SqwidNet, the Internet of things (IoT) network operator in the CIVH stable, is at risk of being shut down as it embarks on a major restructuring to slash operating costs, TechCentral has learnt.

Parent CIVH, which is controlled by Remgro, has made the decision to restructure SqwidNet, which will include cutting jobs and reducing other costs, but even this might not be enough to save the company.

SqwidNet was founded about six years ago under Dark Fibre Africa, a fibre operator also controlled by CIVH, and was recently moved out of DFA to become a standalone entity in the CIVH stable.

The decision to restructure the business was communicated to staff on Monday, according to a source with knowledge of the situation.

The troubles at SqwidNet, which is a leading IoT network operator in South Africa, will come as a surprise to many industry players. The company has invested significantly in rolling out a national IoT network using technology developed by France’s Sigfox.

CIVH CEO Raymond Ndlovu told TechCentral on Tuesday in a telephone interview that the company invested “a significant amount of capital” in building a national IoT presence, which he described as “second to none”. It invested heavily because it identified what it believed was a big gap in the local technology market.

Pandemic made it worse

“They built it and they (the customers) came, but not to the extent we would have wanted or anticipated,” Ndlovu said. The Covid-19 pandemic and associated lockdowns resulted in depressed commercial activity in the economy, which has worsened the problems at SqwidNet, he added. “It’s now even more difficult to get the kind of adoption rates and revenue levels required.”

The company has begun engaging with its customers with a view to saving the business – and the national IoT network it built.

“We are having to consider whether it is viable, with customer uptake and commitment, to keep the network running, albeit on a reduced cost basis. This is going to require buy-in from customers,” he said.

Without that customer buy-in, Ndlovu said CIVH won’t be able to keep the business – and the network – running. “But that is very much a last resort.”

The next step, he said, is scaling back SqwidNet’s operating costs as quickly as possible and to engage with customers to find a solution. If SqwidNet were to switch off its IoT network, the impact on customers could be severe, with several stolen vehicle recovery companies, for example, making use of the technology.

Ndlovu said there are several factors that have contributed to the situation SqwidNet is in, including slower-than-expected adoption by South African companies of IoT technologies. There have also proved to be fewer use cases for the network than expected.

“We could have been early. We might have mistimed our initial investment,” he said. “But it’s better to take it on the chin now than prolong things that are not value accretive.”

The company will retain critical staff to keep the network operational pending discussions with customers and other stakeholders to try to save the company. It employs 24 people in total, Ndlovu said. He said that whatever decisions are taken, they will be taken quickly and will be conclusive.

“We will start with the reduction of headcount immediately. We will try to absorb those people into the rest of the group as much as possible,” he said, adding that no decision has been taken yet on how many jobs will go. “We have to balance the needs of keeping the network going with the requirement to minimise ongoing operating costs.”