I’ve had a few interesting encounters with medium sized clients the past week with regards to business opportunities in Africa.

One firm, in the engineering industry, who are actively pursuing prospects and expanding their footprint in Africa and have set up operations in three countries the past two years.

On the other hand, a well-established South African firm that is into infrastructure development (a massive need in Africa), who have looked at opportunities in East Africa, but are overcome by the perceived challenges of setting up foreign operations.

Walking away from encounters like these, I can’t help but think that people tend to underestimate the size of the African market and overestimate the challenges of doing business.

Let’s not be naïve. Doing business in Africa is not a walk in Central Park, but much rather a barefoot scramble through the Serengeti. The upside reward however….

Africa (at risk of generalizing) faces huge gaps, but those current unmet needs are fertile ground for entrepreneurs. Per a McKinsey study, the biggest needs (read: opportunities) are in:

  • Mobile & digital technologies
  • Education
  • Healthcare
  • Renewable energy (600m people in Africa don’t have access to electricity / 30% don’t have access to running water)
  • Infrastructure e.g. transport

Investment (through business expansion) and innovative solutions to address the above needs, will create social impact whilst growing the economies i.e. creating wealth whilst doing good!

Consider the size & scope of the market:

  • 1.2billion people in economic acceleration (economic growth of many African cities exceeds that of America / Europe.)
  • Projected +-100 cities of 1m+ people in 2030. Fast growing rapidly urbanizing population with rising spending power
  • Per the World Bank, SME’s account for 77% of all jobs in Africa
  • Resources abundance (can double manufacturing and conversion output). And there is a market in Africa (given huge amounts of imports)
  • Rapid adoption of mobile & digital technologies

The need for economic growth is generally recognized by African governments and there is a big push to close gaps and address needs through incentives e.g. tax incentives and free trade agreements. The practical challenges however cannot be ignored either. Many a new business venture are simply overcome by the problems with regards to

  • Access to land / property
  • Lack of infrastructure
  • Intermittent supply of electricity
  • Lack of skilled workforce
  • Cities not well developed

All the above, however, are also an opportunity as it is a need (not a want) which must be addressed.

(This doesn’t speak to corruption and regulatory inefficiencies, which unfortunately you have to deal with, but can be overcome).

So how do you access these markets? There is no easy answer and no one-size fits all when it comes to Africa. A few things to consider in your strategic internationalization planning:

  • You must have a clear vision of what you want to achieve (and why you want to do it)
  • How does your product / offering fulfil an unmet need?
  • Prioritize your markets. (Think cities, not countries)
  • How will you achieve scale (consider access to skilled staff, customers and other businesses)
  • How can you keep the business as operationally lean (i.e. keep costs low)?
  • Can you capitalize on technology or innovate processes?
  • How can you help build the ecosystem?

It is important to understand that success in Africa is dependent on a few key principles.

  • You have to play a “long game”. This builds trust in your brand and hedges risk of inevitable short-term volatility.
  • Innovate your offering / solution for the market / context
  • Diversify your product offeringIntegrate your value chain
  • Understand local context
  • Engage in local partnerships

Current “Rising Stars” in Africa to consider, given their political stability, economic growth projections and incentives to attract foreign investment:

  • Cote ‘d Ivoire (Abidjan)
  • Ethiopia (Addis Ababa)
  • Ghana (Accra)
  • Rwanda (Kigali)

Given the capital cost and risk of an Africa strategy, it must obviously be embedded in a well-defined Internationalization plan, where we do market research, feasibility studies, due-diligence and consider organizational, legal and tax structures etc. With our passion for Africa and experience in the continent, Ascent should be your key-partner in your expansion strategy.

For good measure, also consider these recommended reading (available at your local bookshop)

  • Africa’s Business Revolution (M Leke, M Chironga & G Desvaux)
  • Africa is Open for Business (V Kgomoeswana)

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