Updated: Konga lays off about 300 people after announcing prepaid model

Updated: Konga lays off about 300 people after announcing prepaid model

Nigeria’s Konga, an eCommerce company has reportedly laid off about 300 people from its workforce few hours after it announced a shift of its structure to prepaid model.

According to unconfirmed sources, several people were laid off from its customer service, logistics, marketing and operation units of the company.

If this figure is anywhere near the reality, Konga’s headcounts will be as low as when it had less than USD1 million in revenue as at 2013. It is estimated that its new staff strength will be less than 300 people. For a company that boasted of over 800 people in 2015, it is a sign of worry for many stakeholders.

It is clear Konga will no longer need to have up to 500 people on its payroll given the journey ahead. An analysts who is familiar with the internal operation of the company claimed that the shift towards prepaid only model might lead to a 70% cut in total orders and massive impact on its actual revenue which has since come under pressure since Nigeria’s economy entered a recession and the Naira lost over 70% of its value.

Sim Shagaya is back?

According to an unconfirmed source cited by Qz.com, Sim Shagaya, the former chief executive of the company who handed over to Shola Adekoya in 2016 will be coming back to take charge of the company.

It is not clear if Shola Adekoya will be leaving the company or he would be going back to his old role as the chief operating officer of the company.

There is no clear indication of the total number of affected people, it appears the company is taking a huge decision to clear its way into a new business model that will decide its going concern.

Konga and Jumia, two of the biggest eCommerce companies in Nigeria have witnessed more pressure than any other technology-driven companies in Nigeria due to their exposure to macro and micro economic risks that are either peculiar to Nigeria’s oil-driven economy or geopolitics that affects the crude oil market which in turn affects the value of Nigeria’s currency, accelerates inflation which worsens consumer demands.

Throughout last year and the major parts of this year, both Jumia and Konga have declared record losses with huge impairments to their underlying assets.

Kinnevik AB, one of the largest investors in Konga said it did a write-down on the value of its investments in Konga.

Kinnevik’s 34% in Konga was further impaired down to SEK128 compared to SEK133 disclosed last year. On a USD basis, the company did a further write down to USD15.3 million from USD15.9 million in the previous year.

Naspers, a co-investor in the company has also kept mum on what it plans to do with its holdings in the company.

Although with the biggest business outlay and debt exposure, Jumia has been the worst hit in terms of losses incurred in the last 24 months. In the last nine months as a case study, Jumia recorded more losses from EUR76.4 last year to EUR80.7 million losses this year.

Moreover, the recent actions by Konga is a sign that its investors are looking at getting the company on a faster track to profitability.

Other things have changed about its operational model which many of Konga’s customers and merchants might struggle to adjust to. Konga will be shutting down its warehousing service for its merchants. KOS and or any logistics company its work with will have to pick up products from merchants.

A major impact for merchants is related to rental fees they now have to pay for having their products listed on the site. This means both Jumia and Konga are now looking at generating revenue from advertising of sorts from merchants who will want their listings to be prominent on the site.

The challenges ahead of this is enormous as it further blurs the line between what these companies stand for and what classified sites such as OLX, JiJi and VConnect are doing.

As a matter of fact, Jumia and Konga have executed periodic layoffs. They have both switched to a marketplace model. Analysts are concerned that the last joker might be the switch to a prepaid model which is a make or break decision.