Five challenges of doing business in Africa
In a recently published report, Expansion into Africa: Challenges and Success Factors Revealed, Accenture lists a number of challenges that companies looking to do business on the continent must recognise and respond to.
Most African countries have abundant labour but finding skilled workers can be difficult. Accenture notes that where highly educated people are available, they tend to lack practical management experience. Although employing expatriates is an option, this is not always the best solution. Expatriate personnel might find the living conditions in many African countries difficult. Employing foreign workers also slows down the skills transfer process. Language barriers in certain African countries can also be a problem for expatriates.
Understanding local consumers
Companies must ensure that they understand the values, needs and behaviour patterns of local consumers. Accenture’s research reveals that low-income markets often have unreliable sources of income. Erratic cash flow, for example, affects packaging strategy. “Some consumers tend to purchase in smaller quantities, while others prefer to purchase in extra-large sizes when they have the money, thus avoiding costly travel to the retail outlet,” says Accenture.
Finding the right physical resources
It can be challenging to find suitable office or retail space in many African countries, especially outside of the main urban centres. Utility and municipal services can also be unreliable. Companies are often forced to supply their own primary or back-up infrastructure, such as electricity generators.
Accenture says that new entrants to African markets must familiarise themselves with local requirements. It cannot be assumed that goods that meet the quality standards of a company’s home country, will automatically meet the regulatory requirements of other African countries.
“If your business strategy relies on a local partner in any substantial measure, it might include helping that partner access local sources of capital,” says Accenture. “Many . . . companies are missing an opportunity by not accessing local funding, as it is an opportunity to share risk and enhance growth prospects by effectively enlisting investors as local advocates and business advisors.”
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