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Plug, Play Instant Growth of Instant offices in Addis

An “instant” or “serviced” office is one that is fully equipped and managed by a company that then rents it out to individuals and businesses. Although instant offices are often found in cities worldwide, it is a new phenomenon in Ethiopia. Driven by the increasing number of foreign investors, business travelers, startup businesses, and non-profit organizations, the business model is now gaining momentum. EBR’s Mikiyas Tesfaye explores the issue.

As Ethiopia’s economic performance remains on a solid growth track, the dynamics of doing business in the country is also witnessing modern trends and innovative solutions in the delivery of fully serviced instant offices to customers.

The number of business travelers visiting, startup businesses, and non-profit organizations has been seeing a steady increase. This has generated the need for serviced offices that are immediately available. Although this is considered a standard business practice in most developed countries, the demand for serviced offices, until now, was absent in the country.

Established just a little over six months ago, Molla Business Group (MBG) Instant Office is one of the companies providing the service in Ethiopia. “Our aim is to address the hassle of setting up a decent office, which could take as long as three months, for customers who require an office on a temporary basis and short notice,” Ashenafi Molla, Marketing Manager at the company told EBR.

The company provides instant office services for rent on a daily, weekly, monthly or indefinite basis. For instance, MBG charges USD45 plus VAT for its executive offices, USD25 plus VAT for its cubicles per day.

The business model is best understood as a cross between an accommodation facility and a formal office where the business supplier provides the space, secretarial and documentation services, connectivity, and some level of consultancy. The customer leases the space, and has access to all the amenities that come with an office.

“There is a huge deal of inconvenience in trying to effectively work at hotel lobbies,” explains one IT solutions provider, software architect, and services expert who spoke to EBR on condition of anonymity (he has a nondisclosure agreement in place with his company). “My biggest problems include having to deal with noise, power outlets, disruption to the Internet connection, additional expenses (you either need to use hotel services like drinks or meals, or be separately charged for Internet).”

The IT expert’s work is not formally based in Ethiopia and he needs to travel to parts of Africa and the Middle East to meet customers and understand their technological needs. He also travels frequently to Addis Ababa because his family is living in the city. But due to the demands of his work, and because his company does not have an office in Addis Ababa, he is forced to use hotel lobbies to get some work done.

This is not an isolated case. The number of individuals working for foreign companies that do not have offices in Ethiopia is rising. This is mainly attributed to the rapid economic growth that has attracted foreign businesses, business travelers and remote employees (like the IT expert). This new norm has given rise to instant office providers.

“We had tried to introduce the business model a decade ago in Ethiopia, but the business environment at that time was just not ready for the service,” says Tadele Sinesibhat, MBG Operations Head. The company had to close down that business after a while because there was no demand for it. But as the current environment has radically shifted to the growth side of the economic spectrum, MBG restarted providing the services on a 210 square meter office space located in Yewubdar Building just adjacent Alem Cinema on Africa Avenue. The space is equipped with six executive offices, four workstations, and a conference room fitted with a smart TV. The space also has a lounging area, as well as canteen.

Though primarily not established to provide instant office services, other companies engaged in consultancy also have instant offices for rent. According to information posted in the company’s website, iceaddis is the first innovation hub and tech startup incubator in Ethiopia. The company, established in May 2011, rents a single desk that has unlimited Internet access for ETB280 a day. The rent goes up to ETB1,200 for five days, and ETB3,800 for 20 days. The office is located in Zewdu Building, near Bole Medhanialem, near Hayat Hospital.

“Less than 10Pct of our income is generated through renting our co-working spaces and our main business is incubation of tech startups in Ethiopia and across the region,”

Marcos Lemma, co-founder and CEO of iceaddis noted. iceaddis has plans to expand into Egypt, South Sudan, and Somaliland and locally set up shops in Mekelle and Jimma towns. Markos explains that their co-working spaces represent their fundamental value of openness.

blueMoon is the other company that offers instant office service for clients. Established by Eleni Zaude Gabre-Madhin(PhD) former CEO of ECX, blueMoon is mainly engaged in nurturing and funding agribusiness ideas that are innovative, scalable, and have huge transformational potential. The company also rents office spaces equipped with high-speed Wi-Fi.

“Our core business is incubating startups, youth and the ecosystem to support digital Ethiopia,” Eleni, Chief Happiness Officer at blueMoon explained to EBR. “Co-working spaces and startup hubs are only a small part of it,” she added.

blueMoon’s workspace, located in METI Building on Namibia Avenue between Edna Mall and Atlas Hotel, is open to any startups engaged in any sector, and serves both as a co-working and event space. The monthly rent for a fixed desk is ETB3,000, for an office is ETB10,000. The price tag for a boardroom that can accommodate ten people, is ETB4,000 for a full weekday.

Generally speaking, the business model and pricing strategy of instant offices in Ethiopia is similar to the scheme followed by companies in hospitality sector. MBG’s Ashenafi elaborates on this by saying: “longer occupancy gets price cuts and shorter stays are charged relatively more.”

“I think the price is competitively and flexibly set,” argues the IT expert. Leasing an instant office is perfect for one customer EBR met while visiting MBG’s space. “I am very satisfied with their excellent service,” noted the client, who chose to withhold her name. “I work for an NGO working on peace and security in the East African region and we are in the process of acquiring a license from the government. There is a lot that needs to be done, even though we do not have an office yet. This instant office has been just perfect in meeting all my demands.” Her only complaint was about the parking space at the building where the instant office is located.

Despite a growing appetite for the service, and a widening customer base, the business is not without its share of difficulties. “Our biggest hurdle is the lack of recognition for this particular business model by the authorities,” says Tadele. To date, there is no legal framework that recognizes instant offices as separate business entities.

Markos agrees with Tadele and underscores the challenge. “We operate under a consultancy license, but there is so much we do that is not properly identified and categorized. This has huge ramifications when it comes to taxation.”

Tadele noted that they are working under an events organizing banner, but are in close consultation with the authorities to have it recognized.

Tigist Mekonen, an official at Addis Ababa Trade Bureau’s pre-license directorate recognizes the role such instant offices play in attracting foreign investors. “However, there is no categorization of instant offices currently exclusively providing such businesses.”

“Client filtration was one of our biggest challenges, especially during the first couple of months of operation,” says Ashenafi. The company had issues with targeting its customers in a more effective manner. “It’s a niche market, and with a recent marketing surge, we are seeing our number of customers grow.”

Internet connectivity is the selling point of these service providers. But sporadic connection disruptions mean they cannot satisfy their customers with service worthy of the cost. “At times, we get lower bandwidth than we subscribed for,” complains Tadele.

“As a tech start up, the Internet is the backbone of our services. Though there are improvements in Internet penetration, disruptions continue to be the major challenge and some of our IT customers cannot even get the bandwidth they require,” Markos noted.

The significance of having instant offices providing their services on a competitive pricing scheme cannot be underestimated. The value addition of these services, especially during the initial stages of setting up a business in Ethiopia, is remarkable. Considering this, officials should pay such initiatives the attention they deserve, and extend support.

 6th Year . January 16  – February 15 2018 . No.57

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