MIH Internet Shuts Down Kalahari Kenya and Nigeria as Operating Costs Bites
MIH seems to be running into problems as predicted in Kenya and Nigeria. It is rumoured that MIH Internet has sent out a notice of closuree of Kalahari Kenya and Nigeria to its respective employees. The reasons of the closure of the operations have not been fully revealed but there are rumours that the Kalahari business in Kenya and Nigeria have not broken even.
Sources at MIH Internet Kenya though say that “Kalahari Kenya could sustain its bills thee only problem is that MIH Internet has no focus direction they want to take the business”. The source though intimated that Kalahari never made profits while Mocality and Dealfish are far from even breaking even.
Others say that the shutting of Kalahari Kenya and Nigeria might be the strategy of the new Kalahari.Net. The new CEO has fought to disentangle Kalahari Kenya and Nigeria from the mother retailer in SA since the two entities in east and West Africa looks like unnecessary baggage on Kalahari.net. The former CEO, Gary Hadfield left to join Loot which is a competition to Kalahari.net. Kalahari Nigeria was said to perform better because of the critical mass and the fact that Kenya’s internet penetration and e-commerce awareness is just concentrated in Nairobi. It has been so hard for the Kalahari ambassadors to market their services outside Nairobi.
Kalahari operations in Kenya and Nigeria were shutdown as from Wednesday 19th October and so they are not taking any orders but hope to finish the delivery of current orders. Kalahari has a budget running from May to April and that means that already there is a current budget which is midway to completion. Advertising only is sad to have cost the company in the tune of around $50,000 for Kenya and Nigeria. The online retailer also poached a senior Safaricom employee in April to be the Country Manager in Kenya. Joseck Luminzu Mudiri used to be the Business Development Manager of M-Pesa at Safaricom. MIH Internet gave him a one year renewable contract to run Kalahari.co.ke.
Joseck might not be shown the door at Kalahari since MIH Internet is opening two new sites in Kenya again. One of the websites will be like the Haiya which was shutdown after the exit East Africa Magazines. Moses Kemibaro, Dealfish East Africa’s Regional Manager, is on a 6 months renewable contract. MIH Internet strategy has been to maintain the high level staff and with higher salaries while paying the ambassadors or lower level staff almost peanuts.
Already there is a very high turnover of staff at the MIH Internet entities because of renumeration. First Country manager Cobus Heyl who was former the MD of EA Magazines who was recalled to SA then came David Aoll and later Joshua Mwaniki who now heads Mocality Kenya. It was not clear on what circumstances David left Kalahari but it is said it was not good.
It is funny that MIH will be closing Kalahari which could sustain its costs through sales while letting Dealfish and Mocality which both have no strategy of starting to generate revenue. In fact the recently launch Mocality Deals is a big burned on MIH Internet’s local operations. Mocality deals buy the offers at say 100% of the cost from the retailers and it ends up selling the deals at 80% of the cost from the retailers. Meaning that Mocality Deals is footing a bill of 20% of the cost before you add other overheads like transport and marketing.
Mocality directory services were made free from the word go and also they were even paying users for listing their businesses. Almost 3 years down the line, it still remain a business surviving only on prayers. It would be hard to retain loyality if they decide to charge for the services now. They can only monetise the traffic through banner adverts but still it would be very hard to convince the advertisers considering the perception of internet business in Kenya
Other funny costs which raises questions of sustainability on the operations of MIH Internet divisions in the country is unnecessary travel to and from South Africa as well as regionally. I once saw Neil Schwartzman who is Dealfish General Manager for East and West Africa travel to Kenya just to attend an very irrelevant event at iHub. He could have been sent the pics to SA or could have followed the event live from SA. The presence of Moses Kemibaro at the event would suffice. Neil came to the event at the expense of MIH. While in Kenya, most of the employees of MIH Internet stay at Fairmont Norfolk which is a 5 star facility. You wonder what business sense it makes for all the costs to be incurred on a business which is not bringing in any revenue nor does it have a strategy to start generating revenue soon enough.
All these MIH Internet divisions are under Stefan Magdalinski (General Manager, E-Commerce in Sub-Saharan Africa ) who seems to have not business strategy to bring revenue to the entities. He travels with a host of senior staff all over Africa incurring huge hotel expenses on trips which brings no value to the company but just serves as holiday incentives to the employees being taken around.
All the 3 divisions of MIH Internet in East Africa are headquartered at Saatchi Plaza on Argwings Kodhek Road, Hurlingham Nairobi. You wonder how they are footing the bill at the prestigious location. Unless MIH Internet is on a charity business, you can’t get what is really their strategy because it has not worked and has not promised to work.
Dealfish has round 13 employees, Mocality directory had 15 with some two added for Mocality Deals so 17 and Kalahari 6 employees. It does not make sense why Dealfish and Mocality would have that number of employees. Web business is not that complicated so complicating it through BIG everything including locations, titles and operations is the BIGgest undoing of startups.
The failure of of MIH Internet’s ecommerce ventures in sub-saharan Africa might not be 100% its mistakes. The adoptability of the new idea of business is facing a host of challenges key being the internet penetration, lack of strong payment systems and also since its new, trust has to be built with time. Few in sub-saharan Africa trust that they will get services or products delivered when they make payment online.
What do you think about the decision of MIH Internet to shutdown Kalahari?