How worried are you about the security risks when building your Africa business? Do you wonder if it is possible to build a safe African business? Many destinations in Africa are still very risky and even those countries that have been regarded as relatively safe get suddenly over-shadowed with news of security threats or conflict, which can have a devastating impact on many businesses.
Thousands of people in South Sudan and on the other side of the border to Uganda have literally gone out of business over night when armed fighting broke out, tourists numbers are still not picking up in Kenya after the shopping mall attacks resulting in a small decline in the tourist sector for the second year in a row, and now analysts discuss the impact that the militant Boko Haram has on Nigeria’s economy.
So, a lot to worry about. If security risks in Africa remain a major concern hindering you in your decision-making processes or if you simply want to do your utmost to build a more risk-proof business you should use the following strategies:
1) Serve a regional, not a local market
This strategy is simple: If you lay all your eggs into one basket – one country in our case – your business will be more prone to risk, as you can loose significantly as soon as the basket is no longer a safe place. Serving a regional market or several countries across Africa can mitigate that risk.
Frankly, right now the East African Community (EAC) is the best region in Africa to implement this strategy, because trade barriers are being lifted within its member states like no-where else on the continent. But the essence of a regional strategy can be used anywhere in Africa.
In practical terms that means: If your business has only one operational office and one line of people you buy from and sell to, then you should transform your linear local way of doing business into a multidimensional regional one. Manage your head office in Nairobi and open small branches in Kampala (Uganda) and Kigali (Rwanda) or somewhere else in Africa and build a production, trade, and sales network across these countries. If one arm is suddenly affected by major security issues, your business can quickly increase its focus and operations within the other countries of your regional strategy.
As a start up it will prove difficult to expand so early on, but it should be at the top of your risk management strategy and be addressed as soon as possible.
2) Build an online business
Not only is e-commerce in Africa growing by a staggering 40% right now each year, but this is one of the best ways to protect your business from security threats, especially if you sell services and knowledge rather than products that need to be handled and shipped on the ground.
But even here a regional approach can serve you further.
Take jovago.com for example, the Nigerian online hotel booking site that was started in 2011 by a young Polish entrepreneur has today grown into Nigeria’s biggest hotel portal. But its owner did not stop there – he now has added many more hotels across Africa ….in fact, some of the ‘top destinations’ – as I write – are including several hotels in Pakistan!
So the combination ‘online business + regional market’ is a pretty bullet-proof approach for Africa.
Other business such as online publication, e-learning, or online money transfer among many others will enable you to continue to serve customers across borders and make you less prone to security risks in a particular location.
3) Diversify your business operations
We often get the advice as entrepreneurs to focus on one business and one business only. While the essence of this advice is very understandable, it may not be the wisest advice in the context of Africa’s volatile emerging business environment. Run two businesses or three with a different set of local partners, clientele, location, or industry line – and any upcoming security risks will not leave you stranded
4) Invest in an industry that is less prone to security risks
If you run a travel agency in Nairobi selling Kenyan safari holidays or you have set up a manufacturing company for designer clothes you will usually be more vulnerable to risk when consumer confidence or spending power suddenly fall in the country in which you operate because of external events. There are however sectors that are usually less affected: unless a major war breaks out agricultural activity and the need to buy basic food and drinks will usually continue; families will continue to pay for the education of their children, to use health services and buy pharmaceuticals despite re-occurring terrorist attacks or an armed conflict in a different part of the country.
There are of course other risks: drought or epidemics. Well, doing business is never risk free – and let’s face it, Africa’s fast emerging economy is your biggest potential goldmine as an entrepreneur with little competition, because of the many actual and perceived risks.
But as the 4 strategies demonstrate – there are business models and approaches that make your African business far less prone to unforeseen risk. Use them.
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