13 Feb 2023
Q & A Interview with Capital Ethiopia
Capital: What does VXP do in brief?
Michael Okwusogu: We are 100% African diaspora owned advisory firm Headquartered in London, UK, with offices in Toronto, Canada and Dubai, UAE. We assist firms manage and solve for mission critical day-to-day operational activities. We enable our clients build the required operational sustainability and resilience to lead successful organisations and achieve commercial objectives. All our support is of a practical nature, nothing theoretical as we’ve done the jobs and worked in the sectors as subject matter experts for many years. We know what works on the ground day-to-day and deliver accordingly. Our differentiator is that we build considerable value through practical knowledge, experience, and solutions by developing a data first culture that drives intuitive decision making; utilising the right technological tools enabling superior business performance on a consistent basis; building the right culture with people and talent management as the anchor to success; identifying and utilising appropriate exponential growth frameworks driving competitiveness; empowering clients with the insight to thrive in the transformative information age; and supporting clients build a successful organisation through a framework that delivers operational excellence and resilience.
Capital: Where does it have experience and on what?
Michael Okwusogu: We work in Financial Services, Telecoms and start-up sectors. Along with our partners, we have over 100 years of combined experience across financial services and telecoms as C-level operational and business leaders.
Capital: What is your take on Ethiopia’s business environment and what attracted VXP?
Michael Okwusogu: Let us start with some headline statistics which drew our attention to Ethiopia when we initially discussed what our Africa strategy would be. Given our own heritage is West and East African diaspora, the easier thing to do would have been to focus attention in those countries. But we were very much of the view that opportunities for us lay very much in the road less travelled as they say.
We see the efforts in market opening across telecoms and financial services as having a compound effect on the wider economy with time. Ethio telecom losing its monopoly, yet via Telebirr registering we believe 20m subscribers in the first full year of operations and now, with Safaricom registering 1m subscribers in under a year, validates the assumptions we made about the size of the country’s potential huge internal market largely being untapped. When you then look at the efforts to open up the financial services industry albeit and rightly so, slowly, and the establishment of a securities exchange in a couple of years. It augurs well for the future if things progress positively. Given our direct experience of market openings in various countries we have worked in, we see similarities where our direct lived in experiences will be of considerable value to our targeted client base.
Finally, Looking at the neighbourhood, you see Rwanda making great strides in development. Forging a niche for itself with its Financial Service Centre and other technologically focused industries. Kenya with its developed ecosystem and again, its bid to be the Financial Services centre of the region. But a simple statistic should focus minds. I’ll chose these two countries to illustrate my point. Kenya has a 55m population, Rwanda 13m. Ethiopia is the sleeping giant in this neighbourhood. By 2050 its 117m population would have grown to 205m. I think it adds 3m to its population per year according to UN statistics. This country should be the undisputed giant of East Africa. We think with its large internal resources and market, not least its young population, with the right business and social environment and appropriately flexible and principal based regulations, should see this objective achieved.
Capital: Financial sector liberalization in Ethiopia. How can firms like VXP help alleviate major challenges Ethiopian banks face?
Michael Okwusogu: Change always elicits mixed emotions in people It’s fear, anxiety and any other negative emotion you can think off all at once, but, only if you let it be so. Personally, we view challenges as opportunities not yet realised to our benefit. My expertise is in operational restructuring. I view change and transformation as more tinkering at the edges but that’s my personal opinion. It is an opportunity to grow, learn and re-learn, break the mould, rebuild, re-design, re-create develop and be better, stronger and bigger. Financial services market opening is no different. We see potential for advances in customer/client management end to end. Improvements in operational management and resilience, cost and productivity gains, not ignoring the added benefit of digitisation and adoption of innovative solutions solving for critical day to day mission deliverables. Additionally, the balance sheet/cash management challenges being faced by not just banks, but I’m sure the corporate treasury departments of corporates, offers us the opportunity via our Treasury and hedge risk management solution partners, the potential to discuss with the wider market, areas where our support will bring considerable value add to their operational management and achievement of commercial objectives.
Finally, VXP has a unique skillset of actual lived in experiences of working in markets liberalising across financial services and Telecom. We are all industry veterans and have honed our skills at the sharp business end of the value chain. We know what works and doesn’t work from actual experience. Additionally, our experience spans the Americas, Europe, Asia and the Middle East where we have been directly involved in market openings in these continents as industry professionals. We provide actual practical solutions and advise on what actually works on the ground during these changing times. Furthermore, given our focus on operational excellence alongside cost and productivity management we can support local banks devise and implement the appropriate practical strategies and tools that will deliver greater efficiency, revenue sustainability, more focus and better client/customer management, talent development and management producing higher productivity.
Capital: Experts say apart from providing world class telecom services, the involvement of multinational operators to Ethiopia’s emerging telecom business enhances the penetration of mobile banking and accelerate the country’s journey towards digital economy. What is your take on this?
Michael Okwusogu: The telecoms market liberalization we think is a key cog in the wider economic development of Ethiopia. The industrial revolution largely missed Africa and she has skipped to the technology and now, information age. This is driven by mobile telecommunications. 70% of Africans I believe are either unbanked or lack access to basic banking services. The mobile phone changes this dynamic. This is key to unlocking a low-income country’s potential simply because, for the first time in known history, information and access to services is within the reach of the mass of a population at cost entry point that is achievable. Cost of mobiles has come down to such a degree coupled with access to mass information and data has created the perfect climate for technological revolution in all industries, not just financial services. You see with Ethiotelecom’s initial market growth with Telebirr at 20 odd million in 1.5 years. Safaricom’s first month of operations saw I think, 200k in subscribers? It is phenomenal growth but is the norm across Africa. There is a thirst for access to communication not least its multiplier effect to a wide array of opportunities to the individual in respect of career prospects, access to knowledge through new education channels, access to financial services products. Becoming part of the formal economy and access to a better life though credit flow and growth of new businesses etc.
We are witnessing a time in history where technological change, disruption be it of industries, the future of working, future of money, the production and accessibility of information through the democratisation, demonetisation of mass data. The demonetisation alone is changing at speed and scale that we have not witnessed or evidenced, in the history of humankind, ever! The pace of advances in R&D product development across multiple industries, for example the speed with which the covid-19 vaccines were produced reducing timescales from 5-7 years I think to mere months, is phenomenal. New products hit the market more attuned to individual tastes, more receptive to changing habits and the creation of new industries and business lines, people want to be to approached and interacted with in ways different to the past. It is no longer business as usual, the future is not in science fiction books, it’s here now, alive, kicking and knocking down barriers. The move to a digital economy in my humble opinion is not just important, it’s an absolute imperative.
Additionally, what the accession to a digital economy will do for Ethiopia and this is relevant across Africa, Is what the industrial revolution could not do and perhaps the technological revolution as well, in that this new age has the ability to lift the mass of nation out of absolute poverty into a more meaningful economical life in a shorter space of time. Long term, this will feed into the wider economy to hopefully good effect when combined with other fiscal, monetary and regulatory changes.
Capital: What values will you bring to Ethiopia’s telecom market?
Michael Okwusogu: Given our experiences of working as industry professionals in markets undergoing similar liberalisation strategies, we can only speak of what we have observed. But, saying that, we see several key element as being crucial to any potential success of such initiatives. Firstly, the government must assess the current state of the economy and identify the areas that need liberalisation. Secondly, the development of infrastructure and institutions, such as the financial sector, must be prioritised to facilitate a smooth transition to a more open market. Thirdly, clear and transparent regulations must be established to attract foreign investment, while also protecting domestic industries. Additionally, it is important to have a well-coordinated plan to mitigate the potential negative effects of liberalisation, such as job losses in certain industries. Finally, ongoing monitoring and evaluation of the effects of liberalisation should be conducted to make necessary adjustments and ensure that the strategy continues to meet its intended goals.
Capital; VXP’s value proposition and how that can translate into Ethiopia.
Michael Okwusogu: First off, it’s important to state why set up this firm. We are as I have said, African diaspora and we wanted to establish a vehicle that enabled us to change the narrative of what is generally seen in the west and more importantly, contribute to the development of the continent. Africa and I will state here, Ethiopia is not in need of handouts or charity, but fair treatment, access to talent, knowledge transfer and equality of opportunities. What we have within our firm is decades of excellent brain trust developed and nurtured in large global organisations across continents over many years. We want to support the emergence of countries such as Ethiopia onto the global scene, gain respect and take their rightful seats on the global stage. So, to answer your question it is this: it is our experiences of working in large multinational organisations in senior leadership positions up to C-level. We are all ground-floor leaders so understand what needs to be done, what’s practical, measurable and solvable using the tools and assets at our disposal at the time. Business issues don’t have time for theoretical solutions. Communication as well is absolutely crucial when solving for mission critical issues and getting alignment from a disparate stakeholder community. Where I think we excel in this regard is that we have all worked across most if not all, levels of the value chain from lowly junior processing positions to senior business critical C-level roles. We speak fluently, the languages of the C-suite, Board and shop floor and bridge the gap between all 3 because we can relate and comprehend.
We also purposefully have a small team. On an engagement, the client sees, works with and communicates with the same partner whom they negotiated the engagement with. This level of partnership means that issues get resolved in real time and opportunities realised and taken as soon as they arise. We firmly believe that it is very difficult to understand the client’s needs and wants without this level of involvement hence why each partner only deals with a small number of clients at any one time. We do not offer standardised off the shelf solutions, but bespoke practical solutions that work for that client. We are only interested in developing long term partnerships with clients and do not engage on a transactional basis.
Finally, we’re very transparent and believe in order to develop true and long-standing partnerships, that there must be trust in those relationships. We seek very much to be trusted advisors and conduct ourselves as good corporate citizens when working for each client.
Therefore, we feel that these value factors give us a different proposition and a value add that is original. We feel that this will resonate with clients in Ethiopia.
Capital: Ethiopia is an ideal place to locate for Fintech, Software and Data and Foodtech start-ups. Yet, despite their profound economic significance and potential, start-ups continue to face a variety of hurdles when it comes to-upscaling. What customised service do you have for startups that help them grow exponentially?
Michael Okwusogu: I will share some statistics with you which we have just seen published. I think it illustrates another of the challenges as it may be seen to some, but to us, opportunities of the Ethiopian start-up scene. For full year 2022, African start-ups attracted approx. $5 billion in investment. Break that down and it was the big 4 of Nigeria, Kenya, Egypt and South Africa that took 75% of funding. Kenya was second on the list behind Nigeria’s $1.2 billion at $1.1 billion. Delving deeper into the East African data where the research firm had deal activity reported to them, (Kenya, Ethiopia, Sudan, Rwanda, Uganda and Tanzania.). Ethiopia came in 2nd last just ahead of Rwanda’s $4m at $6m. Sudan was ahead of Ethiopia at $8m. Also, it’s important to add that this is not just a 1-year blip. It’s consistent over several years. Now, to us, this just doesn’t seem right. Ethiopia should be the undisputed lion of East Africa. Why is this not the case? We are looking forward to finding out. We suspect it’s a multifaceted, multi-year issue requiring a series of multiple, consistent and regular solutions leading to a thriving ecosystem developing.
From a VXP perspective, we see these statistics as further confirmation of our bullishness in the country. We see potential for where our tailored support package for start-ups which we developed for the UK and North American market to be right sized and localised for local consumption.
Combine that with various industry certifications we hold internally. We have partners who hold agile and PMO certifications. I, myself am certified as an exponential organisation consultant. Why is this interesting? Well you look at the growth and pace of successful tech firms over the last 15-20 years and they all share what have been identified as broadly 11 key attributes. Now, these attributes are not new as companies have utilised some of them with great effect successfully before the tech scene exploded some years back. What is different now is that technological advances have enabled the adoption of these attributes at pace, with greater agility and reduced costs across several metrics not least, barriers to entry in some cases disappearing. Airbnb and Tesla being a couple of examples of where reduced costs have led to innovations enabling entry strategies being possible for non-industry professionals.
We can support start-ups identify their own attributes, put in place the necessary building blocks to support exponential growth coupled with our forte of operational management resilience, we have also just started working on a mentor programme run by a public university in the US supporting mentees in their tech incubator programme. This gives us access to the strong US tech scene whilst the knowledge exchange enables us to deliver better support to our existing start up clients. We also want to identify areas in which we can, through our service offering, support the wider start-up ecosystem on the ground as the local start-up community builds out the wider adoption of the required governance and structural foundations needed to develop a thriving sector.