Africa made easy SA companies reaping the benefits
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: