DOING BUSINESS IN AFRICA

Doing business in Africa - common practices that might hamper your success!

• Publicado el 20 de marzo de 2017

SiguiendoDejar de seguir Holger Vogt

Market Entry Strategist - Growth Markets

The ‘Africa rising’ narrative has dominated the discussion within the Africa business community over the past few years. Conferences, summits or events that focus on Africa tend to discuss reoccurring topics. Most commonly they centre around Africa’s high population growth (from 1.2 to 2.5bn in 2050), increasing discretionary income (growth of the middle class) and the issue of finance (export credit insurance). Six years after The Economist prominently featured the ‘Africa rising’ story, European ‘Mittelstand’ (eng. SME) companies slowly start to explore business opportunities in Africa. Successfully?!

As a first-time LinkedIn writer, I will aim to regularly share my experiences with you to equip yourself with some tools that will help you doing business in Africa. Having worked on market entry strategies over the last few years, I came across some common practices companies use to develop their Africa business. Some of those practices have to do with managing their Africa business from abroad, rather than locally. I argue that companies need to adjust those practices to be successful in the long-run. Let me shed light on a common practice that I observed several times in the past.

Handling African markets from abroad

The so called ‘fly-in fly-out strategy’ is quite popular among trading companies. Those companies usually work on sales cycles; they pitch – receive an order – deliver the product and move on. However, quite a lot of non-trading companies also use this strategy to handle their Africa business; and I usually ask them – ‘Why?’.

Companies often argue that flying in and out is less risky when you start exploring the market; I agree! Though, what if you successfully sold your first machines, who will service them? Flying your engineers in and out will be costly, time consuming and isn’t always customer friendly. If you sell F&B products on the other hand, you will need to find distribution partners that integrate your product into their existing portfolio. Everyone that has travelled to cities such as Lagos or Kinshasa will support me in saying that you will most certainly find an ‘exclusive’ sales partner on your very first day. Once you arrange to visit your partners warehouse, you will either not find a warehouse, or you quickly realise that he also sells used machines, imported skin care products and spare parts. Hence, in order to find a trusted partner you will spend a lot of costly business trips to various destination over a long period of time. A solution to the problem is to identify your key market first, to cooperate with a local firm that identifies the top 10 partners for you and to spend more time on the ground. The next challenge arises once you found a partner and he successfully sold your first products. How do you measure performance and when is the crucial moment to consider expanding or even manufacturing locally? Many companies lack this type of long-term vision or simply have not paid attention to it, for them SALES are at the top of their priority list. Though, this are crucial questions every executive should consider, apart from knowing your new market environment. Which is why I always advise my clients to look at markets holistically and take fact based decisions.

Handling African markets from Dubai

A recent study (Infomineo, 2017) unveiled that 194 of the global Fortune 500 companies have their Middle East & Africa HQ in Dubai. In oppose, Johannesburg (South Africa) with the largest density of international companies on the African continent, only hosts 58 regional HQs. However, handling your Africa business from Dubai is already one step closer and certainly has its advantages. In recent years Dubai managed to establish itself as a hub to Africa. Apart from enjoying the benefits of a business-friendly environment and zero tax, the emirate allows Africans to meet with their international business partners without any visa hurdles or restrictions. Inviting your Nigerian business partner to Germany on the other hand will most likely end up in DHLing documents across the globe and will require several visits to the German embassy.

In conclusion, if you are serious about entering African markets it is advisable to be more present in the market and to analyse which countries offer the greatest potential for your products. A continent of 54 sovereign countries, deserves at least a coherent Africa strategy and a descend amount of due diligence.

Note: This being my first LinkedIn article I decided to keep it broad. Indeed the article only scratches the surface. I am aware that distance is only one obstacle and that every company needs to evaluate their Africa strategy individually. Hence, I will keep writing more in-depth articles in future. In the meantime I would like you to comment on what particularly interests you and do offer everyone to get in touch with me bilaterally for detailed questions you might have on how to do business in Africa.