Africa is not a Country: Scaling Your Business in Africa

Africa is Not a Country!

When it comes to expanding your business into Africa, it is essential to remember that Africa is a vast and diverse continent, comprising 54 countries with their own unique cultures, markets, and regulatory environments. With anywhere?between 1000 and 2000?languages, Africa is home to approximately one-third of the world's languages. The diversity of Africa's languages is evidenced by their populations. In total, there are at least 75 languages in Africa that have more than one million speakers. It is important to recognize that Africa is not a homogenous entity and that success in one market does not guarantee success in another.

Africa is a vast and diverse continent with a rapidly growing population and a burgeoning entrepreneurial ecosystem. According to the World Bank, Africa is home to over 600 million people aged 15-24, representing the largest youth population in the world. This presents a significant opportunity for businesses looking to tap into the growing consumer market on the continent. However, expanding into Africa is not without its challenges. Companies must navigate complex regulatory environments, navigate cultural differences, and deal with infrastructure and logistical issues.

One key development that is set to facilitate trade and economic growth in Africa is the African Continental Free Trade Agreement (AfCFTA). The AfCFTA is a treaty signed by 54 African countries that aim to create a single market for goods and services across the continent. The agreement came into force in January 2021 and is expected to significantly boost trade and investment in Africa by reducing tariffs and other trade barriers.

For businesses looking to succeed in Africa, adopting an ecosystem approach can be crucial. This involves building partnerships and collaborations with local companies, governments, and other stakeholders to create a supportive environment for growth. By leveraging shared infrastructure and resources, businesses can reduce costs and mitigate risks, while also gaining access to local knowledge and networks.

One example of a company that has successfully scaled in Africa through the ecosystem approach is mobile telecoms giant, MTN. Founded in South Africa in 1994, the company has since expanded to 22 countries in Africa and the Middle East, serving over 240 million customers. MTN has achieved this success through a combination of organic growth and strategic acquisitions, as well as by investing in infrastructure and partnerships with local companies. For example, MTN announced a partnership with Africa’s leading payments technology company, Flutterwave. This partnership will allow businesses integrating Flutterwave in Cameroon, C?te d’Ivoire, Rwanda, Uganda, and Zambia to receive payments via MTN Mobile Money (MoMo).

In contrast, many companies have struggled to achieve the same level of success when expanding into Africa. One example is Uber, which entered the African market in 2013 and quickly expanded to over 15 countries. However, the company faced fierce competition from local ride-hailing firms such as Safaricom's M-Pesa in Kenya, launching Little Cabs in 2016 and Rides launching in South Africa. As a result, Uber was forced to pull out of several African markets and cede market share to local competitors.

Partnerships & Shared Infrastructure

One key recommendation for businesses looking to scale in Africa is to leverage partnerships and shared infrastructure. This can help to reduce costs and mitigate risks, while also providing access to local knowledge and networks.

One example of a shared resource and infrastructure partnership in Africa is the partnership between mobile telecom giant MTN and the Nigerian government. In 2013, MTN signed a deal with the Nigerian government to roll out a nationwide broadband network. Under the agreement, MTN invested $400 million in the network, while the government provided access to infrastructure, such as tower sites and fiber optic cables. The partnership has enabled MTN to expand its services in Nigeria and improve access to telecommunications for millions of people across the country.

Another example is the partnership between Coca-Cola and the Kenyan government. In 2017, Coca-Cola launched the Replenish Africa Initiative (RAIN), a partnership with the Kenyan government to provide access to clean water in rural areas. Under the initiative, Coca-Cola has invested in infrastructure such as water treatment plants and distribution systems, while the government has provided land and regulatory support. The partnership has helped to improve access to clean water for thousands of people in Kenya and has also helped to reduce the environmental impact of Coca-Cola's operations.

Government as an Enabler

Another recommendation is for businesses to consider the role of the government in facilitating successful scalability. Governments in Africa can play a crucial role in creating a supportive environment for businesses to grow and thrive. This includes providing access to infrastructure, such as roads and telecommunications, as well as supporting the development of local entrepreneurial ecosystems through initiatives such as incubators and accelerators. According to the World Bank, Africa's infrastructure gap is estimated to be $360 billion per year, and closing this gap is essential for promoting economic growth and development on the continent.

Scaling in Africa presents a unique set of challenges and opportunities. By adopting an ecosystem approach and leveraging partnerships and shared infrastructure, businesses can increase their chances of success and facilitate sustainable growth on the continent. The AfCFTA is also set to play a crucial role in facilitating trade and economic growth in Africa. Governments also have a role to play in creating a supportive environment for businesses to thrive and drive economic development.

With that said, here are the top 10 factors to consider when expanding your business into Africa:

1. Market Research: It is essential to thoroughly research the market you are entering to understand the local customer needs, preferences, and competition. Make sure to compare notes with what is published on the internet, reports, and secondary data to primary data sources, especially through interviews and 'local champions'.
2. Cultural Awareness: Africa is a diverse continent with a rich cultural heritage. It is important to be sensitive to cultural differences and adapt your business strategies accordingly. Your brand, messaging, and positioning on the market can make or break you. It is important to find a 'Brand-Cultural Fit' for your business.
3. Regulatory Environment: Each country in Africa has its own set of laws and regulations that businesses must adhere to. It is important to thoroughly understand the legal requirements of the country you are operating in and seek legal advice if necessary. Make sure your operating framework fits into the country's regulatory and tax regimes.
4. Infrastructure: Africa's infrastructure is often underdeveloped, which can pose logistical challenges for businesses. Consider the availability of transportation, power, and communication systems in the region you are expanding to.
5. Talent: Finding and retaining top talent can be a challenge in Africa. Develop a strong employer brand and offer competitive compensation and benefits to attract top candidates.
6. Partnerships: Leveraging partnerships and collaborations with local companies, governments, and other stakeholders can help to reduce risks and costs, while also providing access to local knowledge and networks.
7. Financing: Access to financing can be a challenge in Africa, particularly for small and medium-sized enterprises. Consider alternative financing options such as crowdfunding and peer-to-peer lending. Also, make sure to understand permissible investment instruments in that country. For example, if you are a startup domiciled in several African countries, you will not be able to receive investment instruments such as convertible notes.
8. Localization: Localizing your products or services to meet the specific needs of the African market can be crucial for success. This may involve adapting your products, pricing, marketing strategies, and customer service.
9. Sustainability: Sustainability is increasingly important for businesses operating in Africa. Consider the environmental and social impact of your operations and incorporate sustainable practices into your business model.
10. Government Support: Governments in Africa can play a crucial role in facilitating business growth and development. Seek out opportunities for government support and partnerships to help your business succeed.