Defining your business strategy generally involves setting goals, determining actions to achieve the goals, and mobilising resources to pursue your strategy. And knowing current market trends is key to smart strategic planning in Africa. Here are eight business trends and a few tips for increased profitability in 2015.
1. Bet on value addition
African governments are promoting value addition for economic development and there are huge gaps to be filled. This means manufacturing processes that add value to raw products and materials will happen increasingly, generating more money on the continent.
Can you for example imagine an economic powerhouse like Nigeria is annually importing tropical fruit concentrate worth millions of dollars from the west? The value of these imports was estimated at $140m in 2014. Yet fruits are regularly rotting away in Nigeria and across the continent because farmers cannot transport them to major markets either in time or at a profit. This is one example of adding value to raw produce and increasing your profitability, tapping right into African market gaps and trends.
2. Fast-moving consumer products will make up Africa’s top sector
Africa is home to one of the world’s fastest growing populations and an exploding middle class with more spending power. As a result, there is a high demand for fast-moving consumer products, such as apparel, hygiene products, food, electronics, or toys. Much of this is still imported. But the continent needs ‘Made-in-Africa’ products to meet the growing demand in the market, create much needed jobs, and decrease the national trade deficit.
The good news: many very successful African entrepreneurs have started local production with just a few hundred dollars in hand. Using locally available material, craftsmanship, and a strong vision, they started producing shoes, luxury bags, soaps, household cleaning products, and children’s clothing in their own garages or workshops – and have built successful companies, which are now widely recognised. You can do the same.
3. Intra-African trade is growing fast
Intra-African trade is growing at a much faster pace than the continent’s export markets to the west. This is a trend you should be well aware of as it provides multiple opportunities. If you are a producer or service provider, your growth strategy should certainly focus on regional expansion. But the big rise in intra-African trade also opens opportunities in the logistics and transport sectors, or other services and securities you could provide to actively support these traders and address some of the obstacles they face. A great niche to step into – just think about how you could add value in this regard.
4. E-commerce is gaining momentum
E-commerce is on the increase and improved availability of various national and international payment systems have made this possible. Nigeria, South Africa, Kenya, and some north African nations are among the most advanced in this regard, but just last month Tanzania Daily News for example published an article titled ‘Tanzania: E-shopping now consumer favourite’ stressing the country’s middle class is increasingly putting its faith into online commerce.
With high mobile phone penetration and an expected internet revolution over the next few years, this is the perfect time to start positioning your Africa e-commerce business before the wave takes off.
5. Africans are looking for export markets
Export is highly encouraged by African governments aiming towards a positive trade balance. Besides, export allows companies to diversify their operations and trade in hard currency. Yet the lack of knowledge about foreign market access and regulations, and a chronic inability to produce consistently to meet global export requirements are some of the obstacles. There are many opportunities to facilitate market links and support African exporters providing partnership, consultation, information, or training. Position yourself in this regard and you can soon start monetising your expertise.
6. The East African Community growing into a top market destination
The East African Community (EAC) continues to take down trade barriers among its members, providing access to about 150 million people in a single market. The EAC is a top destination for African equity firms who appreciate the growth dynamics and overall stability in the region, human resource capital, and the opportunities the market offers both for expansion and risk mitigation. Nairobi is the buzzing hub of the EAC, but Rwanda’s capital Kigali also presents you with a valuable strategic choice of a different nature: Doing business in Kigali is recognised as a safer and easier route compared to the other EAC member states. And it has another added advantage: easy access to Central Africa, in particular to a large market in the DRC.
7. Women-focused business is a smart success strategy
This is a trend, which is vastly overlooked. There is a growing effort by leading development organisations and some governments to make the Africa-rising narrative more inclusive by integrating women actively in economic development. But not many have seen the opportunities. By choosing women as your target consumer group, and possibly focusing on the employment of only women in your venture, you are not only tapping into a powerful and still widely-overlooked segment of Africa’s consumer market, but you can be sure others will notice. Your women-focused business concept stands out, and if successful media and government alike would want to promote it for you as an African success story.
8. Africa needs managers
The continent’s economic growth needs people who are able to manage and lead processes in various capacities. Africa simply does not have enough skilled senior-level staff and experienced managers to adequately meet such new demands. The gap is so big it poses a major challenge for equity firms, investors, larger corporations and local manufacturing firms operating on the continent. Think of ways to utilise this in your business strategy. One is facilitating the recruitment of Diaspora Africans in both the financial or engineering industries – for example providing management training. The latter is something you could offer both as a start-up or an existing company in your field of expertise.
Africa is rich in distinct market trends. Incorporate them now into your business strategy. Because tapping into these powerful dynamics will increase your profitability in 2015.
Dr Harnet Bokrezion is a senior international development consultant and the founder and CEO of Africa Business Jumpstart, a coaching business that supports you to make informed and strategic decisions while pursuing your business ambitions in Africa faster and more confidently. Follow Harnet on Twitter at @africajumpstart