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Africa
29 July 2015

Extending your reach in Africa

For those who do the groundwork, Africa is a continent of opportunity. Here are 5 things to consider for your African expansion strategy.

Africa is rising: a theme that keeps being revisited, even by prestigious publications such as the Economist and Time Magazine. But those who venture into African territories find it to be a far tougher and nuanced challenge than bullish broad-stroked articles suggest. 

It’s a smorgasbord, easily divisible by country, trading block or language legacies from the colonial eras. Africa could be categorised by resource hubs, population trends, high-risk underdeveloped nations and economic powerhouses.

Yet without care you will burn your fingers. The opportunities for Africa loom large, but it is not a playground for the weak and unprepared. How do you prepare for the African expansion?

1. Don’t talk about ‘Africa’

Africa is not a country and the very notion of treating it as such offends many. Participants in a recent roundtable hosted by Brainstorm Magazine made this very clear.

Matthew Blewett, Chief Investment Officer at Business Connexion, summarised it best: ‘African countries don’t like it when you talk about “Africa” in the singular. It has a paternalistic implication.’

There are two other reasons why this rule is key: first, African markets have matured and increasingly taken control of their destinies. Marching in and laying down the law is not going to endear you to anyone.

The second is that making such assumptions creates a blind spot. The secret to success in Africa is to harness what any given territory can offer.

2. Do the research

Companies working in Europe wouldn't use the same model to market a product in France, and then Poland. Each territory requires a different strategy. Africa is no different – South African demands are not the same as the Nigerian market, for example. Indeed, as a vast region, Africa is more susceptible to variety than any other continent. Companies often make the mistake of taking a one-size-fits-all mindset towards their expansion.

Make sure you have all the facts. Adopt a local approach and conduct or source your due diligence. Numerous agencies are already positioned to do on-the-ground surveys across the continent. 

Avoid too much second- and third-hand research. Writing for the website How We Made It In Africa, Mohamed Zin El Abidine states that ‘valuable and accurate information is almost always obtainable only via primary interviews with the right people, and by that I don’t exclusively mean senior executives; some of the most interesting insights come from people down the corporate ladder, people who are in touch with the realities of their industry, day in and day out.’

It is also wise to look at your own sector: have any competitors, partners or peers tried to expand? Did they fail or succeed? What did they do right or wrong? Asking such questions can create a more sober outlook for your strategy.

3. Forge local partnerships

Local partners are key to success, but you can’t just pick them out of a phone book. This has been the experience of Nomanini, a Cape Town-based startup that focuses on robust point of sale solutions.

Its Chief Commercial Officer Kuda Mushambi said during the Brainstorm roundtable that ‘it takes a lot of beating about the bush.' He emphasised the importance of having the right contacts on the ground, and taking note of local customs and etiquette. 

Established value chains can help. If companies that work with your business already have a footprint on the continent, their guidance to find the right people is invaluable.

4. Understand the risks

The risks in Africa are many and varied. At the far end of the spectrum are serious disruptions: insurgencies, coups, disease outbreaks and natural disasters are all still applicable enough that they can’t be considered unlikely ‘black swan’ scenarios. Just consider Nigeria: in the past five years it has had to deal with divisive elections, terrorists, fuel shortages and floods.

There are more common risks as well, ranging from regulation frameworks to skills shortages to infrastructure problems. The trick is to consider what will impact your expansion and work these into your risk analysis.

‘An effective risk management approach requires organisations to think differently and the main challenge is good communication,’ said Suresh Kana, Senior Partner for PwC Africa in a report on the topic. ‘By setting the tone from the top, boards and management can prioritise risk management and grow stronger, more resilient organisations.’

5. See the bigger picture

Do not be a weekday warrior. This was a core principle that came from Brainstorm’s roundtable. Business is hardly ever confined to a 9-to-5 routine, so why would African markets be any different?

Vodacom Business Africa's Group Managing Director, Douglas Craigie-Stevenson, illustrated this with his experiences in a neighbouring country: 'In Mozambique you have the locals, the expats and the South African expats. Because South Africa is next door, the latter group tended to go home over weekends. But not the other foreigners. They stayed and engaged the environment. As a result, they got things done a lot faster.'

Bidvest Bank echoed the need for long-term thinking in its own take on the topic: ‘Expanding into Africa is not a short-term investment that will pay dividends immediately. So employ a long-term vision with an associated strategy and you’ll reap the rewards.’

Successful African expansions involve lengthy contracts and staff commitments. Part of the big picture thinking is the need to address local skills and infrastructure challenges. Many governments emphasise the requirement for foreign companies to help expand local opportunities. This is woefully incompatible for anyone hoping to make a quick buck.

In conclusion

Perhaps nowhere in the world is as exciting right now as Africa. The International Monetary Fund (IMF) has forecast growth of up to 5% on average for African countries, compared to around 3% for the US, and just 1% for Europe. This is due to several factors, including investment in natural resources, infrastructure spending and improved agricultural yields. 

Clearly, then, Africa is not just the cradle of humankind – for the prepared, it's the cradle of business success.