In a continent of over 30 million km2 and with a potential customer base of over 1.1 billion people, over 50% of Africa’s population less than 20 years old. Africa is home to over 100,000 millionaires and several billionaires, with a lot more people destined to be millionaires in the coming years.
Africa is not one country. Don’t treat it as such.
Africa is a continent, not a country! It is made up of 54 independent and diverse nations. For example, Nigeria has a population of over 160 million while Djibouti has less than 1 million. The GDP of South Africa is over $400 billion while Guinea-Bissau has a GDP of about $1 billion. There are huge differences in culture, language, business practices and economic opportunities among African countries. It’s important to treat them as distinct entities and to be clear about the specific countries in Africa you wish to invest in.
Design for Africa (Not customize for Africa).
A key strategy for success in Africa is to treat it as its own market, not as a subset of another market. A number of companies have failed because they take their products from the west and then customize them to the African market. A better solution is to understand the specific market in Africa you are interested in and design products for that market. For example in the mobile phone category, one of the bestselling mobile phones in sub-Saharan Africa is the Nokia torchlight model. The phone is quite basic but it comes with a flashlight and has long battery life – perfectly suited for regions that have limited power supply.
Be clear about what you will do and will not do.
Before you start any business in Africa be very clear about your business values, your target customers and how you intend to operate. This will guide you in tough times when your limits are tested. Several potentially viable alternative opportunities will be great in themselves. Having a clear sense of focus will help you make decisions that will help you achieve your goals. This does not mean to reject new opportunities. However, it does mean that you should have a guiding principle that helps you filter through opportunities that come your way.
Relationships matter a lot.
Relationships make or break you in Africa. Africans will go the extra mile if they have a strong relationship with you. However, you need to be very selective in choosing whom to build relationships with, since the quality of your relationship will determine what transactions you gain access to. Establishing well conceived relationships with African elites who have a decent and verifiable track record will definitely be a plus for your business. However, you will want to shy away from moneybags who have very questionable characters and reputations.
The middle class is elusive. Target either the high end or the mass market.
The middle class in Africa is very tricky for foreign investors. They are either over- serviced by existing players in the market, with stiff competition, or they just do not exist. Most countries are segmented into high end and mass market. New foreign entrants stand a better chance if they target the luxury segment with premium/ luxury brands (such as Porsche in Nigeria) or the mass-market segment with affordable products (a number of Chinese products in Africa).
Doing business in Africa can be an investor’s dream with the huge market size, untapped opportunities, customers’ appreciation for foreign brands and the favorable regulatory conditions designed to attract foreign investors. However, that dream can only come true when an investor goes into the continent with a solid game plan for mitigating the challenges and taking advantage of the numerous opportunities.
Africa awaits you.
ABOUT THE AUTHOR
Tunde (“Tun-day”) Ladipo is a consultant and an adviser to African Governments and the Private Sector on economic and investment issues. He has worked extensively in Africa, the US and Europe. He has experience in Extractives (Oil & Gas), Financial and Retail Services. Tunde holds an MBA and Masters of Engineering Management. He can be contacted through Auerbach International.