I was asked by akilah.net a few months ago to provide some business advice for African entrepreneurs. Today I decided to share the interview with our Africa Business Jumpstart community. Here it is!
What are the hottest up-and-coming industries in East Africa? What about the most over-looked ones?
There are several industries in East Africa that really witness a lot of momentum. ICT has to be one, especially in Kenya. But we have also seen amazing tech entrepreneurs coming out of Rwanda, a country that puts a lot of energy into establishing itself as a regional ICT hub, and right now there is a very tangible growing momentum for E-commerce in Tanzania.
Real estate is another industry that is currently experiencing major leaps in Tanzania and that offers amazing returns on investment in Kenya and Rwanda. And then of course, there is agriculture and related value addition in form of processing and packaging offering amazing business opportunities across the East Africa region, especially in Ethiopia, Kenya, and Uganda. But then really, there are other industries that do equally well.
You see, I would not suggest that any of these industries are overlooked, but what is overlooked are certain ‘hot’ niches within those sectors. And for everyone who is interested in starting a business in Africa it is that knowledge that is so often missing and that could make all the difference to aspiring entrepreneurs, because it allows you to make concrete and informed decisions.
Let me name a few: In the ICT sector for example there is a huge need and growing trend towards business to business (B2B) services and the automatization of ticket sales in public transport. So less of building cool apps and more of designing and providing valuable service delivery that provide real value to businesses.
One chronically overlooked niche in the agricultural sector is the development of the livestock and dairy industry, a brand new trend coming now out of Tanzania with a new government announcement. Tanzania has received milk from Rwanda although it has one of the largest livestock numbers in the region. This industry is really still in its infant shoes and everyone who is ready to provide related investment, supporting technology, livestock fodder, packaging etc is doing some smart positioning.
But a niche can also be as simple as growing strawberries. There is high demand for strawberries in Kenya for example, so much so that they are sold out within hours. Rwanda’s dairy production is on a high, Tanzania is soon to follow and that means that dairy processing companies want to buy more strawberries for yoghurt, ice cream production, and shakes.
The reality is that there are so many opportunities out there and a lot of them are still under-utilized, so the truth is, I just touched on a few.
What is the best thing a young entrepreneur can do right now to prepare himself/herself to launch a company?
I think far too many aspiring African entrepreneurs are too concerned about the technicalities such as writing a business plan, access to finance, and getting a license. However the fact is that everyone can do that and the majority of people follow that kind of schemata. But this does not make you stand out, it does not get you onto a path of greatness or entrepreneurial success. So if you want to not just open a business, but you are striving for a level of success that exceeds your current expectations, you need to make bold and smart decisions. One important thing to do is in my opinion to not just come up with a random idea, but to look at the most dynamic sectors and then to find a problem or need in that you can fix in that sector. A good solution is usually profitable, especially if you step into already trending dynamics. Then study your industry or market, and with that I do not mean the quick online search you do so you can quickly complete your business plan. But to really understand a problem, your potential consumers or clients, and what your competition provides that you could do differently.
The second thing you have to do is start thinking and acting like an entrepreneur. Most of us do not really have a success mindset, because we were never taught by our parents or our school system what an entrepreneurial mindset looks like and how we can increase our success potential. Fact is that this step goes far beyond implementing a good idea. The most successful people are visionary, time-efficient, they set clear priorities, they persevere, they bounce back quickly from failure, and so on. They undoubtedly have the same set of traits and knowing these traits is the first step towards consciously building them in you, even if that may be hard at first. In this day and age we are lucky, because a lot of the well-known entrepreneurs share their wisdom and experiences generously with the public and they provide insights into the character traits that prepare you for success. The internet is filled with it, make sure you spend time in educating yourself in this regard on a continuous basis.
What’s the most common mistake you see among young entrepreneurs?
I think the most common mistake is that they make emotional and hasty business decisions and not informed ones. This is partly because there is still a shortage of market information, guidance, and tips out there that empower African entrepreneurs. But being aware of your next step, understanding why you make it and how your decision feeds into a trending market context is vital.
The other is impatience. I see a lot of young entrepreneurs who are quick to worry about finding access to capital to realize their idea. Fact is that most investors or banks do not fund ideas, but proven concepts. So don’t worry about how you can sell one hundred thousand units of something or how to afford office rent. Instead demonstrate that you have a proven system that can sell ten or one hundred units well and fast and work out of your bedroom or garage. Once you have a proven concept, a positive track record, and you can prove that you are here to stay because you have been building it all up for a year or two to get where you are then you become fundable.
What are some of the most common reasons investors cite for not wanting to invest in Africa?
Although the numbers of investors is significantly growing in Africa, the majority of foreign investors is still worried by negative perceptions such as corruption, security risks, and bad infrastructure. The risks are certainly there, but in many cases they are really outweighed by the opportunities. The interesting things is that once people are doing business on the continent their confidence grows manifold and they soon tend to see much more opportunity than risk.
Is there anything a African entrepreneur can do to gain investor confidence? Please explain.
I think I touched on this in questions three, but what we need to be aware of is that investors rarely invest into a good idea. They invest in people they trust to have what it takes to grow the business and make them a healthy return. If you approach an investor he has to trust in your ability. Part of gaining someone’s trust is if you do not look for the quick money fix, but you have been sweating to do the groundwork. Investors want to see what you have been through to get to this point. Let me give you an example. I met a young Somali woman entrepreneur in Nairobi who was developing and branding some kind of fertilizer and one year later she was looking for funding. But she had not been merely working on her concept on a piece of paper or discussing it with friends. She had visited a trade show in Nairobi in search of the product which is typically used in Baltic states, she then travelled thousands of kilometres to companies who use the product somewhere in Russia to see for herself, she then brought it to Kenya had it tested in a laboratory, and finally gave the product for free to several women coffee farmers to see how much their harvest improved. And it was something like triple the harvest after just 6 months of using her new fertilizers. After that, she was looking for US$100,000, and there is no doubt she would totally gain investor confidence, because she had done her homework and has proven her true focus, dedication and perseverance. That’s the kind of person an investor would be keen to back, because he can see she is a go-getter with a product that makes a lot of sense. So the message is, do the things that truly make your product and you investable.
Would be great to get your feedback 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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Yes, Dr. This is very encouraging. Most of the time I am not aware of this seminar of a thing, where and how can one get the information of a coming seminar or a business show?
thanks.
Ismail