With relatively slow growth in their home market and economic woes in Europe and the US, many South African companies are considering opportunities in the rest of the continent. However, expanding into foreign markets is always tough, let alone Africa with its notoriously difficult business environment. For this article, Raymond Booyse, founder of consultancy firm Expand into Africa, identified four mistakes often made by South African companies venturing into the rest of the continent.
1. Not doing your homework
Booyse says South African companies often falsely assume because a certain African country has a large population or strong economic growth that their products or services would do well in that market. South African firms are frequently not prepared to spend money on market research.
“One must do one’s homework. Go and look if there is a market for your products or services. After you’ve established that there is indeed a market, find out who your competitors will be,” he notes.
Booyse also says South African companies forget about the high transport costs of moving products to other African countries, as well as how local laws and regulations will affect their businesses.
Many South African business people are ignorant of the cultures and attitudes in the rest of Africa, according to Booyse. He says that although Angola and Mozambique are both Portuguese-speaking countries – what works in Angola’s capital Luanda, might not work in the north of Mozambique. A product that sells well in Luanda, where consumers are more modern, might be less popular in one of Angola’s more conservative cities.
In a recent report, research firm Nielsen noted that African consumers’ attitudes towards technology, fashion and how to spend leisure time, vary greatly. “At one end of the spectrum, Nigerian consumers are technology savvy, fashionable, willing to try new things, individualistic and also brand loyal. Conversely, Ethiopian consumers are not fashion conscious and brand loyal, prefer to look natural and are constrained by life’s circumstances.”
“We are slightly arrogant,” says Booyse. “We think that because we are at the southern tip of Africa that we understand the whole continent.”
He says that South Africans sometimes think they know what people in the rest of the continent need. “In the rest of Africa, South Africans are often regarded as arrogant.”
4. Not being prepared for the high costs of doing business in Africa
Many South African companies are not aware of the high costs involved in doing business in the rest of the continent. “If you want to spend two weeks in Angola it will cost you R40,000 (US$4,700),” notes Booyse. “It is not cheap and easy.”
Jeremy Wiley, a well-known South African businessman, agrees with Booyse. Wiley recently established property services firm CongoProp in the Democratic Republic of Congo (DRC). He told How we made it in Africa in an earlier interview that the DRC is an expensive country to do business. It is not a market for small businesses without the capital to do adequate research and afford the country’s high operating costs.
Wiley added that flights from South Africa to either the capital Kinshasa or Lubumbashi can be costly, and that hotel rates are also steep.