AUSTIN OKERE is the Founder of CWG Plc, the largest Systems Integration Company in Sub-Saharan Africa & Entrepreneur in Residence at CBS, New York. Austin also serves on the World Economic Forum Business Council on Innovation and Intrapreneurship. In this interview with the Association of Nigerian Technology Bloggers, he revealed many challenging issues in the Nigerian ICT Terrain, including how some local IT firms put themselves at a disadvantage position when negotiating with their foreign partners. He also provides solutions that can boost the operation of SMEs in the country. ITPulse’s MARTIN EKPEKE was there.
CWG has been around for almost three decades, we will want you to tell us about the journey so far.
Thank you very much for coming. It’s always a pleasure to chat with you. Computer Warehouse Group PLC was established in September 1992, so it’s 24 years. I would say it has been an eventful 24 years because we have seen a lot of changes, which is not surprising because much as the technology sector disrupts industries, it is also the most disrupted. If you look at the case of Nokia; there was a time when one out of every three phones was Nokia, but today, that’s not the case. We have Blackberry, which also lost the momentum due to lack of innovation. Now, we have Apple and Samsung. They are not resting, they keep on reinventing because other brands like Tecno are coming behind with price competitive advantage. Those are the changes that have happened. In CWG, what we are seeing is almost three waves of change because when we started, we were just an infrastructure company, selling and supporting Dell. Today, that business model doesn’t work anymore because the value you can add is very small; people can now buy Dell from anywhere and from online shops such as Amazon. Luckily, we saw that and acted in anticipation.
Much as the technology sector disrupts industries, it is also the most disrupted. So in CWG, I can say we have gradually de-emphasised our reseller business and going into these high value social impact areas
We went into managed services; this means providing a skill set to manage other peoples’ Data Centre and their operation. For instance MTN; we have almost 130 people that resume there every day to work, they are our staff doing managed services for them. All the calls you made that passes through the Data Cenre, CWG is touching you one way or the other. We went from managed services to what we called cloud services, which is really taking off seriously because of two things; the pervasiveness of mobile phones and the ubiquity of broadband; because with broadband on mobile phone, people can use the phone to do a lot, like e-commerce and even banking. So the mobile phone has made banking more inclusive by increasing the banking population from about 30 percent to 60 percent. Many people who were not able to do banking are now able to do so because of the mobile revolution. Our first cloud product, launched with MTN is called MTN XaaS for the Microfinance banks. The major difference between banks and the Microfinance is the market they address. The Microfinance Banks addresses the grassroot customers and they don’t have a big budget for operation, but they still need technology to serve the people. We provided the technology for them in the form of cloud software as a service. What they do is to use the software to service their customers, but they will pay for use for the number of accounts they serve or whatever we agree with them. The most important thing is that they are not using a big amount of money to buy software or run a big IT department. Therefore the price of their product is much reduced and more affordable since they pay on a subscription basis. We also have the Diamond Y’ello account, which we white-labelled to MTN and Diamond Bank, because the Central Bank ruled that a bank must lead any mobile money initiative; the result of that product was tremendous because when we thought we could add two million accounts to Diamond Bank in a year, we added about six million. Today, we have other big banks that are coming on to the platform. The whole idea is that if we can get all the 60m mobile subscribers on MTN to subscribe to Y’ello account platform, it will increase inclusiveness. The people in the rural areas, do not need to enter a banking hall to open an account; all that is needed is to dial a short code*710# and it will use your KYC that you have done during SIM registration to open an account for you. That’s satisfying for me because this has a social impact, we are contributing to inclusiveness and the growth of the economy. The biggest ones for me are two: one is the one we are doing for the SMEs; there are about 34 million SMEs in Nigeria, but when they want to expand, they don’t have the bookkepping records that the banks will ask for to assess their credit-worthiness. We have an accounting software in the cloud that tracks their inventory and sales and balances their books at the end of every day, which makes it easy to have an accounting records that the banks can use to advance them capital for growth. If for instance, any of them has five shops, he can be monitoring the five shops from a mobile device, without having to physically visit each shop to know how they are doing. What is more instructive is that we also have a cloud e-commerce product, OpenMall, that can support them with online sales with integrated logistics and payment systems. The idea is that with this empowerment, if these 34 million SMEs grow to the extent where they employ one more person each, that translates to 34 million additional jobs. Not even the government can provide such amount of jobs. The biggest challenge and strength that Nigeria has, is its huge youth population. If this youth population is not employed, they can be a source of social unrest. But if they are employ, they can take care of themselves and their families, and pay taxes to the government. They become a value to the society and can also aspire to become middle class citizens. The other one which is very interesting is, we are providing the teleport that is being used for the digital switchover (DSO). The pilot took off in Jos last month and I am very proud that CWG is part of it, along with her foreign partners, SES, and partnering with the ministry of Information and the National Broadcasting Commission (NBC). So, I can say we have gradually de-emphasised our reseller business and going into these high value social impact areas.
Over time, the government has not been able to aggregate the potentials of the informal sector and put it out there for people to know where to invest. Is that not a setback to companies like CWG, especially for the business and plans you have for that segment?
If we don’t address it, it will be a setback for us. It’s good to celebrate successful moguls like Dangote, Elumelu and others; they are billionaires, which is fine. But what motivates me in particular is a situation where you have a billion Naira spread over a million entrepreneurs. Each will then have access to N1m to invest in their respective ideas. I believe the impact will be more significant and inclusive. I am not advocating that you give out money to people as a gift, but give them to start a business from which they will pay back and uplift others. If people are empowered to start businesses, it will in turn create more jobs, this is more impactful and better than having just ten billionaires in a country of 170 million people. What we did as a company, is to be listed in the Nigeria Stock Exchange in 2013 because we have always emphasized that CWG is not going to be a one man company that dies with the owner, we have to make it a strong institution. Like I said earlier, I retired in 2015 and I am happy the new leadership is taking the company in the direction that we jointly laid out, which is very good. CWG was recognized in 2014 by the World Economic Forum (WEF) as a Global Growth company, and I was invited to serve on the WEF Business Council on innovation & intrapreneurship. I was also invited to serve as an Entrepreneur in Residence (EIR) at Columbia Business School, New York after they did a case study on our company. So, the informal sector is very important and should be developed and formalized at every opportunity because if people, for instance, are unbanked, any monetary policies of the government is blunted because the money is not in the formal sector. Government must target the informal sector; I appreciate the mobile money, which is targeted at bringing the informal sector into the banking sector. Businesses in the informal sector must be empowered to grow just like CWG has grown.
The biggest challenge and strength that Nigeria has, is its huge youth population. If this youth population is not employed, they can be a source of social unrest. But if they are employ, they can take care of themselves and their families, and pay taxes to the government
CWG is in four countries; Nigeria, Ghana, Cameroun and Uganda; we also have six partners in Africa and together cover 28 countries; it’s exactly what we do here that we export to those countries to empower their SMEs. So in these 28 countries, we are addressing a consolidated market of over 600 million people. This has helped us to form a big trading block that has economic power, that when we are negotiating deals, we can negotiate as a strong block and get significant discounts from our foreign suppliers, which we can pass onto our customers. The problem is most of the local companies operate in small, isolated units so they hardly get a good deal that consolidation brings, and are not able to scale. The informal sector is very important to us, and we are helping the government to generate ideas that can move the sector; mind you, those in this sector are not poor people, they are only disenfranchised. If I live in a place where the nearest bank is very far away, I will not be encouraged to go to the bank, but if you can bring the bank to my phone, then you have taken me from the informal to formal. There is also the need to train marketable graduates that can learn how to learn, which is what their peers in the advanced countries are doing. We must be able to train our graduates to follow global trends and adapt them to local markets.
This brings me to this story that makes me so sad; in 2013, the World Bank and the Federal Government through the Nigeria University Commission put out a bid for the Nigeria Research &Education Network (NgREN), which CWG and a Consortium of local IT companies delivered. The first phase of the project which connected 27 Universities, the CVC and the NUC, with over one million users, delivered 155mbps capacity to each university and providing high definition telepresence capabilities for real-time collaboration, voice over internet protocol, shared access to research content and joint experimentation projects.
It’s good to celebrate successful moguls like Dangote, Elumelu and others, but what motivates me in particular is a situation where you have a billion Naira spread over a million entrepreneurs. Each will then have access to N1m to invest in their respective ideas. I believe the impact will be more significant and inclusive
The second phase was planned to cover five more clusters of about 100 institutions and five million users. Subsequent phases were to cover all higher education institutes numbering over 600; Federal, State and Private. The network was to be connected to the London Open Exchange via an international private leased circuit, and offer additional services such as web hosting, unified communication, digital library collection, video bridging and archiving services.This indeed would have afforded Nigerian Universities the opportunity to take a quantum leap in standards, and significantly improved their low ranking in quality of teaching and research output, and thereby bringing them closer to their global peers.
But alas, this is not to be, as this laudable project has been shut down for the past eleven months due to non-payment of the segment bandwidth fees. The consortium of local providers have however, left all the equipment intact in good faith, awaiting the provision of bandwidth to restore services. Apart from the immense benefit in value and standardization, the economies of scale of the project saves the universities immense costs, as embarking individually on such a project will be grossly suboptimal and prohibitively expensive.The NgReN provided a very fast Internet, 20 times more than what the Universities could have gotten if they have done it by themselves, albeit at a fraction of the cost.
What the government needs to do is to pay for the subscription so that the system will come back up. The question is where is the willingness? The responsibility to pay is being transferred between TeTFund, Ministry of Education and the National University Commission. As a Nigerian, I feel very bad about it because it doesn’t take anything to turn it on; it is like somebody who already has Decoder and the Dish for DSTV, all that is needed is just to pay for the subscription to get the service. It is really painful because it’s like taking one step forward and two steps backward.
Apart from the immense benefit in value and standardization, the economies of scale of the NgREN project saves the universities immense costs, as embarking individually on such a project will be grossly suboptimal and prohibitively expensive
How has the CWG Academy helped with regards to the lack of employable graduates that you mentioned?
The initial concept of the CWG Academy was for our own use, because the raw material for our business is skills. We used it to equip our staff to make them more productive. But we realized that a lot more people from outside wanted to come, so we increased the capacity in Lagos, Port-Harcourt and Abuja and in other countries where we have operations. The people coming out of the Academy have become very successful; some of them we absolved, our clients employed some, while others have gone to start their own business and are today successful entrepreneurs.
Is there a front between CWG and government to provide and protect the infrastructure that is needed for a viable ICT industry?
This is important because the handshake between the public and the private sector is crucial. It’s true that we can leapfrog with digitalization into a middle income country. We have proven that in Nollywood; out of nothing, we created a very big industry that is recognized anywhere you go in the world; Nigerian films and music are being watched and listened to far and wide. But the question is, are we getting the value for it, are they being paid the right royalties? Digitalization can democratice distribution and optimize revenues, but digitalization rests on the availability of power; if there is no power, the guy that wants to use his phone for e-commerce and mobile banking cannot charge the phone and is locked out. Fixing the power situation is fundamental to leveraging technology to leapfrog. We have developed solutions along with our foreign partners that address revenue losses in the power sector and are discussing with some of the DISCOs on availing them of the technology. Another obstacle with leapfrogging with technology is regulation. Innovation is moving very much ahead of regulation. In America, for instance, the new disrupters like the Uber and Airbnb are moving way ahead of regulation. Where regulation has not caught up with them, they just create theirs and continue because there is demand for their service. Uber for instance doesn’t have any license, but the government has not been able to intervene it because everybody needs the service due to the perception of value and convenience. If the majority is seen to be breaking the law who will you arrest? Netflix was illegal, but today it has become the defacto video streaming service. So popular request and demand will shape regulation if it doesn’t move with the trend. The new digital economy is like a moving train; three things can happen: if you stand in front of the train, it will crush you; if you stay on the platform, it will leave you behind; or you get on the train.
The forex market is presently a disaster for all of us. Businesses are dying because you find a company that has for instance a $10 million trade bill, and by the time the company signed a contract with its foreign partner, the dollar was N178. Now, the dollar has moved to above N300, they still have to repatriate to their foreign partner
So, I believe the public and the private need a handshake, especially in the area of regulation evolution. Another area where help is needed is fair trade; look at the big companies like Microsoft, Oracle and the others that have offices in Nigeria, how much taxes do they pay? It seems that the Resellers are being saddled with the taxes of these companies. The National Office for Technology Acquisition and Promotion (NOTAP) has a code of guidelines for engagement between Original Equipment Manufacturers (OEM) and Value Added Resellers (VAR), which was derived from consultative meetings, after which a communiqué was published. But from all indications these guidelines are being vagrantly flouted. The essence was to establish fair trade terms for the parties. The guideline stipulates that the OEMs take 60 percent of any technical support contract, while the local VAR takes 40 percent on the support revenue. It also stipulates that the VAR be trained to acquire the competence to earn her share of 40 percent. But as I speak to you, local companies do these support jobs for a pitiful for 5-10 percent and also incur the liability that the OEMs should pay. By the time these taxes are withheld, the local companies end up making a loss. This is one of the main reasons why most of these local companies are dying. While NOTAP acted in the best interest of the local companies enforcement is seriously lacking.
How is the forex market affecting the ICT industry?
The forex market is presently a disaster for all of us. Every time we find ourselves in this forex situation, Nigerian businesses bear the brunt. In 2008-2010 when the global recession happened, a lot of businesses died mainly in the Stock Brokiing sector. Now, businesses are dying again because you find a company that has for instance a $10 million trade bill, and by the time the company signed a contract with its foreign partner, the dollar was N178. Now, the dollar has moved to above N300, they still have to repatriate to their foreign partner because if the local company doesn’t repatriate, the foreign partner will not supply again or they will take the local company to court. So, either way, it is the local companies that are going to suffer the exchange loss, not the customer nor the foreign supplier. This is not only happening in the IT sector, but also in other sectors because we are all importing raw materials and machineries, which must be paid at the new exchange rate. A lot of companies are going to die because of the forex market; and it is going to be very painful because it means a lot of jobs will go too.
What is your advice and encouragement for SMEs?
I called them the 3Ws. The first W is the WAY power; you learn whatever you want to do, if you have a passion for it, it is good, but learn the fundamentals so that you can be good at it. The second W is WILL power; when people say you should give up, you tell yourself no, let me keep trying and go the extra mile. My belief in entrepreneurship is, it’s not necessarily for the most brilliant or the strongest; it’s for the person that volunteers.You must have the WILL power to carry you on, even when people discourage you; you must not listen to the discouragement from people because he who does not venture to climb need not fear any fall, but there is little fun remaining down there when you can dare to go up. Failure for me is part of the experience. The last W is the WAIT power, which is just about patient to reap what you have sowed. As Nigerians, we are totally inpatient, and it shows even in the way we drive. If you have WAY, WILL and WAIT power, you will succeed in whatever you are doing in life.
Every entrepreneur can survive on what I called the 3Ws, which include the WAY power, WILL power and the WAIT power. If you have WAY, WILL and WAIT power, you will succeed in whatever you are doing in life