The Executive- Steve Babaeko: We would create a value chain to extract, produce, create a brand for palm oil in Nigeria and Africa…..
Technology will come and go but human capacity for creativity is what will sustain this business
If I have one last goal in my pocket list, I want to be the first agency that will list in stock exchange….
With an uncertain business climate, economic headwinds, the advertising industry like any business is hit with low patronage, a raft of government policies, influx of foreign agencies and an uncertain future. Steve Babaeko, the Managing Director, X3M Ideas, a creative advertising agency, speaks with Adedayo Adejobi on his agency’s third year inroad into Agriculture, consumer confidence, optimism about Nigerian, technology and human capacity for creativity, and getting listed on the Nigerian Stock exchange……
Can you give us a business overview of 2019?
2019 was a difficult year for businesses in Nigeria and the reasons are not far-fetched, it was election year and for a long time, from January to almost half of the year, you saw very shocking business activities going on. I am sure all the major participants in business and enterprise wanted to see the direction the election of the country would go! Technically, for an industry like advertising, we had like a 6-month calendar because the election happened and we have to wait for swearing on May 29. We could say economic activities kicked off in full gear post May 29 which is June and you could see that all of the projection for the GDP growth actually unmet, it went south a little bit because of some obvious economic headwinds that happened. 2019 was difficult to say the obvious.
What further compounded the problem for the Advertising industry was that most of the usual spending that happens within the political cycle did not go mostly through registered AAAN Agencies. I think because of lot of backdoor deals, some foreign PR companies were contracted at the detriment of the local industry. I think it’s high time the government looked into this. Each time those activities happened, it hurts the local industry and if this government is serious about promoting the local contents and industries, they must look into the spending that happen during electoral cycle so that registered advertising companies in Nigeria get the lion share of such spend.
What is responsible for government’s preference for foreign agencies?
It’s all about taste for the foreign; it has overtaken us as a people, which is why I love part of the government policies including the closure of border. It forces us to consume our rice and get used to the taste instead of the obsession for foreign rice and other products. It will be a welcome development if they could do the same for Advertising and related services. You bring foreigners who come to the country with brief cases to do strategy about a country they don’t even know the nuances, culture or tradition of our people and then you pay them so much money to come and do strategy for your campaign, for me it doesn’t make too much sense. We are losing money, and scare foreign exchange to foreign countries to the detriment of our people and industry that employs young people. We are starving them because the fund is not going to them, it’s going to outsiders. For me, it’s crucial that there should be a standing policy that will ensure that local players get to participate robustly within the space.
Are Advertising Practitioners ready to be within the ecosystem where decisions are made?
It makes sense for the government to consider that seriously. The advertising industry is being overlooked in this part of the world but outside I don’t think there is any year that UK economic case is discussed and somebody like Sir Martin Sorrell’s opinion is not sort as to the direction the economy will go. This is necessary because we are the people who interact with big players within sectors of the macro economy, from the manufacturing, to the farmer, to distributors to Fast Moving Consumer Goods manufacturers and so on. They are our clients, so the first way to check where the wind of economy is blowing is from the advertising space because we know who is reducing spend, who is increasing spend so you can use that to build up data to say this is what happened last year, this is what is likely to happen this year. It becomes more important to bring in key practitioners in the advertising industry into government economic planning because if the advertising industry does not do a good job, some of these key manufacturing sectors will not be able to actually actualize their goals. An Ad for International Advertising Association (IAA) says “When advertising does its job, the clients we represent keep theirs”. It’s really a crucial part of the whole macro economy planning that the government should consider taking onboard.
What will AAAN do differently this year concerning APCON and its nonexistent council?
We have been fighting, the fact we do not carry placard disturbing the whole country doesn’t mean we have not been reaching out to the government in every possible way we can. Under the leadership of the current president of AAAN, Nkechi Odigo, the vice chairman at Casers group, we have done a lot, we have met with the Vice President, we’ve met with the secretary to the federal government, we have sent emissaries, we have sent letters, we have reached out to Minister for Information under whose purview the advertising space falls into. I think the government should really do something this year because you cannot leave a whole industry with people’s job hanging in the balance. You cannot leave that sector grounded for 3-4 years without a council, it makes no sense. There is a government act that sets up APCON and to see that it’s the government itself that is flouting that act, for me I find it very bewildering. I don’t even know how to express it. I think this year we need to even push the envelope more. We need a council and the government needs to find a way to accede to our request because we have sent so many letters and I’m using this opportunity to reach out to the government to look into setting up a council for APCON because it’s very important, the future of this industry depends on it.
The issue of consumer confidence is taking the front burner, is there any hope this year?
If we look at the macro economy, each time the oil price crashes that when consumer confidence ebbs. The government is hamstrung, looking for how to manage the situation. With the current US/Iraq crisis, oil prices have been going up which is good for us. I think benchmark for this budget is 62%, but its going to 69% dollars which is really good for us. If it continues like that, government will have more revenue to fund the budget. But another thing that affected the consumer confidence late last year was the border closure. For these, the government needs an effective advertising sector , if we look at the goal of the border closure, it’s very sound strategy but if we don’t find a way to communicate it effectively to the people, then we start to have problems. People just think this government is wicked and wants to punish the people, simply because the communication poorly handled.
Let’s look at Benin Republic, our neighbour, it’s a problem country for Nigeria because that is where most of the foreign goods – the bad, the good and the ugly – come into the country. There is no government in the world that would fold its hand and allow one small country turn it into a dumping ground due to illegal importation and smuggling. The government has to stand up and do something! Of course there have been casualties that was not intended because there are people whose daily lives depend on the cross border activates. All those impacted on consumer confidence but as go we can see since the border closure, agricultural activities in the sector have improved, nature hates vacuum, there no vacuum in nature, if the border is closed and we have need for rice, some people have to fill that gap and It’s happening. If the government consciously balance this strategic intent with discipline and focus in execution, before the year runs out, you will see that consumer confidence will go up.
In the short time, inflation will go up but if we look at it in the long-term, there is light at the end of the tunnel. One of the biggest sectors that can balance out the job deficits we have in the country today is agriculture. If the agricultural sector becomes more developed, there is no reason this country should not be able to produce enough food for the whole sub region. If there is a short-term pain for a long-term gain, I will go for that.
Nigeria is the biggest economy on the continent, it will shock you that we represent small amount of export even in our sub region. Should we now trade that for open border that will make people overrun the economy and kill the agric sector that we are putting effort to build? The government just needs a much better way of communicating to the citizenry, if you have the best intention for your children and you are not communicating, they will think you hate them. This is where we need advertising and effective communication. I think this is where the government scored a big F9 as far as I am concerned.
In view of the current noise about digital Advertising, what does this hold for advertising?
Technology will come and go but human capacity for creativity is what will sustain this business. Unlike most people, I am not all panicky about digital advertising. The new media of today will become the old media of the next 3 years. You have to take into account that this threat exist, how are you going to mitigate the threats of losing business and be above board is the question. Any agency that wants to see its business grow, needs to know how to integrate technology into what it does because that the trend, that’s where the budget will continue to go. In Nigeria, because of the peculiarity of our own social economic structure, we probably will get there. However, digital technology and traditional advertising will still remain side by side until we are able to clean up some of the challenges we have in our infrastructure and social space.
2-3 years ago, X3M made incursions on the African space, where are you presently, and what’s the plan going forward?
We are in Nigeria which account for the whole West Africa because Nigeria represent about 75% of the entire west Africa GDP. We are in South Central Africa, operating from Johannesburg and Zambia covering Malawi, Mozambique and whole of that south central Africa region. This year, we’ll have the opportunity to move into East Africa that will cover Kenya, Rwanda and Ethiopia but for now, let’s keep our fingers crossed.
Aside Nigeria, has the business started making tractions in all those countries?
The objective is not to make money; the objective is to do what other people think is impossible. The immediate objective of anything I go into is not money, my objective is to do what should be done, look for problems to solve and if you do it very well that’s where sustainability comes in. The fact is if you don’t do it effectively you can’t be talking about money. Once you identify the problem and solve it very well, possibly the reward will come in. we are very optimistic that soon, we will begin to see result of all the handwork we put in.
You painted a picture of the general economy in 2019, how did X3M Ideas perform in 2019?
The number could have been better but we are one of the few agencies you can say despite the storm, the economy headwinds, we were still able to survive and withstand them. Again careful planning, good fiscal policy -try to bring down cost, drive up productivity of the team. It’s not a disastrous year for us, though it could be better. But again, we are part of the micro economy, whatever happens at the macro economy, has a way of trickling down to us.
For this year, we have gotten policies out of the road and fortunately something happened as at December last year, the budget has been passed which has not happened for long time. Hopefully when the government starts to spend, the engine of enterprise has to hum and move in Nigeria. We are looking forward to decent 2020.
You are always very optimistic about Nigeria, what’s the reason? Do you have plan to list in stock exchange?
I have couple of potential investors that I am meeting with in Switzerland in the next couple of days, it’s part of the whole bigger picture. About Nigeria, this is my only country; unlike most people these days, I have only one passport and it’s my Nigerian passport and I’m so proud of it. Also I feel that in my lifetime, this is the period I have seen the highest number of people fleeing Nigeria and emigrating, not even shoe-makers and mechanics but middle class, bankers etc. My point is some people’s great grandfather stayed back and built that Canadian economy and that Canadian society that our people are running to. Again not to knock the people running, the people running know why they are running but I am saying this is the time we need to look inward and say extra sacrifice is required from everyone to see if we can turn around the tide and make this country a great place. Instead of us running, people will be running here to seek refuge and this is the time we have to make that sacrifice and if we don’t make it nobody will make it for us. This is why I am optimistic about the country.
On listing on stock exchange, honestly if I have one last goal in my pocket list, I want to be the first agency that will list in stock exchange. I know it’s going to take a bit of some kind of mergers and acquisition; we are really open and ready for some of those conversations. Like I said, we are meeting some potential investors in Switzerland in couple of days. For some of the expansions we are doing now, we require a lot of money. I keep telling people if I have a war chest of a hundred million dollars in my pocked today, I will turn Africa upside down as far advertising is concerned. We are looking forward and optimistic, we have built a brand that people will be excited to invest in. This year we are going to be 8 years old, it’s been 8 years of upward growth year-on-year. So, we are optimistic that we will find those kind of investment that will allow us expand effectively.
What do you see in 2020 in advertising industry?
We have been hearing talks about mergers happening and one has happened this year and hopeful more will still happen. When people are complaining people are not merging and acquiring, I said we have not bottomed out yet, once you bottom out, common sense will prevail this is the only way to go and I think we are beginning to get there. If telecom companies can come together and say instead of individual companies erecting masts all over the place, why don’t we start co-location? Are we more buoyant than telecom companies? We need more cooperation in our sector and I am hoping that will happen this year.
What is the idea and motive behind Babaeko farm?
I am a Nigerian and I am passionate about anything Nigeria. Let look at it as a nation we can’t even feed ourselves and all the statistics available indicate that by 2030, Nigeria will be third biggest country in the world behind China and India. Right now at 200 million people we can’t even feed ourselves. What happens when we get to that stage? So it becomes an imperative that all hands must be on deck to further push agriculture. Secondly, this is a country where we leave open borders, if I go to certain places, I don’t buy fruits because we don’t know the kind of fruits that we are eating again I suspect that because of all these genetically modified foods, that is why we see a rise in cancer because in the days of our forefather, we hardly hear about anybody having cancer but today it’s all over the place. It means that even the quality of food we get is suspect and to mitigate against this, we have to grow our own food. What further blew my mind was the statistic I got somewhere, it claimed that as at 2018 this country spent 500millin dollars to import palm oil, this does not make sense in any way. There is no way I can sit down and sleep at night knowing that half a billion dollars is expended on palm oil, that’s for me a final straw.
I have close to 50 hectares with palm trees in Kogi state, by the end of this year, it will be one year and then we want to start bringing the machines from Malaysia that will be doing the extraction. I am not even pretending that it’s easy because I can see the challenges, now we are setting up irrigation systems that we got out of Israel. We try to see how we fuse technology into traditional means of farming. We are really excited.
What I found out again, is that anything I do comes back full circle into advertising. Our research is on-going now, there are few palm oil brands but palm oil is mostly commodity, there is no brand you can request for the way you say “give me Maggi”. We don’t have those kind of branding for palm oil, that’s where it’s going to end up. We already have the structure for advertising, we would create a value chain to extract, produce, create a brand for palm oil in Nigeria and market.
Processing and storage remain the bane of many agric businesses, how do you tackle these?
That’s why for me, palm oil becomes a very good place to start. If you look at the value chain of it, there is nothing that is wasted in the entire chain. There is value everywhere. You do the extract; you can convert to vegetable oil and you can get palm kernel oil, the shell of the palm kernel you can use to produce soap. Everything is useful so there is no room for anything wasting. I am always online studying about that particular sector, getting knowledge. I just registered for an online course in one Australia University about this. We have technical partners, we are working with Corporate Farmers Internationals. We are really excited about it and looking forward to the next 3 years when will have our first harvest
What next after the farm?
What we want to do is find a way to expand the farm and replicate the Kogi state model across the continent, We are in talks with one Africa country to know if they can be in there. It’s not too early because the Chinese say “The best time to plant a tree was 25 years ago and the next best time is now” as for me, I always plan ahead.
As long as you know what you are doing, so far so good, all our predictions we are ticking them month on month and I need to study for every region we go to, we have to see what is best for them in those areas, it’s what we going to focus on. We still want to focus on things that can be used locally and can be imported so whether its cash crops or consumable it’s still going to be what we can export .