Opinion

Three Winning Strategies Doing Business With Africa

Doing Business in Africa

During a recent business event in Germany lead by a renowned American business leader and multi-millionaire, I mentioned that I show entrepreneurs and business owners how to do business with Africa – the right way.

He was quick to brush it off: ’People don’t look at Africa. It’s too risky.’

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As an Africa Business Trainer and consultant, I usually come across two recurring problems: People either miss out on the huge pool of opportunities altogether, because their subjective judgement regarding the severity of risk in Africa leads to disengagement, or they are keen to do business in Africa’s emerging markets, but then make hasty and uninformed decisions when getting their venture off the ground.

Africa’s emerging markets present an amazing pool of opportunity across various industries. In most sectors, demand still exceeds supply by a mile. Yet in order to create a truly successful economic engagement with Africa it is paramount that you build your venture on well-informed, strategic decisions. Your choices should largely be driven by local market dynamics, not by personal connections, preferences, or perceptions.

Here are my top three business strategies that will surely increase your success rate:

  1. Consider a country’s risk-opportunity ratio before getting started

I still get requests from across the world, where people want advice on a certain market in Africa. I regularly ask myself: They have 54 markets (countries) to choose from, why did they choose one of the riskiest to get started?!

When you decide to start doing business on the continent, to engage in trade activities, or invest in Africa as a newcomer, you need to understand that Africa’s 54 markets are very diverse – also in terms of the business climate. Start by assessing the risk-opportunity ratio in your market of interest. There is no doubt that you will find the most favorable conditions in African markets that fall within a low risk/high opportunity category. Sure, once you have enough experience operating in Africa, strategic decision-making can earn you considerable rewards in high risk/high opportunity environments, but be prepared that it will take you much longer to get started there and you will face considerably more cost, corruption, and other risk factors.

You may also be able to develop strong industry niches in low risk/low opportunity markets. You should however avoid the final category as a newcomer: high risk/ low opportunity markets! Yet many don’t.

Hence, risk mitigation in Africa is important, but a crucial part of that needs to happen straight at the beginning, during your market selection process. You can then focus on the concrete local opportunities at hand.

  1. Look out for new development trends – and then make a strategic move

Did you know for example, that the Government of Tanzania is currently moving from the commercial hub Dar es Salaam to the capital Dodoma after four decades? UN agencies, the private sector & commerce are following. Just imagine the sudden mind-blowing demand for a wide range of products, services, and trade activities in a city that has been pretty sleepy up to now. This is huge and the best time for you to come in!

Dar es Salaam

Or are you aware that Ghana’s government is rolling out a huge plan as you read this to become West Africa’s number one tourism destination? Again, the calls for hotels, restaurants as well as related product and service offerings is enormous. Ghana’s government has made it clear: they want to hear from you, be it because you are an international investment company or a small start-up wanting to rent out surfing equipment or beach chairs.

I could fill pages with these kind of opportunities and first mover advantage. But what I want to make you aware of with the examples given above is that there are certain industry developments happening across the continent right now. Find out about these trends and then move in strategically and with a clear intent. You can position yourself as a newcomer in no time and grow. It’s powerful!

  1. Target consumers and businesses

Although market growth is driven by multiple factors, the growing demand for products and services among African consumers is currently the most dynamic and fastest expanding element. Businesses in Africa generally also make a great group of clients. So, revisit your business model. Whom are you targeting? If your main clients are governments, public institutions, or a limited number of other bodies which are not only far less responsive but where you also quickly hit the ceiling, you will find it often much harder to succeed and expand as a newcomer. Besides, your revenue streams will usually heavily fluctuate. Instead, target consumers or businesses with enough spending power.

In closing, Africa is the world’s last frontier and as soon as you step onto the continent, your challenge will not be to figure out what to do, but what not to do! Opportunity is huge and you have many avenues to engage with Africa by running business operations either on the ground, or by managing your venture and partnerships while still being based in the US. Or you simply invest. But do so well informed. I will show you next time on Trade Post how to best do this.

 

Dr Harnet Bokrezion is the founder and CEO of Africa Business Jumpstart, a modern-age training and consultancy business that supports you to make informed decisions while pursuing your business & trade ambitions with Africa faster and more confidently.

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