‘Its pure, hardcore survival’: Jumia Uganda CEO on business conditions in light of Covid-19
By Ron Kawamara, CEO of Jumia Uganda
In Uganda we had a full lockdown where passenger vehicles and public transport were not allowed. Markets and shops had to be closed for almost two months. This was an aggressive measure against Covid-19 and consequently Uganda’s businesses have suffered much more than, for example, our Kenyan counterparts or our Tanzanian counterparts, and other businesses in countries across Africa. Our economy heavily depends on us exporting and then importing goods back into the country.
In Uganda, 60% of all trade products don’t move on trailers or on haulers or on trains, they move in private and public transport vehicles. By stopping that, it disrupted the whole ecosystem of the movement of goods. The whole supply chain was disrupted. Some 80% of the economy here is the informal sector dominated by small traders, women and young people. These people rely not on the expensive forms of transport but on public and private means to move their products.
So, for a long period of time, this was totally disrupted and it was a double whammy: you couldn’t go in and out of the country and you also couldn’t move within the country.
We really see that there are not many winners at the moment and a lot of losers in this economy.
In the corporate space, people’s spending power is down. They’re stuck with heavy wage bills, the overheads have not changed, landlords still expect their rent and are heavily in debt. We see here that there’s a ripple effect and companies have responded by holding onto the cash. That means no additional spend on marketing, no salary increases for employees, and most companies have either reduced or plan to reduce their teams. Despite this, the cost of doing business remains high.
Overall companies that have had an online presence have fared much better.
Consumers were quite concerned about Covid-19 and many of them opted to use automated ways of obtaining goods and services. Traders who had no access to their physical shops or market stalls also needed an outlet to be able to sell and continue to make a revenue from home. So, we did see a spike in business for companies like ours.
I think it has also inspired a new cohort of entrepreneurs. During the four or five months of full lockdown, we saw hundreds of online shops open up, doing things from water delivery to gas delivery to baby products to feminine products. We saw a huge spike in that, so that tells you that a lot of people saw opportunity in e-commerce.
Overcoming the issue of trust
Historically we’ve seen an issue with trust when it comes to online businesses. In this market, even in the best of times – when customers can come to your shop and touch a product, feel it, taste it and negotiate with the seller – there’s still a very high influx of Chinese knock-offs and sub-standard products with no warranty and no returns.
Customers were already afraid of being hosed off, so online typically is a stretch too far for them. With the onset of Covid-19, e-commerce and online businesses were the safer option. We saw a big jump in credibility and trust in online businesses.
Changes in consumer spending
What we’ve seen since then is a strong shift in what customers are spending on and how much they’re spending. We see that customers are now mainly focused on buying key essentials such as food instead of luxury items.
For example, for our business we’ve seen a big drop in fashion sales, we’ve seen a big drop in our electronics sales. Overall, there’s been a downturn in the key categories that are non-essential. While we’ve seen a big increase in the usage, with more users buying more frequently, they’re buying low value items.
Looking to the future
I think there’s a general openness now to automation and to technology. I think many companies have realised that you don’t have to do things the way you did them before, that you don’t need to have physical means, and that you don’t need to have 100% of your staff in an office.
Potentially what you will see now is companies deciding that actually instead of spending tens of thousands of dollars to rent skyscrapers in Kampala for staff that don’t need to come to the office, that those are real savings they can invest in growth, they can invest in people, and encourage work off-site, and that they don’t need to have big procurement teams.
Leadership in a time of crisis
I think this time has been tough for leadership because there’s a lot of anxiety in the markets and in the teams. Companies are closing, employees are being cut. There’s that anxiety within my own team.
While people are staying home and staying safe, we’re coming to the office, so it’s a balance of leading with empathy and yet keeping the eye on the end goal of making sure that we can support the vendors whose shops are closed and the customers who can no longer access the supermarkets and the markets.
For me it was stipulating or sharing what the big picture is, why it matters that we come to work, why it matters to the vendors, why it matters to customers that are at home, why it matters for our own job security. And, at the same time, being empathetic to their fears of coming to the office and the risk of contracting the disease and taking it back to their families.
So, for me, it’s been that balance between being empathetic and communicating the vision and the strategy at a time where there’s a lot of confusion and anxiety.
The number one priority for most businesses in Uganda this year is to remain relevant to the changing needs and expectations of the customers. This is the most important survival and growth opportunity because we know it’s going to be tough for the market.
So, it’s not about job creation or scaling the business at all costs. It’s about reducing your spending, being resilient, remaining relevant to the extent that you can stay serving your customers, and making sure you have a cash flow that’s going to support you until a vaccine is mass distributed.
You’re looking at a one-year run rate to tighten your belt. It’s survival for many businesses, especially SMEs. It’s not job creation, it’s not social impact, it’s not scaling to the next level. It’s pure, hardcore survival.
This article is an excerpt from The Africa List’s ‘Business Barometer 2020’.