You’ve expanded your business in Africa. You’ve produced a watertight strategy. But how do you secure continent-wide success? This question remains largely unanswered the among those growing businesses in Africa. According to Strategy& (PwC’s strategy consulting company) as many as 66 percent of business expansions into Africa resulted in negative shareholder returns.
To find the answers, African Business Review quizzed strategy specialist Jorge Camarate. Camarate is Partner at Strategy&. He has spent 12 years consulting across the globe, but has now settled in Johannesburg to advise clients in business strategy. As part of his role, Camarate gives companies tips on how to bridge the strategy-to-execution gap in Africa. We ask him to share his guidelines with us.
Acknowledge that Africa is not a country
Rather, Africa is made up of 54 diverse countries. According to Camarate, many large Western companies fail to recognise this, instead viewing Africa as a homogenous hub. This perception is “quite prevalent, especially if you talk to companies outside Africa, like multinationals in Europe, the States, or Asia”, Camarate explains. “There are multiple realities that people struggle to understand, like how different two countries can be and the slight nuances that can make a business either very successful or impossible to grow.”
Watch out for cultural differences
Different African regions have different cultures. Camarate explains how this should affect business decisions. “I’ll give you an example that I find quite interesting,” he says. “Funeral insurance or funeral plans are very popular in parts of the continent – they’re extremely popular here in South Africa. There are certain societies within Africa where it’s taboo to talk about them and there’s certain societies where you can talk openly about that, where people find importance and a moral imperative to make sure that funeral costs are covered, because they don’t want to pass on any debt to their offspring. In these countries, funeral plans are extremely popular. In countries where you can’t talk about death, it’s impossible to sell the product. There are societies where talking about death means inviting death. So although two countries may look very similar, they have a slight cultural nuance that might make products either easy or difficult to sell.”
Capitalise on your capabilities
What are your business’s strengths? Identify them, build on them and gain the ones that you don’t have. Camarate uses South African financial services company Sanlam to demonstrate this process. He tells us Sanlam’s capabilities are risk, actuarial, and capital management. When expanding from South Africa into wider Africa, Sanlam didn’t have “low cost distribution channels, the knowledge of customers from low income levels and how you build these simple, straightforward products that need local nuances”, Camarate says. In order to fill this void, Sanlam “looked for partners and acquisition targets who investigated their access to the local population that they needed”.
Take your time when securing deals
“There’s always this perception (especially a couple of years ago) about Africa: that you need to secure a deal at any cost.” Camarate explains how Sanlam bucks this trend, thus providing another lesson. “They always took the view that they should invest the time in due diligence, and the minimum time it took for them to secure a deal or secure a partnership was a year and a half. So they invest their time, do a lot of due diligence and they even invite the management team of the companies they acquire or partner with to come to their office. They invite them to understand how they operate and build that relationship.” Can’t Sanlam lose deals by not acting fast enough? “It’s better to invest and let many deals fail, and for the few deals that come through to be the right deals,” Camarate explains.
Source some local talent
According to Camarate, local talent pools are remarkable, yet shallow. But that doesn’t mean that foreign businesses must rely on expat talent when expanding into Africa. If you search for local talent in universities or try to poach from competitors, you won’t find a substantial amount of potential employees. “Ultimately, you must do a combination of both,” Camarate advises. Developing this talent will also yield results, e.g. providing graduates with training. He also recommends sourcing staff from the African diaspora, of whom some are looking to return from the West to Africa. “They’re now trained and have a Western mind set and a work ethic that be extremely useful,” says Camarate.
Credit: African Business Review
