Seven pieces of advice on how to start business in Africa
GUEST ENTRY: Doing business in Africa can be a big challenge for many. But it does not have to be. You just do it right from the start. Here are 7 tips for getting started doing business in Africa.
1. DO YOUR HOMEWORK
Seek advice from other companies, consultants, and experts, who know your market (or potential markets) well. You do not have to learn the tough lessons the hard way.
Join communities where businesses meet and share experiences about Africa. Discuss with people who have started business in Africa and learn from their experiences and adapt their advice to your business case. Note the do´s and dont´s. Make sure you understand the culture and business environment of the market that you are about to enter.
2. FIND & UNDERSTAND THE MARKET
Africa consists of 54 countries. Remember that the countries are diverse and offer different business opportunities.
Make a careful assessment and selection of the market to enter. The very nature of your business may require you set down in one of the big cities. If you’re a tech company, for instance, East Africa may be the place for you. If you´re in the offshore, oil and gas sector, West Africa may be more attractive.
Identify the opportunities by making a sector- or country analysis to determine which African country is the most attractive for your business.
It is important to understand the customer segments and behavior as well as the competitor strength. You therefore need to elaborate a detailed market analysis.
3. DEVELOP A BUSINESS PLAN
Elaborating a business plan is crucial. Your business plan must at least cover the following areas:
1) Demand for your products/services in the market (including e.g. SWOT analysis).
2) Price level
3) Local competition
4) Sales and marketing
5) Legal / political framework
6) Organisational set-up
7) Investments & Financing (incl. external finance)
8) Viability of the business case
4. VISIT THE MARKET
Visit to Africa is necessary either while elaborating your business plan or as part of the on-location feasibility study. Include visits to relevant local companies, authorities, and universities to get an understanding of the local environment. Join relevant business delegation to the selected African country you want to penetrate.
5. FIND THE RIGHT MODEL
You can enter a market in several ways. Find the right entry model. Your business case may be suitable for joint venture or merger with a local company. You may also need to work closely with local agents, distributors and suppliers.
The steps are many and some involve local partners. Discuss carefully with local partners in order to align expectations and get a common understanding of goals and strategies. The business culture and structure are often different to what you are used to on your home market.
It is also critical to register any trademarks or other relevant intellectual property rights and obtain relevant permissions.
Finance is crucial when starting up businesses in Africa. Your feasibility study or investment and financial analysis will determine the need for finance, including the share of any external finance.
Map the market for external financing, private investors, venture capital, funding options, loans, grants, and credit insurance suitable for your needs. Find a local bank as your main banking partner locally and make sure the local bank can administrate and offer international money transfer routines as well as advisory.
7. IDENTIFY QUALIFIED STAFF
In order to implement your business case, you need qualified staff with the right competencies. It can be a challenge to identify staff – especially people with managerial experience and practical technical skills. You most likely need to offer training and in particular on-the- job training to make sure they can carry out the job in accordance with expectations. Also be aware of cultural differences.
Flemming Sørensen is the CEO of Nordekon Consultancy Company assisting Nordic companies in doing business in Africa.
Nordekon also facilitates AFRICA INNOVATION NETWORK, the largest Nordic business network for companies, diplomats, organisations etc. with focus on business, investments, tarde and sustainable impact in Africa.