‘Air connectivity, payment system challenges to doing businesses in Africa’

Dr. Olusola Obabori is the Group Managing Director of Red Star Express PLC, a foremost transport and logistics company in Nigeria. In this interview he speaks on 30 years of doing business in the country, the challenges of logistics firms and the drive towards promoting the growth of Micro, Small and Medium Enterprises (MSMEs). The […]

Dr. Olusola Obabori is the Group Managing Director of Red Star Express PLC, a foremost transport and logistics company in Nigeria. In this interview he speaks on 30 years of doing business in the country, the challenges of logistics firms and the drive towards promoting the growth of Micro, Small and Medium Enterprises (MSMEs).

The COVID-19 pandemic seriously impacted the logistics business, would you say businesses are now recording some improvements and bouncing back?

As far as our company is concerned, we haven’t seen much improvement in terms of the indices but, are we able to overcome some of those challenges? The answer is yes.

In 2020 and 2021, the company did a lot better and from 2021 to 2022 that we are in, we are very confident. I cannot give out the numbers of the third quarter because it is yet to be approved by the audit committee and it has not gone yet to the Stock Exchange. So in terms of performance, I think we are very lucky that the company is beginning to do better than what we had during the COVID-19 year.

30 years as a business concern, would you say it has been a bed of roses for Red Star?

This year is an important year for us. Red Star will be 30 this year; in October. That is a major milestone. When we had our 25th anniversary, many of you were also there with us in 2017 and you helped us to improve. We will share our improvements in the last 30 years.

Without any doubt, this company has been able to weather the storm. If you go back down the lane, I know that many companies that were registered in this country are no longer existing.

We are grateful that the company has grown in our fixed assets, current assets, staff strength and our relevance in the industry has also grown. We are focused on expansion and strengthening the SMEs that work with us. 

Some of you will remember we had a programme some time ago that we called SME1000 which was to help us to help as many as a thousand MSMEs in Nigeria by giving them training, and access to our services at a reduced cost to help them to grow.

When they grow we can charge them big money but when they are in the process of growing we have created a segment for them to help them grow.

Does that mean SMEs have been incorporated as part of your CSR?

An SME is a company or an organisation that does not have more than 50 – 5 to 50 members. If you check what the United Nations says about SMEs. Now if you talk about the micro; you have the micro, small and medium. You have MSMEs, they are even smaller.

SMEs are bigger because sometimes they could have an income of about N50 million. If you go down to the micro, you are looking at somebody who has a shop and has an income of N25 thousand.

The government has started taxing those people differently. They said if you have revenue of less than N5 million, you may even have some tax exemption.

Those who sell on social media platforms don’t even have a shop, some operate from home. They are cottage enterprises of some sort.

We have a database of some of these people through various platforms. We invited them for a session and we did a lot of exposition on what they require to run their businesses effectively. What kind of training do you require to run your books, inventory? Little things that you might think don’t matter, matter to them. They have the money to start up the business but they don’t have the training.

So part of our CSR is to train those people; speak to them from time to time, hold sessions and work with other agencies. They hold programmes that we sponsor. 

Once we get data of these businesses, we tell them what is available for them. We can tell them that we will ship their goods from Lagos to Ibadan at a substantial discount rate. These are some of the things we have done. 

Today, I am sure that we have more than 3000 of them on our platform and we hope to do more in that area.

The major area of our focus under that is to look at the agro sector. The agro sector is a very important part where you find a lot of peasants working.

What’s your plan for expansion within the African continent?

The greatest challenge we have in African countries is transportation. If you are going to Tanzania for example, you cannot get a flight from here to Tanzania. You will have to fly to Kenya first. If you are sending something to Lesotho in South Africa, how do you go there? There is no direct flight. It is more difficult to connect Africa than it is to connect most parts of Europe.

Europe has a well-established rail system, and air connection system. There was a time that if we wanted to send something to South Africa, we would have to send it to London first before we then shipped it to South Africa. 

That was how we operated in the past because there was no direct flight from Lagos to South Africa.

Even in Ghana, we were going to Ghana through London. Can you believe that? That is how complex it is to connect African countries. That is a major headache for people who want to do business, apart from the currency challenge that we have. Connecting one part of Africa to another is a major issue.

So what we tried to achieve is to ensure that we can do business with ourselves. Many of us here are importing from China, Europe, but how much is Africa doing business with Africa? Very little. So the purpose of AfCFTA (African Continental Free Trade Agreement) is to ensure that we do business with ourselves.

To overcome the challenge is to put money in place and the payment system that helps to transact seamlessly without having to change the money to dollar first. The moment you change the money to dollars, you see the challenge it will bring.

AfCFTA will help us to transact more. Our job in that space is to help people to transport better. If you need to carry a container from here to Ghana, I can’t tell how many months it will take to get there. 

If you are going to fly, it is easier but if you are going to transport heavy equipment that is manufactured here across, where is the ship that will take it to Ghana for you? Whereas ships are coming in from China, Europe and you can say in 10 days it will arrive.

Those are the kinds of challenges that our industry is facing and part of what Red Star is trying to do is to look at how we can connect Lagos to the rest of Africa either by air or by sea. These are some of our own efforts in working with the government to actualise some of them.