The past few days have been a rough ride for Kenyan agri-tech firm Twiga Foods amid speculations of the company starting its downhill path following the latest redundancy notices to over 250 of its workforce.
For a company that has attracted more than Sh23.2 billion in funding besides goodwill from the government, its latest turbulence has unnerved players in the tech industry who are counting on it to provide a successful model they can learn from.
Chief executive Peter Njonjo sat with the Business Daily to explain how he is adapting to changes in the marketplace and why restructuring is just part of the strategy that will see Twiga outlive its competitors.
You have been on a sacking spree these past few months. When do you stop and how many people are affected in the latest round?
I would want us to go just a little bit behind in time to understand what has changed in the environment because it's not just us, it's everybody going through this process at this time.
So it can't be that the economy is just affecting one type or a select group of companies, something is happening that is impacting this.
At some point, you need to start thinking about how to position the business in a way that allows you to achieve the original objective, while still meeting day-to-day needs and taking into account the cost of capital.
Part of the strategy that we are eyeing is to take operational costs out. We need about 40 percent less cost than where we are today.
I'm not talking about people, I'm talking about general operational costs because we have established that it is feasible to run the same operations we do at 40 percent less cost.
That said, we are letting go of a third of our permanent headcount by next month.
What part of this fraction have you shed off as of now?
So far we are in the process of working through the redundancies because, at the end of the day, there is also a process that we need to respect.
As far as the Employment Act is concerned, you can't just wake up and tell people that their employment has come to an end.
So the key thing is that first of all, we have to issue an intent to impact roles, and that intent then opens up a feedback session.
During that feedback session, we then have a conversation with all the potentially impacted employees.
Then once we have clarity, we issue redundancy notices after confirming the specific roles that will be impacted. So all those processes are what we are undertaking right now.
What does a third of your workforce translate to in terms of numbers?
Our headcount is about 810, so you are talking about a third of that (about 267 people). So these are the people that have received their notices of redundancy. It's just that this information was leaked to the media when we were in the middle of the process.
A third is quite a significant figure. Won't this affect your strategy?
Now, our strategy has covered that question very well thanks to our ongoing investments in technology.
For example, if you think about how customers are clustered in the market, sometimes you have geographical routes that are fixed, where you say, this lorry only serves Kayole or Umoja.
But when you fix a location, you run the risk of having trucks go with say 70 percent empty space on days when orders are low.
So what we've done is that we've built technology that is going to shift all that, where we're now able to have different customers being served on different days and no fixed routes.
That way, our trucks are always full and as a result of that, we have reduced the number of trucks we need by 40 percent for the same volume of business that we were doing.
Also, by moving to rent our Tatu City-based warehouse, the number of trucks that we can load simultaneously is suddenly so high and so now we can serve all of Nairobi, Thika and Machakos regions from the warehouse, meaning we no longer need depots.
As a result of that, we have shut down 11 depots and that model has significantly improved our operational efficiency.
How much investor funding have you raised cumulatively to date?
If you look at what happened between 2017 and 2021, there was a significant increase in the amount of capital that was available for start-ups globally.
The reason that was the case was because interest rates were very low.
There was a lot of liquidity in the markets because of the whole issue around quantitative easing where governments in developed markets issued a lot of money to support people who were going through Covid-19.
There then rose a huge appetite to invest in emerging markets and what we saw was that the venture capital that was coming to the continent was very high.
It was around that time that we also raised a huge portion of our financing before the funds later dried up. Cumulatively we have raised a total of $160 million (Sh23.2 billion at current exchange rates).
The perception created out there by the staff firing reports is that Twiga is struggling and this works to deflate the confidence of smaller start-ups. What is your message to the market players?
The thing is, we're going through a restructuring period that will last between two and three months. It is going to be tough as we try to put all the pieces together but after this phase is done, we will emerge a much stronger company that will remain in existence for a very long time.
Are we laying off all our staff? No, we're laying off a third of them. So what are we going to do with the remaining two-thirds?
Are we just going to keep them for the sake of keeping them? No, we have a plan and that plan is aligned with all our stakeholders.
What timelines are you targeting to achieve profitability and get back on sound footing?
Every strategy is developed to achieve a certain objective. The reason why we are restructuring is because we need to get to a point where we can generate more resources internally.
All the things that we need to achieve our goal, we have invested in.
So right now with this restructuring, it's just picking a few things and then we get the business to where it needs to get to. Within the next 12 months, we should be generating our cash.
