Growth Prospects For Nigeria’s SMEs

Cele: Walk us through the key findings of the research result commissioned by you and the EIU.
Darwish: We commissioned the economist intelligence unit few months ago to do a detailed analysis on the status of SMEs in Nigeria in particular being the largest economy in Africa. We’ve always suspected that SMEs have an important role to play but we wanted to understand what is the level of that role? We are shocked to realise that 90% of all businesses in Nigeria are SMEs, 90% of the workforce are employed by SMEs. We were positively and extremely surprised that the massive ICT revolution and growth over the past years have contributed to and facilitated the evolution of SMEs.

Cele: What does it mean for a private player and a big player that you are; not only in the Nigerian space but on the rest of the continent, does this alert you to developing programs that can help SMEs and ensuring that you are considering these entrepreneurs in your procurement and pipeline strategies?

Darwish: Definitely, this report is comprehensive; it looks at the state of SMEs in Nigeria in particular. We realised that in Nigeria, SMEs have several issues, starting with their policies. In Rwanda, the Government decided that taxes are paid online through an e-finance system; this has reduced the number of working hours to produce tax reports from 900 in Nigeria to 200 in Rwanda.

Nigeria needs to create things like that- although the registration cost has been reduced by 60%, the request for the presence of a lawyer to register an SME has been waived, so policy is quite important to simplify tax, to reduce customs laws and to create a more enabling environment.

Other sectors of the economy need to play a role. In Nigeria, we found out that only 14% of SMEs have a bank loan overdraft, this is abysmal; no business can function without the support of Banks. Banks need to relax their requirements, find a way to work with these SMEs, engage and mentor them. This is the key finding we need to look at in other countries in Africa.

Cele: As an entrepreneur who moved to the African continent in 1998 and has managed to build a power house which is not struggling to raise capital or find new opportunities, do you think something also needs to change in the mind set of Nigerian and African Entrepreneurs to improve their capital raising efforts?

Darwish: Yes, definitely. Entrepreneurs need to improve their governance structures, book keeping, transparency needs to be prioritised. Most Entrepreneurs just go after the sales and cost reduction aspects but there are many other aspects to the creation and growth of their businesses. Banks find it hard to work with these entrepreneurs based on the aspect of governance and book keeping and I advise and encourage SMEs and Entrepreneurs to invest more in that.

Cele: IHS from the operational perspective now takes care of 23,000 towers across the African continent and you have raised quite a bit of money for your capital expenditure going forward. Give us an operational update on how the company is going and what new targets have you set for yourself?
Darwish: IHS is the largest tower company in Africa, Europe and the Middle East and we are extremely proud of that being a company of African Origin, we started in Nigeria in 2001.

Today we operate in five African companies, we own most of the 23,000 towers you mentioned; we were extremely aggressive on growth last year, we moved the number of towers we owned from around seven to eight thousand to twenty-three thousand within the next few months as we close the second tranche of MTN in Nigeria.

The focus now is on consolidating this portfolio and improving the cost base which means it is good for our shareholders as we reduce the cost but more importantly, it means investing in solar energy, investing in more efficient power systems that can substantially reduce the cost of operating these towers and it is equally important to eliminate diesel.

It is a shame that we emit so much pollution because of the hundreds of thousands and millions of generators.

Our mission as a company aside from making money for our shareholders is to eliminate the diesel burnout on our towers.

Cele: It was such a pleasure having you with us and hopefully, the initiatives that you deployed at IHS will have a ripple effect on the entrepreneurs not only in Nigeria but across the continent.