How to do business in Africa and how to navigate is a huge challenge when you plan to do business on the continent for the first time. After all, how do you get your head around 54 markets and then make an informed decision? It does not surprise me that many make mistakes along the way, and that is normal, but here is my honest take: some of the mistakes could have been so easily avoided!
Doing business in Africa has for many become a fulfilling vision, in particular for those of us in the Diaspora: you can tap into a huge pool of unrepresented opportunities that would allow you to create the wealth and lifestyle you dream of, while at the same time enabling you to make a positive impact on the lives of Africans and your own communities back home. What a great vision for life indeed!
But I have noticed that a significant amount of uninformed decision-making is happening long before market entry. Today I want to share some important DON’TS for doing business in Africa, as I still see many making these mistakes. It’s really just a quick list to give you some support and tips how you can improve navigation when entering Africa’s markets in a business context for the first time.
#1 Don’t choose a high-risk / low opportunity market
You should choose the location for your Africa business model based on assessing the risk-opportunity ratio of that market. When basing your choices on personal preferences, you tend to overlook risk and overestimate opportunity. Therefore an objective assessment of several markets in Africa is vital: Don’t go for high-risk/low opportunity markets! I am surprised how many first time entrants into Africa are choosing exactly those. These are markets that do not belong to Africa’s growth markets, which means that economic growth, related positive market dynamics, and opportunity are relatively limited. Further, these markets usually suffer from a difficult business environment and increased business risk.
The most favourable business environment exists in the low risk/high opportunity category, but experience and strategic decision-making can earn you considerable rewards in high(er) risk/high opportunity environments. And I would advise you to avoid the final category, high risk/ low opportunity markets, all together.
TIP: Study my blog ‘Overcoming obstacles’ section or use the World’s Bank ‘Doing Business Ranking 2016’ as one useful tool to assist you with that
#2 Don’t try to make your start-up concept fit into an African context
A common approach I witness is that people who want to enter the African market have an idea, business concept, or a certain product/service at hand and all they want to do is start selling that in Africa. I wished it was that easy. But the reality is: successful market entry and positioning in Africa is much, much more complex than that. You need to be prepared to tap into the multi-dimensionality of that undertaking!
Finding a highly demand-driven need or problem and providing a solution is such a powerful basis for business success anywhere, and what place provides more scope for that than Africa? Instead of coming up with a shoe and trying to make it fit, look at the problems on the ground and understand how you would be able to find a solution tailored to a specific local issue.
Approaching your concept from that angle, will not only automatically give you the crucial understanding of your potential role in a new market, but it also enables you to open your eyes towards the changes and tweaks you have to make around your product and marketing story, so it actually fits in with local market realities.
Tip: Also read: ‘Successful African Business: Don’t underestimate this ONE ingredient’ – and why!
#3 Don’t underestimate the competition (and what to do instead)
Does Africa offer a large pool of opportunities? Yes. But that does not mean you don’t need to understand your competition. First of all – because I cannot stress it often enough – Africa’s markets is getting more crowded by the day and that means that it is absolutely vital that you develop a sense of urgency. Getting a head start can significantly increase your success rate long-term.
Further: Chinese and Indian companies moving into Africa or already operating there are a serious business competition in certain sectors, even for already well-established businesses, as they usually are simply able to offer almost anything at a cheaper rate – and cost still widely wins over quality or source Africa (although we can witness a slow shift in that regard). This is in particular true in areas such as consumer goods, construction, energy, and telecommunications. Other large Western companies are buying successful new African businesses in their niche, to own a larger market share.
There is much more to say, but to keep it short: While you will simply face such competition in an open market, working on your unique selling points and competitive advantages is key. Standing out in Africa and becoming a leader rather than a follower is becoming increasingly essential to your success!
#4 Don’t Rely on Imports Long-Term
I still receive a significant amount of e-mails asking me to find distributors for certain products in Africa. Here is my frank reply: Africa is not interested in imports, but in exports, and this is why you will get little enthusiasm, cooperation, or support from anyone in Africa in this regard for the former. Yes, Africa is heavily relying on imports, but there is nothing new about that, and unless you find a market that is really just newly opening up after a major conflict for example (this is how the extra risk friendly made their millions with imports in Angola and South Sudan some years ago), it is simply difficult, uninspiring, and short of a long-term vision to focus your entire business strategy on African imports.
What works instead is a business concept or strategy at your end that promotes and advances African exports. Or – when you rely on regular imports for your business to look into local manufacturing. This is what the major stakeholders in Africa’s growth markets – both at government and industry level – are giving their undivided attention to: local manufacturing and exports. While imports are becoming more expensive.
It is a trend that is expected to accelerate fast across the continent over the next decade or two with local value addition and job creation being heavily promoted as national development goals. Tap into that – it’s much more powerful!
#5 Don’t expect things to run the way they work in the West
You decide to write an e-mail to a business in Africa. Then you write to ten businesses, but you never receive a single response. Don’t feel discouraged. It does not mean there is no interest, but e-mail is by and large simply not a preferred tool of communication whereas a mobile phone call works wonders if you have to get hold of someone from abroad (and you often find mobile phone numbers on company websites in Africa).
E-mail communication works much better in South Africa, Kenya, Nigeria, with Africa’s younger business community, and some chambers, but in general it can cost a lot of patience and perseverance to get in touch with people or even to follow-up. The sequence – email/letter – follow up call – follow up call usually works best.
Another aspect you may find challenging is trying to set up meetings in a row from a distance. Sure, I understand, you have only 5 days in the country and want to make the most of it. You may feel frustrated and a little anxious, especially when you depend on a local partner or a government institution to set the appointments up for you. Here is my secret: Relax! Don’t waste your energy. Instead, set up 1-2 meetings with key stakeholders at your very first day in the country and then use their recommendations and referrals to connect you to other important contacts once you are on the ground.
I have never done it differently and you will be amazed, how many people will see you within minutes, hours, or a day or two, when you explain you need their advice or assistance as you are a guest and you will leave the country in a few days. Many Africans may be slow in responding to e-mails, but most of them are incredibly flexible and welcoming when you just knock at their office door.
TIP: Also read ‘How To Converse With African Business Partners‘
Hope you found some tips helpful to your endeavours! I wish you much success!
I would love to hear your comments and questions! And if you’d like to get my latest articles on Africa business opportunities and tips as soon as they are published, feel free to click the little box ‘Notify me’ below the comment section.
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As always, informative article Dr. Harnet, thank you. Are there any African markets you would consider high risk/low opportunity in general or this is especially specific to the kind of industry one is wishes to establish a business in.