Africa made easy SA com­pa­nies reap­ing the ben­e­fits

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THE OP­POR­TU­NI­TIES across the African con­ti­nent are grow­ing, and al­though there are still many lessons to be learnt, South African com­pa­nies are per­fectly poised to tap into this largely ig­nored mar­ket.

This is the opin­ion of Wayne Bor­chardt, a se­nior ex­ec­u­tive who leads the strat­egy ser­vice line for Ac­cen­ture in SA. Speak­ing on Africa’s Board­room, a CNBC Africa pro­gramme that high­lights the chal­lenges and op­por­tu­ni­ties faced by busi­nesses across the con­ti­nent, Bor­chardt said that Africa was a vast con­ti­nent, sim­i­lar in some ways to SA, and so pre­sented great growth op­por­tu­ni­ties.

“Some SA com­pa­nies that have en­tered th­ese mar­kets at an early stage are al­ready reap­ing the ben­e­fits,” Bor­chardt said. “MTN and Shoprite are good ex­am­ples of suc­cess­ful pi­o­neers, gain­ing early mar­ket share. I think we are see­ing the sec­ond wave in Africa, mov­ing be­yond re­sources and other pri­mary in­dus­tries like agri­cul­ture, and demon­strated not only by SA com­pa­nies in­volved in the con­sumer sec­tor but also multi­na­tion­als like Unilever, Hewlett Packard, Cisco and oth­ers.”

Men­tion­ing the grow­ing con­sumer ac­tiv­ity in many African coun­tries and a po­ten­tial mar­ket of about 900m con­sumers, Bor­chardt said that al­though there were many lower and mid­dle class con­sumers on the con­ti­nent there was a large and grow­ing mar­ket as­pir­ing to West­ern brands. “ They are start­ing to demon­strate their in­ter­ests in lift­ing them­selves up. We have seen their dis­cre­tionary in­come in­creas­ing faster than their ex­pen­di­ture, so we have more dis­pos­able in­come avail­able for pur­chases.”

Dr Al­bert Wöcke, fac­ulty co-or­di­na­tor at the Gor­don In­sti­tute of Busi­ness Sci­ence (GIBS), added that we now in­creas­ingly see SA com­pa­nies go­ing af­ter mar­kets where there’s an in­cred­i­ble amount of growth hap­pen­ing. “Africa has got this in­cred­i­ble fa­mil­iar­ity to us and SA com­pa­nies have an abil­ity to op­er­ate in a dual econ­omy. Africa has a large lower base econ­omy, the base of pyra­mid type of area, and there’s a lot of in­fra­struc­ture that’s shaky – to put it po­litely – and SA firms know how to op­er­ate in that en­vi­ron­ment and at the same time at the top. They have this built-in abil­ity to be flex­i­ble in th­ese en­vi­ron­ments, which a lot of over­seas com­pa­nies don’t have.”

But why do SA com­pa­nies need to ex­pand into Africa?

Bor­chardt said that all com­pa­nies need to grow, con­sid­er­ing many op­tions to se­cure growth. “ The lo­cal mar­ket is fairly ma­ture. Sat­u­rated. Al­though other mar­kets would be ac­ces­si­ble to SA com­pa­nies – per­haps South Amer­ica and even de­vel­oped coun­tries – Africa is right on our doorstep.”

Re­cent re­search by Ac­cen­ture also con­firmed that there are op­por­tu­ni­ties be­yond com­modi­ties. “ There’s a lot of ac­tiv­ity com­ing from SA con­sumer fac­ing com­pa­nies, in­clud­ing those in­volved in telecom­mu­ni­ca­tions, re­tail, in­sur­ance and bank­ing.”

Re­gard­ing pit­falls, Wöcke warned that there was a mis­con­cep­tion that if you have been to Zam­bia or Botswana you know Africa. “Africa is in­cred­i­bly di­verse and you can make ter­ri­ble mis­takes. How­ever, we are ob­serv­ing that the ed­u­cated up­per mid­dle class is looking more and more alike and this grow­ing sim­i­lar­ity also is very ex­cit­ing.”

Bor­chardt agreed on the di­ver­sity and sim­i­lar­ity as­pects. “How­ever, I’m not sure that all SA com­pa­nies are do­ing enough to know and un­der­stand the dif­fer­ent coun­tries’ cus­tomers. Some are only se­lect­ing from their range of prod­ucts what they deem ap­pro­pri­ate and are of­ten miss­ing the tar­get.”

The reg­u­la­tory en­vi­ron­ment is also very un­sta­ble in some coun­tries, Wöcke warned. “It is good ad­vice to use as many lo­cals as pos­si­ble, smart peo­ple who un­der­stand you and would look af­ter you in th­ese coun­tries.“

Bor­chardt said that it was also a good idea to use the part­ner, fran­chise or strate­gic al­liance route in African coun­tries. “ This makes sense un­til you at least know the coun­try bet­ter.”

SA com­pa­nies should also be aware that tal­ent is a chal­lenge, al­though there are some highly tal­ented and skilled peo­ple.

Com­pa­nies should be pre­pared for a learn­ing curve and higher ini­tial costs. “ This could in­clude the buy­ing of gen­er­a­tors due to un­re­li­able elec­tric­ity and the hir­ing and train­ing of lo­cal tal­ent,” Bor­chardt said.

Both Bor­chardt and Wöcke also men­tioned the im­por­tance of so­cial in­vest­ments, which cre­ate le­git­i­macy and demon­strate that you are com­mit­ted to the coun­try.

Bor­chardt con­cluded with three crit­i­cal suc­cess fac­tors when you con­sider ex­pand­ing into Africa:

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