As an Africa business coach I have come across a recurring problem: ad hoc decisions driven by immediate gratification win over long-term strategic goals. In short, as Africans we make widely emotional decisions when we plan and start our Africa businesses and that usually compromises the competitiveness of our ventures.
Africa presents an amazing pool of opportunities and in most sectors demand exceeds supply by a mile. Yet in order to create a truly successful business there is a huge need to build your venture on well-informed, strategic decisions. Your choices should largely be driven by Africa’s market dynamics, not by personal preferences or perceptions.
Here are my top five business strategies that will surely increase your success rate:
1. Consider a country’s risk-opportunity ratio for startup and expansion
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. 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 you may also be able to develop strong industry niches in low risk/low opportunity locations. You should avoid the final category, high risk/ low opportunity, yet many don’t.
Risk awareness and management need to be integrated factors in your business strategy, but rather than basing decisions on risks per se (as many moving into Africa do), be driven instead by the level of opportunity and then accommodate the factor risk accordingly. It’s simply a better success strategy, as it is forward-looking and dynamic.
2. Consumer-oriented scalability
Unless you are a million-dollar investment firm looking at long-term profitability, you will increase your success rate many times over by introducing and selling products and services that are both consumer-oriented and scalable.
The reason is simple: although market growth is driven by multiple factors, the demand of African consumers is currently the most dynamic and fastest expanding element. So revisit your business model. If your main clients are governments, public institutions, or a limited number of other bodies which are not only less responsive but where you also quickly hit the ceiling, you will find it much harder to succeed and expand. Instead, target consumers or businesses that supply directly to a big segment of end users.
However, targeting consumers and meeting their needs is not sufficient. If you are offering a product or service that is not easily replicable outside a certain segment of the population or across national borders then your business model has low scalability. It’s potentially a poor choice, and one which can limit or cost you considerably. Africa is a large emerging market with low competition in need of basic products and services, and the potential of large scalability will be one of your best advantages.
3. Local partnerships
Building valuable partnerships is a sound strategy for success in any business, but the benefit of local partnerships from an early stage (during planning or shortly after entry) take it to a whole new level in Africa. This is particularly true if you are not a national of the country in which you are operating. Local partnerships are extremely valuable in manoeuvring your business through a range of challenges you will face in Africa, in increasing impact and revenue through avenues you may not have previously considered or thought possible, and in gaining greater acceptance locally, which has been described by many analysts as an important factor for sustainability and profitability in the region. Local partnerships can also be an effective risk management strategy, as these links are often priceless when mitigating the impact of unexpected risk.
However, it can be a challenge to find good local partners who meet your unique set of expectations. Be careful of the choices you make as poor partnerships may cost you heavily.
4. Multi-level strategic positioning
To position yourself and your business in the market place is crucial for the success of any business, but the strategic approach I suggest for Africa is unique to the continent.
a) Become an influencer, not just a supplier: There is not only a huge lack of services and products, but also a significant lack of information, education, accessibility, political awareness, trade links etc. in Africa. This provides you with opportunities to facilitate and influence related market segments at policy level, for example through public initiatives or thought leadership.
b) Become part of a national or regional vision: Many African countries have easily accessible national development agendas or vision documents, and several governments pursue them with great ambition. Similar strategy documents exist for regional entities, such as the East African Community. Study them and learn how you can communicate the goals of your business in a way that feeds into national and regional objectives. Clearly referring to these among key decision-makers and being viewed as an enabler will potentially be of great advantage and open many doors.
c) Think regional or pan-African: Intra-African trade is increasing and there are ambitious initiatives underway among several nations and within the African Union to take down certain trade barriers. Huge infrastructure programmes that span several countries are in progress and regulatory frameworks are being revisited. A lot is happening, and to be aware of these developments and include them in your business strategy will be rewarding at multiple levels. Not only will you expand your market potential considerably, but to think and act at a regional or pan-African level will also enable you to diversify risk and extend exit strategies. This is partly because your value goes up among investors looking for promising Africa business ventures; we are witnessing how more and more Africa startups and small and medium enterprises with relatively simple concepts are receiving multimillion-dollar injections from foreign firms.
5. First mover advantage with long-term outlook
The international business community is slowing waking up to Africa’s new growth story, and more and more foreign companies are moving in, although an increasing number of Africans are also setting up successful enterprises. However, the window is still open wide enough to be the first, or among the first, in certain market segments. You will usually get higher financial rewards out of this, but it will also allow you to position yourself as a business authority while continuing to focus on long-term developments.
Careful and strategic planning is the key to exponential success in Africa, but these processes can only be built effectively if you know the growth markets in the region well enough. I think it is worth the time and effort to keep yourself informed. In the end, the reward will go far beyond considerable financial revenue. Yes, a successful African business will enable you to build a grand lifestyle for yourself, but it is much more than that: you are now actively contributing to shaping Africa’s future.
Author: Dr Harnet Bokrezion is a senior international development consultant and the founder and CEO of Africa Business Jumpstart, a coaching business that supports you to make informed decisions while pursuing your business ambitions in Africa faster and more confidently.