Expanding Into Africa

Here are some suggestions that will help you expand into new and emerging markets in Africa

BThe unique opportunities and challenges in the African markets make determining where to enter a new market and what strategy to use especially important. Your options will vary depending on your industry segment, the sophistication of the business environment, relative levels of risk and the amount of control that company management would like to maintain. Ideally, you should gather as much information as possible from a wide variety of sources and develop a clear plan for expanding into Africa.

Get a local partner

Successful businesses know that their ability to compete in any market depends on the people they employ and do business with. If the opportunity exists, some companies may want to acquire a local firm or enter into a joint venture to gain access to the market. However, even if a company does not require a local footprint, it will need to work with reliable, local partners that can assist in navigating the market to properly execute the company’s strategy. These “navigators” can provide significant advantages such as in-depth market knowledge; access to networks for financing, human capital, and other resources; and the ability to maneuver within local regulations and the unique operating environment.

Many firms providing support for entry into African markets advise that local partners can be critical to success, depending on the country and the type of business. And having a partner whose interests align with the company’s goals is essential. More often than not, the partner should be local and on the ground, but finding the right partner can be a challenge. You also need the right amount of incentive and alignment.

Local partners can be difficult for foreign companies to identify because foreign managers do not always understand the local market dynamics, and publicly available information is in short supply. Many local companies rely on more informal business practices that many international firms find difficult to assess such as verbal agreements rather than written contracts or the reliance on family members in the business. Inquiries through local legal counsel or other trusted local advisors may also help a company explore the suitability of potential partners.

Develop two-way relationships

In most markets, the business community tends to be relatively small and a company can quickly get to know the key players. Building a reputation at the outset as a company that wants to work with local businesses helps to establish relationships that promote acceptance and support.
The need to build contacts within the government depends on the industry. It is usually helpful if the relevant government ministry understands the company’s plans and how they will affect the local community. More extensive relationships may be needed to gain insight into how to access certain incentives or get permits approved. Companies might also build relationships with local village leaders, country directors, and staff of international organizations operating in the area, local business associations, and trade organizations.

Develop two-way relationships

Businesses with any presence on the continent are faced with a choice for their staff – bringing in expatriates or hiring local talent. In the long run, building local capacity is much more likely to yield sustainable success. Hiring expats may limit a company’s execution strategy because of the potentially higher expense to transfer an entire team or to compensate for an undesirable location.

If expats are willing to go to more rural parts of Africa with fewer available resources, they may want higher compensation. In addition, foreign staff have a learning curve, and some argue that expats will never fully understand the nuances of the local African culture.

There are several options for hiring local talent while still achieving business objectives. One alternative is to hire foreign-educated Africans. An additional alternative is to hire local talent, which is generally cheaper and comes with built-in knowledge of the market, including how and when to interact with government officials.

Although currently a large and reliable pool of qualified and highly trained professionals are not typically available in most emerging African markets. However, the scenario is changing fast as education and training advance and Africans gain higher education levels.