How to Scale in Africa: Key Lessons From Success Stories
It is no longer news how the ease of doing business and investment climate in most African countries has improved a great deal. This can be attributed to the recent concrete efforts put in place by the national governments of various African countries, not only to attract foreign investments, but also to entice and attract citizens living in the diaspora to invest back home in their respective home countries.
There are several business opportunities being explored by several investors, both foreign and within African markets such as agriculture, textile, auto-parts, infrastructure, defence, communication, crude-oil, raw materials, transportation, logistics and fintech to name a few.
These businesses and companies have thrived through different kinds of adversities and scaled. They have mastered the ability to create value for their clients, market, environment and the economy they operate in.
How did they scale? Lessons from success stories:
There are several success stories, San Carlos Farms is one of the authors favourites and he recently wrote a short article about the company business model. Others such as Tolaram, Huawei, Zartech, France’s CFAO (acquired by Toyota Tsusho Corporation in 2013) entered the African markets when it was more of a challenging terrain, and yet prospered. These foreign investors operated and competed locally like their local counterparts, in the same business environments that several have complained about.
The local investors (and indigenously owned companies) have also prospered and scaled massively where others have given excuses. Aliko Dangote may be one of the most popular ones, however, there are hundreds of locally owned businesses that have succeeded and still succeeding by solving market frictions, price and service-product innovations and value additions to mention a few.
Among the few common traits of the success stories in the continent are;
Controlling and cementing their presence in the targeted market;
Creating a local ecosystem;
Establishing product differentiation and recognition using quality, availability, affordability.
Persistence is the key
The business opportunities in Africa are enormous, yet challenging. As an investor, do not expect to break-even or cash out returns/profits from your business within the first few years. Initial low sales, economic downturn, and political uncertainty could be expected. Be patient about growth and when you are patient enough, profit could emerge. The key to the success of several local and foreign investors is that they stayed while others pulled out; they persevered where others fell out due to political uncertainties or other reasons.
At a stage where critical infrastructures were missing, they never left the countries they operated in. Some built their own infrastructures, some were able to use the existing infrastructures while educating the government of the day on the need to invest on critical missing infrastructures.
Another big lesson from the successful companies in Africa is their obsession with end users, which are the final consumers. As intending and aspiring locals or foreign investors, they tend to focus on individual-user perspective; meet their users immediate needs, anticipate their future demands and be prepared for the next digital wave. The implication of this is that it could lead to higher-quality products and services. In return, the users could become fans of the company and adopt most of these new products and services.
Observe the market needs, trends, existing players and try to offer customers better products and services on a platter of gold using technology such as blockchain, drones, automated self-service, better customer experience (cheaper and accessible). There is no product-sense in producing a product or building a local factory when the final or finished products cannot get to the final consumers or to the market due to bad roads.
Target the income pyramid
Observe the income level of the larger proportion, leverage your pricing mechanism on that and then aggressively market your products and services. Price is a key factor in determining the success of a product or service in any markets or sectors within Africa, especially where your competitors are competing fiercely. Nothing beats a cheaper, yet better, product that can serve similar or more advanced purposes as the expensive products.
For instance, Tecno mobile is an Asian mobile technology company that manufactures mobile devices solely for the African market, when Tecno mobile first entered the African mobile and telecommunications market, the penetration model was not to provide the most sophisticated mobile device to the high-end consumers like the iPhones, Samsung, Nokia, Alcatel or Motorola. The target was the low-end consumers, low income brackets of African society, where the larger population of 1.2 billion people in the continent fall into. An affordable mobile device with a bigger screen, voice calls, SMS functions, music player, browsing among other functions such as radio and T.V availability; although the quality was not the best as it is at the time of writing, people embraced it and it even went viral for its loud speakers.
Stay in touch with the policy and budget
It is vital to put reviewing the budget of the central government and watch the direction of its policies closely.
Reviewing both the business and economy policy of the country you wish to invest in rigorously. Governments and through its numerous agencies, regulatory bodies do quarterly, monthly, bi-annually and annual policy reviews. Knowing the direction where the current governments are heading will help you to protect your business and investment interests as well as know which sector to charge-into.
Another tip is to follow the policy trends and lending targets of the financial development institutions such as Africa Development Bank, World Bank, EXIM Bank, IMF and others.
One way to stay in tune is by joining various investment forums and chambers of commerce in your location, such as the China-Africa Business Council in my case.