Chal­leng­ing

Finweek English Edition - - COMPANIES & INVESTMENTS - Garth The­unis­sen

“I al­ways talk of the two Africas – the Africa of chal­lenge and the Africa of op­por­tu­nity,” he says. “The thing is that you can’t get to the Africa of op­por­tu­nity with­out go­ing through the Africa of chal­lenge.”

Some of those chal­lenges are the ob­vi­ous ones that have be­come syn­ony­mous with the con­ti­nent: lack of in­fra­struc­ture, cor­rup­tion, bu­reau­cratic red tape and po­lit­i­cal risk. How­ever, those fac­tors can com­bine to throw up other, more un­ex­pected ob­sta­cles.

For ex­am­ple, Layzell says some of the KFC fran­chises that Yum! has es­tab­lished on the con­ti­nent have had to be equipped with two gen­er­a­tors in case of power fail­ures as well as a full water treat­ment plant to sup­ply water safe for hu­man con­sump­tion. Then there’s also the peren­nial un­avail­abil­ity of build­ing sup­plies such as the ap­pro­pri­ate tiles or coun­ter­tops, which of­ten have to be im­ported from SA or else­where.

The re­sult is that cap­i­tal ex­pen­di­ture costs to set up a fran­chise in some African coun­tries can of­ten amount to as much as $100 000 more than if the same fran­chise were set up in SA.

“The costs in­crease ex­po­nen­tially the fur­ther north one gets from SA,” says Layzell.

Nev­er­the­less, he says one can­not fall into the trap of try­ing to run the busi­ness from the Jo­han­nes­burg board­room. One has to spend time in the mar­kets one is op­er­at­ing in, while the ap­point­ment of lo­cal peo­ple (as op­posed pp to fly­ing yg in SA ex­pats) p ) is also cru­cial, he says. Only that way can one be­gin to grap­ple with by far the big­gest chal­lenge faced by com­pa­nies try­ing to es­tab­lish a pres­ence in Africa: sup­ply chain is­sues.

For KFC the big­gest sup­ply chain prob­lem is sourc­ing qual­ity chicken. Layzell says one can­not sim­ply re­sort to im­port­ing the birds from SA as many African coun­tries ei­ther im­pose heavy tar­iffs on chicken im­ports or ban them al­to­gether. The re­sult is that Yum! has had to not only de­velop its own busi­ness on the con­ti­nent, but also help de­velop the busi­nesses of its sup­pli­ers.

That’s why Layzell says the ex­pan­sion of ri­val out­fits like Nando’s and Fa­mous Brands on the con­ti­nent is ac­tu­ally ben­e­fi­cial for the en­tire sec­tor as they help cre­ate an en­vi­ron­ment in which emerg­ing sup­pli­ers can grow and f lour­ish. It’s some­thing Layzell says will ben­e­fit all play­ers in the long term.

While he ac­knowl­edges that all of sub­Sa­ha­ran Africa is an even­tual tar­get for his busi­ness, thus far KFC’s ex­pan­sion on the con­ti­nent is be­ing driven through Nigeria, Ghana, Namibia, Botswana, Mozam­bique, Le­sotho, Swazi­land, Zam­bia, Malawi and Kenya. This year will also see new out­lets open­ing in Tan­za­nia, Uganda and Zim­babwe.

While he’s re­luc­tant to dis­close rev­enue f ig­ures he does say that in terms of the num­ber of restau­rants, the rest of Africa ac­counts for just 10% of the cur­rent foot­print in SA. It’s a sta­tus quo that is un­likely to last very long.

“We’re very small at the moment but over time we will ex­ceed what we have in SA,” he says. “There are 50m peo­ple in SA and a bil­lion peo­ple north of our bor­ders.”

Bruce Layzell

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