforms to create market awareness and present themselves to new consumers as providing an essential service. This is what Jumia is doing through its partnership with global health product manufacturer Reckitt Benckiser to provide access to hygienic products.
FASHION AND CONSUMER PRODUCTS MANUFACTURING
Several producers of consumer goods worldwide have retooled their operations to shift to the production of essential items such as hand sanitizers, ventilators, or face masks. For African manufacturers who have the capacity to do so, this can be an opportunity to access new regional and international markets. I am thinking specifically of the fashion and textile industry in Ethiopia and West Africa.
But there might be other, longer-term opportunities besides face masks. One of the major Corona-trends that experts believe is here to stay is the mass adoption of remote working (with this new term, Work From Home) in developed markets, even if it is not a silver bullet. Africa might take longer to transition to this new way of working as stable internet and power supply at home remain a challenge. But it can certainly service the world. As someone who’s been working remotely since 2006 (and been a full-fledged digital nomad since 2015), allow me to share a personal insight: I see the need for a proper WFH apparel line that would be comfortable like pajamas but presentable like office wear, at least on top, for Zoom calls. Such a clothing line could be produced in Africa and sold globally. If you want to work together on this, let me know!
TECH
Talking about Zoom, here’s an example of a business that is uniquely suited to these strange times we’re living in. One of its great features is the ability to change the background of your video. Any solution that can contribute to improving the professional quality and ease of video calls, including in low bandwidth environments, would be worthwhile for African startups to explore.
Another big opportunity for startups: Africa’s largest innovation incubator CcHub is offering between $5,000 and $100,000 in funding to companies with COVID-19 related projects covering last-mile communication, help for people affected by the disease, production of essential medical supplies and support for disrupted food supply-chains.
And last but not least, EquaLife Capital is launching a $20M Africa Venture Debt Relief Fund that will support venture businesses starting with a preliminary focus on the East African region with loans between $200k and $2M. This is big and this is very needed, and I hope EquaLife can inspire other funds and especially DFIs to repurpose some of the vast amount of capital raised in 2019 to support other sectors of the economy across Africa.
PHYSICAL VENUES: EVENTS, SPORTS, CINEMAS, CONCERTS, RESTAURANTS
Of course, the hardest hit sectors are those which involve the physical presence of people in public spaces. As confinement measures and travel bans are rolled out across the world, cultural events have been cancelled and venues shut down. Festivals, galeries, museums and conferences are going virtual to avoid going dark completely. Hollywood studios, starting with NBC Universal, are giving up on theatrical windows after the closing of cinema chains to release new films directly online. World-class artists are streaming private concerts from their homes, and restaurants move to delivery only (will this be the comeback of Travis Kalanick?). But of course, this is not the same, especially in Africa where the communal experience is paramount.
Filming has also stopped in most markets (but not yet in South Africa) and on-going productions have been shut down, causing major disruption and job losses and spurring Netflix to launch a $100 million relief fund for out-of-work creatives (AGAIN: thank you Netflix) which we hope will also cover stalled projects in South Africa and Nigeria.
The first step to take for all these businesses unfortunately is to cut costs down quickly and dramatically, move as much of their activities online as possible, and attempt to renegotiate loan repayment schedules if they have any. But that’s far from enough. So, as George Clooney would say, what else?
CONTENT
As they stare a global recession in the face, African entertainment companies will have to rethink and reshape their strategic investments to survive. Although they will have to save money by divesting from some assets, they should also invest to preserve their future competitiveness. According to Nielsen, video consumption could soar as much as 60% in coming months. Broadcasters and streamers have already started to adjust their programming to match a viewing landscape dramatically different than even just one week ago. In Africa, StarTimes has opened up free access to more than 100 local and international channels on its streaming app, StarTimes ON, while MultiChoice is making several of its 24-hour news channels freely available to stream on DStv Now in South Africa. For now, news is getting most of the attention, but soon broadcasters will also have used up their backlog of original scripted content and they will need more, and more of different types of content.
Studios and development executives are still looking for great IP, even if investment decisions may be delayed. Now is the time for African companies to invest in the content development and IP creation side of their business, through activities that are well suited to individuals or teams working remotely, so that they can be ready with solid projects when production can start again. Writing, of course, necessitates very little resources and can take many shapes and forms: news articles or blog posts, long form fiction or nonfiction, books, plays and screenplays, comics, or stand up comedy sets. Audio content can also be cheap to create: podcasts, audio book recordings, radio plays, music and songs of course. Animation and video games can still be produced by teams working remotely. And finally, even with the shutting down of film and TV sets, new video content can still be created by repurposing archive footage, finishing projects left on the back-burner, or filming short comedy or educational content at home with a smartphone and a laptop. In fact, after being bombarded this week by ads for online yoga and HITT classes, I find myself wondering why there aren’t any truly sleek African dance workout videos? Sherry Silver seems too busy to corner the space herself so it’s up for the taking.
And to finish this week, a special shout out to African creators doing their part by offering their educational content for free: Ubongo Kids, Bino & Fino, BRCK, and Nollywood’s highest grossing director and animation studio owner Niyi Akinmolayan who created an “understanding coronavirus” video in Yoruba, Igbo, Pidgin, Hausa and Effik versions after noticing that non-English speakers in Nigeria didn’t have access to this crucial information.