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Coronavirus Weekly Update: Nigerians are not buying phones

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YCombinator cuts investment size
A TechCabal roundup about the
impact of the coronavirus pandemic
on Africa’s tech industry

JUNE 28, 2020
This newsletter is a weekly special focused on the effect of the novel coronavirus, COVID-19 on African tech and innovation ecosystems. Subscribe here to get it directly in your inbox every Sunday at 3 pm WAT.


Hello,

Before we get into today’s topic, here’s your weekly reminder to maintain the strictest safety measures as the coronavirus is still out and raging, now more than ever.

According to our live coronavirus counter, recoveries in Africa are impressive, but there have also been 9,488 deaths. So please wear a mask, and act responsibly.

In this week’s conversation, smartphone shipments in Africa have taken a big hit. We had earlier predicted a downward slide in smartphones coming into the continent, but
nobody saw this one coming; it is the biggest decline in 5 years.

According to a report from the International Data Corporation (IDC), things do not look so good. Inside the Computer Village in Lagos, things look even grimmer than on paper.

If you are new, do catch up on past editions of this newsletter.

Back to the conversation; Nigerians are not buying phones, and the ripple effect is bigger than just the economics of the smartphone
market.

WHAT’S HAPPENING

Rising prices and falling demands

Inside Computer Village; Africa’s largest ICT market, Kassim (not real
name) is a trader who deals in fairly used phones. He tells me prices have risen as much as 50% in less than three months, and patronage is falling concurrently.

In April, I sold a secondhand iPhone X for ₦105,000 and now it is ₦205,000. The iPhone XS Max that cost ₦235,000 is now ₦285,000. And people are always haggling these prices; it’s frustrating,’’ he said, echoing the sentiment of other merchants.

Before the pandemic, the Nigerian economy was already weakened by a crash in oil prices, and a devaluation of the naira against the dollar.

Shipping costs have also increased drastically. In March, importing 1kg smartphones and accessories to Nigeria cost $5.5 to $6 at an exchange rate of ₦380 to a dollar. Now, traders in Computer Village say the same quantity costs between $9.5 to $10, exchanging for
₦440 – ₦450, and depending on the shipping company.

All these added costs are causing a price fluctuation and worsening patronage of fairly used phones; a staple for smartphone users in the country.

Things are not exactly rosy for cheaper, brand new phones.

In Nigeria, and Africa,
Transsion has democratized smartphone access with its pocket-friendly brands and has a massive market share.

Despite the pandemic, the company has continued launching smartphones but the outlook is not so great.

Shipping hassles are multiplied for Transsion as sources close to the matter detail tedious processes and often hefty custom duties. The company will also be actively taking losses, considering that most dealers had already pre-ordered goods at the old exchange rates and pre-COVID conditions.

Most importantly, all these added costs are threatening its affordability value proposition.

The recommended retail price (RRP) for its Tecno Camon 15 is ₦65,000, and Tecno Spark 5 is ₦49,000.

Both newly launched, these phones will normally cost ₦50,000 and ₦39,000 respectively, but when the marketers add their margins, prices skyrocket above their RRPs.

Most phone sellers agree with Kassim’s 50% reduction in sales; people have stopped buying phones.

The bigger picture

There are many implications of this decline.

With 189 million subscribers, Nigeria is currently Africa’s largest mobile market, and most of this growth has been fueled largely by affordable smartphones.

GSMA had earlier projected that mobile phone penetration in Africa will be at
66% by 2025, this growth will most likely stall. Beyond Nigeria’s massive population, this pricing problem is a continental one.

Also, as Africa is mobile-first, most innovations have taken off on mobile, and inaccessibility to affordable smartphones will generally slow the rate of digital adoption.

What to do?

An executive and industry expert says the quickest fix to this problem is cutting down on the production costs of smartphones and, hence, their quality.

This is a two-way street. OEMs can either cut down on quality and let customers know, or still do the same and not tell them at all. But it is a very thin line to walk because the brand’s credibility is at stake and when things are back to whatever version of normal, most consumers will jump ship when they are able to afford
better.”

This expert goes on to say that this is not an option most companies are willing to explore, or admit to, and that smartphone manufacturers will most likely ride out this storm.

FROM THE CABAL

COVID-19 is quietly threatening the future of Nigeria’s news media
Nigerian media companies are now struggling with the drop in advertising spend that has affected media publications globally. Microeconomic issues have complicated the problem causing a number of print publications to slash the number of pages in their newspapers. Many news
publications are cutting jobs and slashing staff salaries to stay afloat. Tough decisions lie ahead
.


Bosun Tijani: The role of innovation hubs in Africa’s technology
growth
.
CcHub cofounder, Bosun Tijani shares what the journey has been for the hub since 2010, how it has evolved over this period in terms of its mission and the technology landscape in the countries where it now operates. He also discusses how vital innovation hubs are to the growth and development of the African economy if distributed and made to play on individual strengths of the various countries on the continent.

Why Nigeria’s biggest payments companies have entered e-commerce. The pandemic has forced many traditional retailers to go digital. Lockdowns between March and May restricted commercial activities to essential services. To avoid losing their clients to competitors, payment companies including Paystack, Flutterwave, OPay, and Remita are adopting the “platform” approach. They are providing a full
e-commerce experience to merchants in addition to their core payment services
.

NEWS FROM AROUND THE WORLD

YCombinator to cut the size of its investment in future cohorts
The world’s most famous seed accelerator is cutting the size of its standard deal from $150,000 for 7% to $125,000 for the same equity. “The future of the economy is unpredictable, and we feel it is prudent during these times to switch to a leaner model,” a spokeswoman for the accelerator said. The new deal will apply to startups who join YCombinator from the Winter 2021 batch.

Satellites documented COVID-19’s impact from space. NASA, the European Space Agency (ESA), and the Japan
Aerospace Exploration Agency (JAXA)
have created the COVID-19 Earth Observation Dashboard using satellite observations. The dashboard will allow users to explore how the ongoing pandemic has affected airport and shipping traffic, city night lights, and agricultural production in locations across the
world.

WHAT WE ARE READING

COVID-19 Resources & Funding Opportunities by ANDE
ASPEN Network of Development Entrepreneurs (ANDE) has put together learning resources and funding information to help entrepreneurs navigate the impacts of COVID-19, present and future. Check it out here.

Best wishes for a great week

Stay safe and please observe all guidelines provided by health experts.

You can subscribe to our TC Daily Newsletter; the most comprehensive roundup of technology news on the continent, and have it delivered to your inbox every weekday at 7 am WAT.

Follow TechCabal on Twitter, Instagram, Facebook, and LinkedIn to stay updated on tech and innovation in Africa.

– Victor Ekwealor, Managing Editor, TechCabal

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