In the face of macroeconomic headwinds that have made it more difficult to secure funding and have driven venture-backed companies to scale down their operations, Twiga has decided to perform another round of layoffs in order to maintain the viability of its business.
As part of its efforts to become a more “lean, agile, and cost-effective organisation,” the Kenyan B2B e-commerce platform has announced that it will be terminating the employment of 283 workers, which accounts for 33 percent of its total workforce of 850.
Twiga has announced that it will be implementing new “strategic operating adjustments,” one of which is discontinuing its in-house delivery service, which relied on leased vehicles, and replacing it with a model in which it will hire contractors on a pay-per-use basis.
To achieve this goal, the company has launched a logistics marketplace, which provides independent truck drivers with access to its delivery services. The company estimates that by using the route-to-market tool on its marketplace, it will be able to cut its logistical expenses by forty percent. After letting go of its sales crew in favour of independent agents, the company is now cutting ties with a second in-house department in order to streamline its operations.
In addition, the company has closed ten distribution centres in Nairobi and relocated all of its operations to a contemporary warehouse that covers 200,000 square feet and was officially opened for business in 2017. Twiga’s products include the Soko Yetu platform, which enables vendors to buy from a list of suppliers, and Twiga Fresh, the company’s main fresh-produce endeavour that tries to solve traceability difficulties, stock outs, and price volatility. Both of these products are available on the Twiga website.
Read also: Twiga, Expands Operations in Kenya With Twiga Fresh
Remarks from Twiga’s CEO
“Twiga Foods Limited operations are still up and running. However, based on recent corporate fine-tuning processes, Twiga has taken several interventions to optimize its operations and enhance operating efficiencies. These interventions include the introduction of a logistics marketplace…adopting a central warehouse model at Tatu City and transitioning our sales approach to a commission-based agents’ model has also resulted in improved operating efficiency,” said Twiga co-founder and CEO, Peter Njonjo.
Twiga, which was established in 2014 by Njonjo and Grant Brooke, has stated that its activities in Western Kenya are still operating strong, despite the fact that some buyers have been unable to place orders. It continued to assert that it is “working on improving its Western Kenya operations in an effort to optimise service in the region.”
“This optimization process will involve the design of an improved route-to-market model in Western Kenya regions such as Kisumu, Kisii, and Eldoret, which a single central depot may ultimately serve once the process is complete. Our Kampala, Uganda Depot continues to operate, as does our Taita-Taveta farm operations,” said Njonjo.
Why the layoff
The decreasing purchasing power of Twiga’s clients was highlighted as another reason for the company’s decision to make the modifications. The company is the latest to join a growing list of startups in Africa and throughout the world (including B2B e-commerce platforms like Copia and MarketForce) that are shrinking in response to a downturn in VC funding, which has caused cash to become expensive and difficult to obtain.
“It is particularly instructive to note that, in the last 24 months, the macroeconomic environment has changed dramatically, locally and internationally, escalating the cost of capital significantly. The cost of capital has increased substantially for venture-backed startups, and there is a need to restructure the business model and make it more resilient to the prevailing environment. Those who do not change will not be here tomorrow,” said Njonjo.
Among the companies that have invested in Twiga are Creadev, a family office and private equity business with offices in Paris and Nairobi; TLcom Capital; IFC Ventures; DOB Equity; and Juven, a spinoff company of Goldman Sachs.