Business Review, Q2 2020

This has been a challenging quarter. One week before we were due to hire 30 graduates, internet connectivity for the general public went down nationwide. Some businesses kept their connection, others didn't. Although an exceedingly rare occurrence, it was a decision made by the Government. Big thanks to the British Embassy in Addis Ababa for letting us in to use yours! On the bright side, Teseteo are now fully authorized by the Ethiopian Investment Commission and have been placed on a whitelist to ensure future high quality, continuous internet. This was made possible by meeting senior officials at Ethio Telecom and speaking to various organisations (i.e. British Embassy, DIAGEO, Kifiya, InLaks). Our company are now able to provide solutions 24/7, 365. As privatization of Ethio Telecom looms, services will only improve. With a bit of research and the right connections, companies based here can already source Premium telco services – difficult to find, but available. As any entrepreneur working in Africa will know, you must be resourceful and patient to make things work. But, with the right amount of perseverance - there is great progress (and money) to be made...

Despite Coronavirus, 2020 has already been an eventful year for Ethio Telecom and 40% of it is up for grabs. Two 15-year licenses/permits are also being sold at auction and all this has potential to generate an extra ￡1 billion in revenues. Companies bidding include Safaricom, Helios Towers, MTN and Orange (12 in total - 10 telecom operators and 2 non-telecom operators). The business is keen not only to improve general services - but also infrastructure. Ethio Telecom has reportedly been split into two wings for that purpose. Earlier in 2020, the Ethiopian Government committed to establishing an autonomous telecoms regulator called the Communications Authority (ECA). Its objective is to promote the development of high quality, efficient, reliable and affordable communications nationwide. This authority wants a competitive market to achieve these goals and they are also responsible for issuing licenses. I have personally visited the Ethiopian Communication Authority’s HQ and spoke to Directors there about QOS, connectivity + our business moving forward. With a population close to 110 million and growing telco / internet penetration; foreign companies clearly see Ethio Telecom as a profitable venture. As the only state-owned telecommunications company left in existence, it will be interesting to see how they adapt to changes. Teseteo are an Enterprise Customer so will be closely monitoring + reporting back on improvements that come from privatization activities. Deloitte are Transactional Advisor and KPMG are dealing with asset valuation.

Teseteo work with an internet company called WebSprix and pay them a monthly fee to handle daily connectivity. We can easily adjust bandwidth for larger numbers of staff. Our company share an office-block with WebSprix meaning they are always on hand to handle any FAQs/troubleshooting that may come up concerning bandwidth/QOS. Our SaaS provider, Connex One, runs seamlessly with a fibre connection. Teseteo chose fibre over WiFi to ensure 100% quality and clarity. We are a priority customer of Ethio Telecom + well connected to tech-companies, telco providers and engineers throughout Addis Ababa. Our partnership with Connex One (Customer Engagement Platform) enables us to offer inbound/outbound interactions through a secure, cloud-based, omnichannel engine. You can read more about our work with Connex One here – teseteo.com/connex-one Voice is still a hugely popular form of communication for customers, and our main focus at this point in time. That being said – now more than ever companies need an omnichannel approach. With Teseteo, clients can monitor ROI/success-rates across website, emails, chat and social media. Keep an eye on our Analysis Page for reviews + information around that – teseteo.com/analysis Platforms worth mentioning include Glassbox, Pendo, IBM, Gainsight and Genesys. Connex One are also working on some interesting, broader CX technology.

Gamification is a great feature of the Connex One platform as it motivates employees and makes work fun. The system also encourages our guys to be more competitive (especially around hitting CSAT/KPI scores) and that results in better overall service. Our business model allows staff to start earning competitive salaries from day one + bonus structure and various incentives in place too. See here to learn about Life at Teseteo – teseteo.com/joinus

The Ethiopian business year ends on 8th July and since 2019, Government have collected around 217.24 billion Birr ($6.32 billion) in tax. FDI here will result in more tax – but ease of doing business and operating conditions must get better for that to happen. Also – BPO/KPO (a sector Teseteo operate in) can generate lots of cash for the country if it continues to be pushed as a priority sector. Ethiopia recently adopted IFRS standards and companies should adhere to requirements when submitting financial reports. It is obviously worth recruiting an accountant with IFRS knowledge. Salaries up to 10,500 Birr per month are taxed at 30% (including pension). Employees earning over 10,500 Birr pay 35%. Income tax, pension + any withholding tax is declared and paid monthly. VAT is due quarterly. This must be taken seriously as there are penalties. Companies in Ethiopia need to be audited annually and are given 4 months to do so i.e. if a company closes its books on December 31st, it must declare on, or before, 30th of April. Companies need to declare and pay taxes even when an audit has not yet been completed. They can account for any under or over payment later - but in the instance of an under payment, there is interest due. Teseteo’s financial year ends on Dec 31st and starts Jan 1st. All tax regulations are issued by the Council of Ministers. Bonus and commission are to be included as salary and taxed accordingly – however, some income is exempt i.e. medical expenses or travel (the maximum tax-exempt allowance is currently 2,200 Birr <US$81> per month but cannot exceed 25%). Tax must be paid to the Ethiopian Revenues and Customs Authority (ERCA) within 30 days from the end of each calendar month. Such payments should also be accompanied by a statement about each employee receiving taxable income for the month.

Although nothing drastic, new labour laws were put into effect last year. This is something we have discussed previously (www.teseteo.com/analysis) Probation for employees has now increased from 45 to 60 days. If it’s done properly and in writing, termination of contracts during that time period is allowed without need to pay compensation or severance. Maternity leave has now been extended from 90 consecutive days to 90 working days and annual leave is up from 14 working days to 16 days (1 more day for every 2 years’ service). Rate of pay for overtime work has slightly increased on previous years. Overtime = 6AM-4PM: 1.5 x hourly rate, 4PM-6M: 1.75 x hourly rate, "rest day": 2 x hourly rate and Public Holidays: 2.5 x hourly rate. Reporting late eight times in a six-month period or absence from work for a total of five days in a six month period (while being warned in writing) can lead to immediate termination. Having all this written down and keeping a record will go a long way. Employees are not entitled to sick leave until they have completed probation. Sick leave cannot last for more than six consecutive months over any 12 month period. Staff on sick leave are entitled to 100% of their wages during the first month of sickness, 50% over the next two months and zero if sickness lasts over 3 months.

Q2 2020 has been a slog but pleased to say investors are still moving forward, and we still have a strong client-base on our side. What drew us to Ethiopia more than anything else was the talent, and that will always be in strong supply. Bureaucracy can be an issue and it takes a lot of patience to get the mundane stuff done. The Government in places like Ethiopia tend to have a stronger hold on what goes on compared to Western countries i.e. USA and UK. That is just a fact and needs to be dealt with accordingly. BPO/KPO is a key sector for the Ethiopian Government and Jobs Creation Commission (who we have partnered with). I am confident things will only get better going forward not just for Ethiopia, but the Global economy as a whole. We have an amazing team (young to senior) and in my opinion that is what will make this company a great success - www.teseteo.com