Top 10 tips for getting involved in business in sub-Saharan Africa
13 September 2013
Africa as a continent is growing fast. Its consumer-facing industries are due to grow by $400bn by the end of this decade, research by McKinsey shows. The International Monetary Fund (IMF) expects Sub-Saharan Africa to grow at a rate of four per cent in 2016 and 4.7 per cent in 2017.
Sub-Saharan Africa combines a growing middle class, rapidly developing economies and a youthful population reaching working age as well as having smaller families to create a region with increasing disposable wealth.
But considering the dramatic variations from country to country in categories such as prosperity, population, urbanisation, age bracket and per capita consumer spending, how does an international business ensure the smoothest possible entry?
1. Pay attention to online and mobile – Sub-Saharan Africa’s increasing prosperity is due in no small part to the rise of the mobile phone and its ability to increase connectivity while making business transactions easier.
It is estimated that in Nigeria, e- and m-commerce outfits have grown at ten times the speed of traditional shops – albeit from a very low base.
2. Mall culture – SubSaharan Africans are quickly becoming fans of malls due to the convenience and different experience they offer. Although the novelty factor may eventually wear off, the importance of malls in the region is expected to continue.
3. Family and local values –Consumers throughout the region are proud of their heritage and want to maintain local identity. Many have international aspirations and show preferences for international goods in some areas – for example food and pharmaceutical products where international standards are perceived as more stringent than African standards – however firms that incorporate African products as part of their range may do better.
4. Research is essential – It is crucial to find out what the competitors, suppliers, distributors and demographics are like before moving into a new market.
5. Use appropriate products – Africans do not want cheap goods. Quality counts and Africans appreciate goods that are designed with them specifically in mind.
6. Consider distribution – Deliveries in Africa can be difficult. For example, many consumers will not have an official address. Coca-Cola got around this by shipping to a local drop-off point.
7. Payment methods – Firms with an online presence need to offer the option to pay cash on delivery or reserve online and collect. Many consumers will not have access to banks or credit cards that would enable them to make online payments.
8. Pricing – Firms need to offer a variety of products at different price points in order to appeal throughout region with uneven wealth distribution.
9. Maintain brand awareness – Big firms should play to their brand strengths. For example, Unilever is using its Lifebuoy soap brand to promote proper hygiene habits to 1bn consumers across Africa, Asia and Latin America in an effort to prevent child mortality.
10. Market entry – Working with a local partner can increase a firm’s knowledge, expertise and reach in a new market. For example, French supermarket, Carrefour partnered with African firm, CFAO in order to gain better access into many Central- and West-African countries.