Worsening Case of SAPA. Even South African Startups Haven’t Been Spared
“This has been a difficult decision to make considering our passion to serve the Nigerian market,” the company wrote in a statement on its website. While we will no longer be operating in Nigeria, we will continue to keep abreast of activities in the Nigerian market and work towards a potential re-entry into the market at a later date.”
These were the departing statement from South African online house cleaning business, SweepSouth as it announced it was ceasing operations effective November 25, 2022. The startup had operated in Nigeria for just 5 months.
The Johannesburg-based firm expanded into Nigeria in June 2022 to enable consumers to book home cleaning services at competitive rates and connect them with SweepStars, or properly verified cleaners with a lot of experience in home cleaning. According to the startup, the global macroeconomic situation is unfavorable, and this has a negative impact on the home services sector. Due to the current economic challenges, the business became unable to function sustainably in Nigeria.
ICYMI: In September 2022, SweepSouth raised $11 million, which it claimed would help with its pan-African expansion. Its brief activity in Nigeria began as a part of that expansion drive.
In the past month, two South African businesses have announced their withdrawal from Nigeria. SweepSouth is the second. By December 25, 2022, South African retail giant, Massmart will depart the country, as it revealed last month after selling its Games Discount World stores in Nigeria.
Why are they running? Simple. It’s SAPA
SAPA: a term used in Nigerian Pidgin English to describe a state of being extremely broke or poor
When Massmart announced it exit from the Nigerian market, it cited that the current currency volatility has restrained consumer demand. This trend made it challenging to operate profitably in the country that was once hailed as the next bright growth spot for retailers. Massmart CEO Mitch Slape had announced plans to sell up all of its general merchandise Game stores in Nigeria to reduce losses in that underperforming division.
A depreciated currency can result in far reaching implications for macro and financial stability. For businesses, it is capable of distorting the market mechanism; hence, it distorts merchandise trade as well as capital flows. In general, when a currency loses value, people’s purchasing power declines as well because products — especially imported ones — cost more money. And when that causes a general rise in prices, it’s called inflation.
Consumers’ low purchasing power amid worsening economic conditions in Nigeria is forcing startups’ exit. The worsening case of SAPA in the Nigeria has reduced the ability of consumers to afford basic services, hence distorting the normal flow for businesses.
Nigeria will appear to be the ideal target for startup expansion due to its burgeoning market, but this is not the case. As cost of basic needs continue to be on the rise, there is a prolonged strain on consumers, making it impossible for them to afford luxuries. Consumers will now rather take up those domestic duties as they can no longer afford the luxury offered by SweepSouth.