JOHANNESBURG – Every entrepreneur’s dream is to expand beyond the presence.
For some this means increasing the size of the business while for others it means venturing into borders beyond the business’ comfort zone.
This is the case for most committed entrepreneur who want to expand into Africa. While this is one of the most important for the growth plan of the business, such expansion however requires careful research and ensuring that a number of important factors are considered.
Here are some of the key factors to look into when considering venturing into Africa.
Each of Africa’s 54 countries represents a unique market with differing challenges and intricacies for doing business. The various economies, laws, languages and cultures need to be thoroughly assessed around strengths, weaknesses, potential opportunities and threats. Growing operations across borders should not be based on how big a business is, nor which growth stage the business finds itself in. It should be on markets that are conducive for the required business goals.
Entrepreneurs should consider, among other things, the language barrier; availability of local skills; potential demand for the product/service, as well as the competitive landscape present in the market. The region’s historic economic performance should also be an important consideration along with its future performance as this should provide a good indication for growth prospects.
Conducting due diligence and understanding all relevant regulations is crucial. Most companies make mistakes during this phase and find themselves facing massive fines or potentially devastating legal action down the line. Crucial information should include required permits, business and property registration processes, credit requirements, tax legislation, labour market regulations, and local content requirements. While most countries have adequate laws in place to protect foreign investors, it is the enforcement of the laws, or even the time taken to perfect one’s rights that is often a substantial inhibitor to doing successful business in a country.
Developing robust contracts and making use of local attorneys to ensure that the contract complies with local laws is therefore imperative.
If an entrepreneur wants to succeed in any country, it is essential to have a strong local presence, knowledge of the local market, and an understanding of customer expectations. Employing workers from the region can potentially be one of the best ways to support the company’s operations and will not only benefit the business and its reputation, but the local economy too. Finding the right employees, creating cohesive teams and implementing skills training within the organisation relies heavily on understanding the culture of the region, and being able to effectively work around the potential language barriers.
One of the most important things to do is to understand the reliability of basic resources such as electricity and water supply as these continue to be a challenge in various countries. There are many regions that only receive supplies a few hours per day. Where necessary, entrepreneurs need to budget for backup facilities such as generators or even consider signing contracts with mobile fast-track suppliers who can operate and maintain their own generators on the business’s property. Similarly, water scarcity and regular droughts are commonplace in many regions, which is why businesses may need to consider implementing water saving initiatives for their buildings and recycling where possible.
In closing, while entrepreneurs need to consider a number of aspects when expanding across borders, the rewards for getting it correct are significant, and this list should not deter entrepreneurs from taking the leap, but should serve rather as a reminder of the amount of research that should be conducted beforehand.
Africa is open for business. All it takes is enough drive, passion and perseverance to tap into its growing markets.
Ben Bierman is a managing director at Business Partners Limited.