Last week I heard a talk by a consultant from Roland Berger who specialized in Sub-Saharan and Southern Africa. He offered some practical advice for doing business in Africa. This is what he said, and some of my experiences of how it holds true:
1. Take market intelligence and customer understanding seriously: product-oriented companies won’t make it there; on the contrary, understanding local habits may help you design products fitting to the market. The CEO of a Nigerian real estate company explained how when someone is buying a house, it’s quite common that a close relative comes and contributes money to it without the other knowing that would happen. Understanding this aspect of Africans’ communal mentality allows this company to offer financing options that make housing affordable for people who would not qualify for a mortgage.
2. Have tactical agility: the environment may change very quickly, and if you are fixed on a particular business model you may find yourself out of business in the blink of an eye. When the Central Bank of Nigeria discontinued the deployment of ATMs outside bank branches, the sale of ATMs disappeared, and a local company saw its business disappear overnight. It reacted by changing its business model from that of a provider of IT to an enabler of IT, operating in the world of cloud computing, redeploying the capabilities the employees had acquired in the ATM business.
3. Think through the operational implications as you design your strategy: if you don’t, you may find yourself incapable of implementing that “nicely designed” strategy. Just take the case of logistics and transportation, which may become a nightmare. Unless you take that into account, and consider the cost impact of underdeveloped infrastructures, your business case may become a fiasco.
What’s your experience regarding these issues?
On a separate note: if you are in Barcelona, you may want to visit an exhibit at IESE on Álvaro del Portillo, former Grand Chancellor of the University of Navarra. He encouraged IESE to contribute to building business schools across Africa as a way to play a role in the socio-economic development of the continent.
2 thoughts on “Doing business in Africa: some practical advice”
Another ingredient worthy of note for companies doing or wanting to do business in Africa is the role of the informal sector. Most calculations of per capita incomes often leave out informal ‘creative’ incomes such that targeting of consumers based on published income levels is often inaccurate.
Official incomes need to be blended with informal income sources to get a near accurate and reliable per capita income which should guide market segmentation activities. Quick examples that turn published per capita incomes on their heads are average purchases of phone call times ( called recharge cards in Nigeria) and expenditure by females on hair care products. Going by published incomes alone, those in the DE socioeconomic classes should be unable to afford these items in the numbers that they do. We know better.
Thanks for bringing up this important point, Lorenz. Those interested may want to read an earlier related post on the informal economy.
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