We invest more in Nigeria because it has the most potential – AfricaWorks CEO
With its presence in eight cities across Africa, AfricaWorks, providers of flexible office spaces on a mission to unlock African’s business potential plans to set up 100 co-working offices on the continent by 2025. GREGOIRE SCHWEBIG, the founder/CEO of AfricaWorks, in this interview with BusinessDay’s ENDURANCE OKAFOR, shares insight on the company’s expansion plans, and why Nigeria is its most important market. Excerpts:
Before the COVID-19 pandemic, the co-working industry in Nigeria and Africa was growing rapidly and was described as one of the fastest-growing markets globally. How do you think the pandemic, considering it promoted remote working and virtual meetings, affected the growth?
I think the pandemic has been a huge booster for the industry globally, and particularly in Africa. The reason is, yes, there is a new model, whereby we’re seeing a lot of hybrid work. But having said that, the entire remote isn’t working, we’ve seen that it doesn’t work. It doesn’t work everywhere in the world and doesn’t work in Africa, mostly because the infrastructure is not there and because as humans, we also need interaction.
So, in terms of the future of work globally, our conviction at Africaworks is that it will be a hybrid model. A lot of the production work is going to be done remotely and digitally, while all the ideation will still be done physically in person, and hence the need for having office spaces in a different way than pre-pandemic.
So why I’m saying that the pandemic has been an enormous accelerator for our industry, is that a lot of companies which used to have traditional office spaces are now shying away from traditional leases, which for instance in Nigeria, it’s five to 10 years. You have to pay three years upfront, so it’s extremely costly, and they want to shift to a much more flexible setting, where especially here, you know, it’s a workplace as a service, it’s completely a one-stop-shop solution. They just open their laptop and work we take care of everything for that.
What strategy are you putting in place to be competitive amid the current realities?
Pre-pandemic and also during the Nigerian boom, I think a lot of our competitors were charging in dollars but we are purely charging in Naira. We have a very specific and unique model in terms of real estate for Nigeria. So as opposed to going in a traditional office block, that generally are charging in US dollars, and where the rent is particularly high, we have decided on purpose, and you see the space here to go through the business park route. So, we’re able to provide all the functionalities of a co-working space. The offices are fitted out, there’s furniture, we take care of the electricity, all the utilities, the internet and all that while providing an easy and convenient place to be.
For us, our story in Nigeria is that we opened six months ago, and this is our first block. So, in total, it’s 2200 square metre office space, we’ll have 300 people working here soon daily.
And six months after having open we’re already 90 percent plus occupied. So, I think in terms of product-market fits, it’s quite obvious because it went beyond the expectation in our business plan. And so having this very strong validation, we’re right now turning down several clients, it gives us the confidence to now say we want to double down and we want to expand massively in Nigeria. So, our plan across Africa is, to have 100 Africaworks by 2025. So, to grow 10 times what we have currently, in the next six months, we’ll be opening 10 More Africaworks at the Pan-African level.
Nigeria plays a very important and key role in that expansion because for Nigeria alone, we have plans to open 10 Africa works by 2025, probably eight of them in Lagos and two of them are probably in Abuja. So, our plans short term in 2022, is to open four more AfricaWorks. Probably one more in VI, and one each in Ikoyi, Yaba, Ikeja and Lekki. And by the way, where I’m talking from, we’re the biggest co-working space in West Africa. So that will make us the number one co-working operator in Nigeria and across Africa.
What distinguishes Africaworks from its industry peers?
I think it’s a combination of factors. I think we’re the only truly Pan-African. I mean it’s Africaworks, born in Africa and growing in Africa. It’s African, hence the name Africaworks, that’s unique and I think no one else is doing that.
I think the second thing that is very unique about Africaworks is that we’re not only a co-working space but we also a business community. We don’t only target a certain sector; we cater as much for big multinationals as to small ones. So typically, here in the space that I’m talking to you from, there are big oil and gas companies, international oil and gas companies. There are some betting companies as well. So, you have these big multinationals across here in other blocks, we have Universal Music that has put its headquarters here. So next time you hear a Tiwa Savage album, you know that it will be recorded over there.
So, we have this kind of big multinational which roughly represents half of our clients but 25 percent of our clients are really, local SMEs oftentimes, you know, a law firm in the service sector or digital marketing agency. The last 25 percent of our clients, which is very unique, are fast-growing startups, and it also includes international startups, for example, Glovo has put its headquarters in Nigeria in our space here at our Africaworks in VI but also homegrown fast-growing African startups. You might have heard of a company called Move Africa, it has put its headquarters in Nigeria here. It’s one of our biggest clients as well, they have their headquarters with us both here in Lagos and as well as in Kenya.
Your mission says AfricaWorks plans to unlock Africa’s business potentials. How do you plan on doing that?
This is our purpose and very alive in whatever we do, to unlock Africa’s potential through work. Our ultimate goal is to help boost job creation across the continent. So, to answer your question, it’s the way we see the Africa we’re exploring and looking at Africa’s potential is by providing great spaces where people can work. Great design, very functional spaces, and basically, our value proposition to our clients is; come to us and we’ll take care of everything, no wahala, just focus on your work and grow your business.
We bring you a headache free solution. So that allows you to focus 12 hours a day, on growing your business, as opposed to being distracted with, the infrastructure that is not completely available.
What’s your take on Nigeria’s co-working industry?
I think it’s a burgeoning industry. It’s a very interesting industry, I think it’s an industry that is about to explode and experience a 10 to 15 year of very aggressive expansion. We want to be the frontrunners of the emergence of this industry. I think there are opportunities for different players as well, I mean, the market is growing very fast.
What I’ve seen is, a lot of the operators were focusing on one particular element of the market. So either for example, an operator in Yaba and our view is that Africaworks is slightly different. We want to have the coverage of the entire city and not just be based in VI or Ikoyi but we want to be in Yaba, in Lekki and all of the different business nodes. So that’s one of the things we want to bring to the market as well the network effect, where every member of Africaworks could then have access to all the locations.
Let’s take a real-life example, you are in Ikoyi and you have a meeting in the morning, you might want to go back but you have another meeting in the afternoon and so you don’t want to go back to your office because there’s too much traffic and you have three or four hours in between your meetings, you want to be able to access some of the Africaworks where you can come and you can work for this three or four hours in between your different meetings.
So, we want to have a coverage of the city and provide this network effect to our clients. We want to provide a solution where at any point in time, an Africaworks facility is within 10 to 15 minutes away from anyone doing business with it.
With your presence in eight African cities where do think Nigeria ranks compared to its peers?
Depending on the criteria, the ranking is very different. I think probably, and I’m not here to flatter Nigeria, but the country is the most interesting market out of the cities that we operate. It is the one where we see the biggest potential and in the proof of that, is that it is the one where we as Africaworks are investing by far the most, way beyond any other cities we’re in. This is where we see a huge upside, which is a function of many things, one is the sheer size of the economy, which is significantly bigger than any other countries but also, what we found out is that Nigerian businesses are very agile in adopting the latest trend and so just what we’ve seen in technology, a lot of them are adopting a lot of the latest technology.
We see that there are a lot of early adopters in Nigeria, because there’s an appetite for newness, for the latest innovation and we don’t see that at the same level elsewhere. The boom of the tech sector in Nigeria is a reflection of that desire to adopt the latest trend and innovations. So, to answer your question, it’s the most important market for us, it is where we invest the most and where we see the most potential.
Running a business in markets across Africa doesn’t come without its challenges. What are some of the issues you face doing business in this part of the World?
There are a lot of challenges, just like you find in any country. Some of these challenges, and some of these barriers to entry, also create opportunities for us to provide this one-stop-shop solution for our clients. I would say that the cost in general- the cost of setting up an office here, the cost of doing business is very high in Nigeria, much higher than anywhere else on the continent.
There’s a very high barrier to entry, to get a place like what we have in VI- to take the place, do the renovation and things like that is a high ticket It is not everyone with a small amount of money that can do it. So, I think that creates a barrier to entry.
That’s also one of the values we’re bringing to the table. Historically, before this whole co-working sector and shared office sector emerged, it was costly and that was a barrier for a lot of businesses to come in and explore the potential and the opportunity of doing business in Nigeria. What we’re trying to do is bring down this cost. So actually, help both international and local businesses to reduce their bill so they can actually reinvest that money into the core of their businesses and therefore grow.
What are some of the key lessons Nigeria’s co-working industry can learn from other developed markets?
The key lesson for us is that it’s not enough to provide great office space, it’s not enough to provide all the functionalities, this is a must-have but beyond that, it’s about building a community and in our case, we’ve made a conscious choice of having a business community.
In western cities, for instance, London, you will see a lot of co-working spaces, with lifestyle angles, maybe a health angle and wellness angle. They will provide yoga classes and the whole wellness thing, we have nothing against that but our positioning is they will create great spaces, but also create spaces where people can grow their business and this is really what we want to be saying.
We want to be telling our clients to come to Africaworks and grow their business. They are going to be able to do so because they are going to be able to focus on their core business, that’s one but also we, through the community will be able to connect you, some of the time it will be with clients, other times it will be with partners, or maybe some funders as well so you can grow your business.
What role do you think the government can play in helping to deepen the growth of the co-working industry?
Two things. One is typically to reduce the import duties on some of the materials that we’re using to set up, our co-working spaces. If I were to draw a parallel, for example, Kenya historically has wanted to push its hospitality industry and so for any hospitality project, the government would say, no import duties on, for example, all the furniture.
The government could help kind of spearhead and accelerate the growth of the sector by reducing some of the taxes, especially in the import duties that clearly explain part of the reason why the cost of setting up shop is so high, so that’s on one angle.
The second angle, honestly, it’s the cost of financing. Businesses are receiving funding in Naira, which is obviously in the double digits, but more around 20 plus percent. As a business to be able to sustain and grow with a 20 percent cost of finance, it’s very, very, very tricky and that doesn’t apply only to us but to all the Nigerian economy. In a recent discussion, the few funds by the Nigerian Central Bank came up, intervention funds for very specific sectors. That allows to kind of drop the cost of financing and with the rate, generally, I’ve heard a single digit, and you know, if co-working and innovation hubs would be eligible to such intervention funds it will go a long way in boosting industry growth. It’s not the same thing when your cost of financing is 25% because when it’s 9%, you can do much more, much faster, and that will further accelerate the growth of the sector.
Considering your expansion plans, are you looking at raising funds?
We’re always raising funds. We have raised funds in the past from African international investors, venture capital funds, and strategic investors, mostly. Half of them are strategic investors. We have a constant need, and we’re about to announce some funding in the next few weeks. I cannot disclose it now, because it’s 95% done.
We’re fortunate enough to be profitable, so it is mostly just a reinvestment of our profits into growing the business. We have secured different lines of funding with Nigerian banks, as well as debt venture capital funds out of Nigeria as well.
We have grown our financing bases in Nigeria to fund the expansion plans and further to that, we are also working on some additional funding. These will help deepen the Pan-African platform and help us reach the goal of the 100 Africaworks.
How many businesses have you served so far in Africa and what are your projections?
We currently have 300 companies, which are members of Africaworks across Africa. By 2025, we’re likely to have roughly 2500 companies across the continent as part of Africaworks. In terms of Nigeria alone, we currently have around 50 companies that are our members, and we are probably going to grow that number to close to 500 by 2025.
Our plan for 2025 is to have 100 Africaworks and that’s our growth plan. Moving from 10 to 100. That’s quite a lot because just in pure numbers, that means two or three openings per month so it’s not a small amount.
Also, we have plans for, not only big cities like Lagos but smaller cities, with plans to enter with a slightly different model. In terms of what is the trend in the African market? I think the trend and model is unique but it has some similarities with some of the ones we see in the US in Europe or Asia.
But there’s a model that is very unique to Africa in terms of co-working, which is a function of how the African cities are structured. Let me give you an example, we all know that traffic in Lagos is not something simple, Nairobi is the same. Where it is typical, a similar amount of mobility of workers in let’s say, Asia, you know, you cross Singapore from point A to point B, in 20 to 30 minutes, you don’t have the same mobility in most of the African cities.
The consequence for us is to have what we call a hub and spoke model, whereby, as opposed to having one or two AfricaWorks locations in Lagos, that could be very big and very much the traditional model, we would rather have medium to large locations across the city. This is with a view that people who live in Lekki can work from Lekki, people who live in Ikoyi can work from there too.
So really, we have this very distributed model, which I think is the way to go in the industry because what you don’t want, especially post-pandemic, is people driving two or three hours to go to the office back and forth every single day. This is not good for anyone- for the employer and the employee, because he’s spending a fortune and wasting a lot of time.
QUOTE: I’m not here to flatter Nigeria, but the country is the most interesting market out of the cities that we operate. It is the one where we see the biggest potential