26 executives exit in shake-up of Samsung’s Nairobi office

A major staff shake-up has taken place at the Korean electronics giant Samsung’s Kenya unit, causing the exit of more than 20 senior managers.

Robert Ngeru, the firm’s East Africa vice-president and chief operating officer, is among the 26 senior and mid-level managers who have left the company since the beginning of the year, according to confirmed reports.

Mr Ngeru, who has been pushing for Samsung to put up a television, laptop and printers’ assembly plant in Kenya, said he had tendered his resignation and was serving notice till end month.

The plant was initially expected to employ 900 people directly and more than 1,000 in its supply and marketing activities besides supporting the transfer of knowledge.

Mr Ngeru’s exit follows those of Manoj Changarampatt, who served as the company’s IT and mobile director in East and Central Africa, Albert Kigada, the printer division product manager, Mukunya Mugo, the human resource manager, and Danish Oyugi, the country manager for hand held products. 

Mr Oyugi has since joined Lenovo as the business head for East Africa while Mr Ngeru said he planned to set up a consultancy and a poultry farming business, declining to indicate why he was leaving the electronics firm.

Mr Ngeru, who has been with Samsung Electronics East Africa since 2010, has previously worked as Mobile Communications manager at Microsoft and general manager at Motorola. 

Samsung’s management did not respond to questions on his exit, choosing instead to send a holding statement on the same.

Autonomy

One executive, who left the firm earlier, attributed the exits to the Korean firm’s decision to strip the regional office of its autonomous status.

“There is a change in strategy that has seen most input by local executives not being considered and a push to align the marketing campaigns to the global one, something that is not working well and runs against the previous approach of localising the marketing strategy to resonate with end users,” he said. 

This has also meant that the local office gets its budget and targets from the global headquarters.

The Nairobi office, which also served as Samsung’s headquarters for East and Central Africa, had 150 permanent employees — 100 Kenyans and 50 expatriates by January this year — and the exit of 26 Kenyans means a quarter of the local staff have since left the firm.

The establishment of the Nairobi headquarters was also meant to reduce the decision-making time and build closer ties by providing faster support services to partners in the region, a move that was expected to culminate in the setting up of a local assembly plant.

Mr Ngeru’s exit now puts plans to set up the plant in doubt.

Samsung currently serves Kenya and the larger East African market through shipment of finished electronic products, including laptops, refrigerators, television sets and printers.

Establishing a local assembly plant would have seen the firm ship in knocked-down units for assembling — increasing the efficiency of its supply chain and possibly cutting down the cost of its products.

Mr Ngeru had said in previous interviews that the establishment of the plant had been delayed by negotiations for tax incentives with the Ministry of Trade and the Kenya Revenue Authority (KRA). The amount of money the Korean firm planned to invest in the venture was pegged on the incentives offered.

READ: Samsung gives Kenya its first TV, printers assembly plant

Revenue drop

The change of strategy comes as Samsung’s global earnings from smartphones and other mobile gadgets dropped, piling pressure on the company to change tack.

In January, the South Korea-based multinational announced a 64 per cent revenue drop for the October-December 2014 period to $1.8 billion (Sh164 billion), contributing to the tech giant’s first annual profit fall in three years.

Locally, the company, which has been enjoying market leadership, has come under intense pressure from Chinese rivals Huawei and Tecno, especially in the rapidly growing mid-to-low-cost smartphones market segment.

Till March, Samsung had been the market leader, controlling about 46 per cent of the total (400,000 handsets), feature and smartphones sold in the Kenyan market monthly.

“We have maintained a strong lead on smartphones but latest market statistics indicate that Samsung has been losing market share to the Chinese firms,” Mr Ngeru said. 

In July, Samsung lost a court case filed by a former employee, citing racial and sexual discrimination. The court awarded the employee, Koki Muia, more than Sh7 million for wrongful dismissal after finding that her dismissal was unfair and unlawful in the circumstances.

The court also found that Ms Muia was mistreated in her employment by being subjected to racial and sexual discrimination.

Three years ago, Samsung’s East and Central Africa business was worth $250 million and the firm had projected that it would stand at $2 billion by 2015.

Localised presence

Samsung joined more than a dozen companies, including Nokia Siemens Networks, Airtel, Nestle, and PepsiCola, that picked Nairobi as its centre of operations in Africa as it sought physical presence and local intelligence.

Samsung also aimed to develop the local industry further by establishing assembly plants. Currently there are such plants in Sudan, South Africa, Nigeria, Ethiopia and Senegal.

The change in strategy also puts plans to broaden Samsung’s sales and marketing strategies through customised messages into question. That effort was embedded in the flagship programme, Samsung Electronics Engineering Academy (SEEA), which was created to develop young leaders for Africa’s feature.

SEEA was established to align Samsung’s corporate social responsibility vision – ‘Built in Africa, for Africa, by Africa’.

READ: Samsung electronics opens engineering academy