MIH Internet Shuts Down Kalahari Kenya and Nigeria as Operating Costs Bites

Posted In Web - By robertalai On Friday, October 21st, 2011 With 21 Comments

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?

About - Robert is an African Tech Blogger, Critic, Net Evangelist, Speaker, Mentor for Young Boys and Girls, Editor @TechMtaa and likes to Provide Sanitary Towels To Poor Women through the DishAPad Initiative

  • I saw this coming…Plus, all the daily deals sites are not even close to breakeven. The economics of mass market do not apply to Kenya

    • Smooveben

      Don whats the source of your comment ‘all the daily deals sites are not even close to breakeven’?

  • Allan Kapten

    I think its sad for the industry in general, personally I felt that Kalahari.co.ke had great potential. I made a purchase from them about a year ago and their customer service was simply SUPREME. They called me and ensured my delivery was made to my doorstep. I hope some sort of deal will be made to salvage Kalahari, Dealfish and Mocality. The industry needs it. 

    • Vin.

      True. Kalahari.co.ke was simply the best. I wish they didn’t have to close. 🙂

  • Me

    You’re acting very cheap with comments like – “they were staying at a 5 star facility”, thats not your concern – your “job” is to report the news, not to fabricate it.

    • And our other concern when reporting the news is also to put the news into the right context. Don’t worry MIH will not cut your perks

  • Peter

    Your grammar sucks! Every paragraph ‘contain many BIG grammars errors who is why its distract from otherways goods article’

    • “From otherways goods article” then you dare correct people. Arrrrgggg!!!

      • I agree, sometimes your articles are not proofread…but what keeps me coming is the news, not the grammar

    • I believe the essence of this blog is to provide tech news…If you are looking for a grammar website try The Guardian

  • Kalahari seemed to be doing good (or so i thought). well this is a new concept in Kenya and with the current concentration of internet accessibility to Nairobi call for patience and good strategy. The Kenyan market is gradually accepting online retail trade and only the resilient players will make it. I think some Kenyan should acquire this sites and customize them further. One business historical disaster i also recall is that south African companies have had very little success in the Kenyan market for the simple reason of failing to understand the Kenyan market which is extremely unique.

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  • They might have been over ambitious with their plan but I think they should not just close but downsize the staff and just focus in Nairobi and Lagos.  Amazon took five years before they broke even and now its the King of e-commerce.  If Kalahari runs a lean mean machine and solidifies the urban market they stand to rule this industry in years to come.

  • Economics Smooveben. Do the Math…Check the number of deals bought per deal, deduct the deals sites’ commission and you have the answer

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  • M Shah

    We all know that the internet is the next big thing, but running a successful business doesn’t change whether it’s online or traditional bricks and mortar. Having tons of cash to blow is great but it’s definitely not going to guarantee success.

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  • jon

    This peace of article is so factually wrong on everything. Please don’t feed us trash. Placing your deals at mocality or other groupon styled sites is a way of advertising and acquiring repeat clients. So mocality does not pay you to place your offer on their site. It is the other way round. Revenue on the subsidized goods is shared at the agreed %. In other words nation does not pay you to place your ads on their newspaper.

  • animaniac

    well the sad thing is that they are a tad-bit expensive. I shop on eBay and together with shipping (and maybe sometimes tax) the price is way below sea level. it’s a brilliant idea whose time has come. but it has to know and get known. it has to build trust, give incentives and the likes.

    you make a good point about unnecessary costs being piled. that’s never good for a start up. a business like that needs 5 multi-talented, multi-“taskable” people at most for around 3 years. it’s thin line between growth and profits.

  • @robertalai:disqus . Are you able to know what kind of revenues Kalahari.co.ke was making? I would actually like to see a Kenyan Website business that is making real Money and paying its employees. 
    Kenya-airways.com makes millions from tickets – But then again it has a huge offline support including a 24/7 call center that accepts Mpesa , e.t.ci don’t know of any other making real money, maybe scrapping through.kenya.new24 might attract some good old google adverts 🙂 where is the moneyyy??

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