Finding the ideal real estate when expanding across a border is a challenge for many multinationals. For those companies looking to Africa, the property regulations and long-term lease requirements in some countries may impede expansion plans. In Lagos, for example, long-term lease agreements are the norm, with tenants often required to make an upfront payment to cover three years’ rent.
“This means companies end up overpaying for their real estate needs,” says Gregoire Schwebig, founder of AfricaWorks, a pan-African company that provides flexible and co-working spaces for its members.
“Generally real estate is second in line after payroll when it comes to operating expenses for companies. It can become a barrier to entry.”
Schwebig identified the need for a simpler, more affordable solution in the feedback and requests from the clients of Haussmann Group Africa, a property service provider company which he founded in 2014 in Kenya. There was room for another player in the market to provide an innovative solution and, in August 2019, AfricaWorks – a separate legal entity – opened its first 800m2 space in Abidjan, Côte d’Ivoire, with 150 workstations. It was followed shortly by a 2,000m2 space in South Africa in Cape Town’s CBD.
Despite the six-month delay in its aggressive expansion strategy owing to the global Covid-19 pandemic, AfricaWorks’ eight spaces already boast over 1,000 members in cities such as Abidjan, Cape Town, Nairobi, Lagos and Accra.
Before the end of 2021, the company wants to have 20 locations across Africa, including cities like Casablanca and Johannesburg, bringing the total to 3,000 workstations.
Schwebig was born and raised in Paris. He started his career in the finance world with jobs in London and Hong Kong, before joining a venture capital fund in Nairobi. In 2014, he founded Haussmann and started AfricaWorks five years later.
“If you combine Haussmann and AfricaWorks, we operate over 30 legal entities in Africa,” says Schwebig. “It often sounds like a complicated process (to establish a legal entity) and is seen as a barrier to doing business in Africa. Our experience is that it is often easier than it’s perceived to be.”
Once the companies are up and running, the expenses associated with the corporate governance requirements for each of the jurisdictions do add up, Schwebig admits. Each legal entity needs to comply with local legislation and regulations on corporate governance, tax, external audits, as well as board and company secretary duties. This raises the cost of doing business. AfricaWorks, alone, has 12 registered legal entities, which requires the attention of one full-time employee tasked with governance.
Apart from Schwebig, who works out of Paris, the team of 35 is based in the cities where AfricaWorks has a presence.
A business model based on core competencies
The idea for AfricaWorks originated out of Haussmann, but the start-up is benefiting from the core competencies of Schwebig’s first venture.
Over time, the Haussmann team has mastered how to identify and negotiate the right lease in tricky real estate environments and has the experience to make sure capex to set up the space is kept to a minimum. Haussmann currently operates in Kenya, Uganda, Rwanda, Tanzania, Zambia, Mauritius, South Africa, Nigeria, Ghana and Côte d’Ivoire.
“AfricaWorks does not have a one-size-fits-all or copy-paste model. We tailor the space to suit the specificities of each location. This enables us to reduce the cost per workstation. Currently, our cost is one-third of that of our competitors.” Schwebig lists global player Regus as the company’s biggest competitor on the continent.
In 2020, AfricaWorks raised €3.5 million which helped it expand outside of its first two locations: Abidjan and Cape Town. Schwebig explains that the company is careful with how it manages these funds. “This is where my finance background comes into play. We are very agile, nimble and frugal.”
The company’s business model is structured to ensure a mix of different-sized clients, with a new location ideally accompanied by a large multinational anchor member that commits to a long-term agreement or to occupying a substantial part of the available space.
“Our clients include a mix of big multinationals like L’Oréal, Airbnb, Toyota and Universal Music. They make up a third of our client base. Another third is generally fairly established B2B smaller businesses and the last third consists of start-ups,” adds Schwebig.
AfricaWorks does not own any properties but it is a consideration for the medium term, possibly by establishing a real estate investment trust.
Apart from the regulatory cost of doing business, finding the right talent to support the expansion of a service business is challenging; especially one that aims for unwavering excellence, Schwebig says.
“While the design of the space is unique in all locations – and we are comfortable with that – the customer experience should be top-notch and consistent despite the different environments. What I’ve seen way too often is a one-off product which is great, but the moment it is replicated, you lose that quality and consistency.”
Future growth and diversification
AfricaWorks is fielding a growing number of queries from clients looking to exit traditional leases in favour of a more flexible product. For example, the company offers members options such as renting hot desks for a few days per month that can be used as and when required.
The next step, says Schwebig, is to build a community among its members across all the locations. “We want to connect the Cape Town ecosystem with the Lagos ecosystem to the Abidjan ecosystem and so on. Ultimately, the goal is to create a pan-African business community that will assist our members to grow their businesses.”
The company has just launched its AfricaWorks Connect app, providing a platform where members book meeting or event rooms, but where they can also interact virtually and attend online workshops.
To expand the value offered by the network even more, AfricaWorks wants a space in Paris, London and Dubai before the end of 2021. “We’ve identified these three cities as the locations with the biggest working relations with Africa,” he says.
Covid-19 may have delayed AfricaWorks’ expansion plan for six months, but Schwebig believes the changing world of work could be a business opportunity for the company going forward.
“In the first couple of months, like most businesses, we were taken by surprise and had to pause and re-strategise about the future. However, it became clear that the way people work is changing, from traditional office set-ups to more flexible options.”