Expanding into any new country is always a huge task for a foreign company. But in Africa’s frontier markets this can be particularly daunting.
One reason behind this is a lack of quality business-to-business support services, which forces a company to worry about developing skills and expertise that are not part of its core business. For example, if there are no professional chefs or catering services in a city, a hospital has to focus time and resources in securing a steady supply of fresh produce from local farmers and training its own chefs and catering staff. The same goes for hygiene, cleaning and energy management. The more resources a hospital has to spend on these activities, the less it has to focus its core function: to provide medical care.
It is this gap in services that Tsebo Solutions Group is capitalising on. The company has managed to expand to 21 African countries (and two in the Middle East) by providing non-core services that helps its clients operate more efficiently. These include security and IT solutions for banks; cleaning and catering services for hospitals; and energy management and procurement for factories.
The business was started in 1971 as a small contract catering company in South Africa – with its first client being the University of Cape Town. It later diversified its offering to facilities management as a one-stop-shop solution and won a couple of contracts in Southern African Development Community (SADC) countries. But its big break into the rest of Africa began in the early 2000s when it won a bid to provide services for Barclays’ bank branches and head offices, where it would offer solutions that included onsite security, receptionists, IT capabilities and cleaning. This gave it a foothold into west, east and central African markets and today Tsebo has three other major banks as clients, as well as many others across a range of industries.
According to the group’s CEO, Clive Smith, there are a number of large facility management firms around the world, but the African market as a whole remains virtually untouched. He believes this is because Western companies would have to completely redesign their solutions to address African realities.
“So, for example, the European and American companies in our space… they don’t have to worry about network capacity or data speed, because they operate on 50K networks. But come to Africa and you have to redesign your entire IT system to work in the cloud and on hand-held systems,” he told How we made it in Africa.
“We realised there is a huge space for [a company] to become a global player, but dominating the African space.”
A key strategy has been acquiring specialist companies in African economies that can either give Tsebo a foothold into a particular market or specific industry expertise. One example of where it has done this is its 2015 merger with Allterrain Services Incorporated, which had expertise in remote camp management for African mining and construction companies. Tsebo now services over 60 mines in Africa.
However, unlike the mining camp services space (which is highly competitive with a number of global companies bidding for contracts), Smith believes facilities management holds a potential first-mover advantage. This is especially the case in frontier markets such as the Democratic Republic of Congo and Burkina Faso.
“There are small providers that do maintenance, generators or small services… but from the facilities management side, we have first-mover advantage,” he continued.
“We see this becoming the larger part of our business [in these markets].”
He added that acquiring smaller local players in African frontier markets has been key to the company’s success.
“Every country has its own culture, banking environment, legislative and tax regimes… You have to have local knowledge and that is one of the reasons that we are bringing small or medium-sized local players into our organisation, and merging with them, to give us that local content,” he said.
“You cannot go into Africa and think that you can bring global systems and deliver without local knowledge.”