Is your company prepared to do business in Africa in 2016?

Lagos, Nigeria

Lagos, Nigeria

Frontier market economies in Africa are predicted to grow higher in 2016 relative to the well-known emerging countries. Indeed frontier markets are where populations are growing and urbanising rapidly, household disposable incomes are increasing and the taste for sophisticated consumables is rising.

Is your firm well positioned to take advantage of the economic opportunities frontier markets present?

According to a Boston Global Consulting (BCG) report Dueling with Lions: Playing the New Game of Business Success in Africa, released in November 2015, multinational firms, historically the major source of manufacturing and supplying African consumers, are losing to competition from what BCG calls ‘African Lions’ – companies based in and grown out of Africa, and able to withstand and win market competition from multinationals.

What are the winning strategies of these African Lions and what can your company learn from them? According to the BCG report, these companies have the four Fs: focus, field, facts and flexibility.

Whether you are a local firm or a foreign investor looking to invest in Africa, these four Fs can provide input for your strategy in 2016.

Focus: African Lions are winning because they consider the continent to be their primary market and source of revenue, and hence give it all their attention. This has been seen in the emergence of pan-African businesses which spread across regions. For your winning strategy in African business, give it all your attention. Consider putting in place resources to give your company a permanent face on the continent, make your business visible and strengthen partnerships on the ground.

Field: On-the-ground experience, gained through many years of living, working and understanding the culture of African business is an advantage to African Lions. Being overly professional and disregarding cultural practices is not the way to do business in Africa.

CEOs of the firms categorised as African Lions are down-to-earth, build strong personal relations and understand that not all agreements need to be formalised. Also, the notion that Africa is one country should be done with. You can gain on-the-ground experience by carefully selecting and then regularly interacting with your in-country partners, understanding local business processes and working with consultants.

Facts: It’s the norm that business decisions are made based on accurate data, however, in Africa accurate data is not a given. To win, firms investing in Africa need to gather information through innovative strategies and use a lot more personal judgement. Also, the traditional view of Africa as a high risk continent must give way to a thinking that juxtaposes risks and opportunities and puts in measures to mitigate them. You must look at the facts behind the figures, ask critical questions and connect dots to get a better appreciation of the state of your business and investments.

Flexibility: Your business processes, products and activities need to be tailored to local conditions. Your business model cannot be replicated in Africa without regard to local economic, social and cultural conditions. Some investors may have to venture into totally new or related areas of business due to emerging opportunities and policy and regulatory reforms. For example, the increase in the use of mobile phones in Africa is driving innovative businesses, and flexible firms use this technology to expand financial inclusion and access to health services.

The rules of doing business in Africa are changing, see the opportunities and mitigate the risks. But by all means take advantage of the opportunities.

Best wishes in 2016.

Dode Seidu is the founder and team leader of Frontier Market Advisors, a trade and investment facilitation consulting firm based in Ghana, West Africa. Frontier Market Advisors helps firms interested in Africa to identify and take advantage of investments opportunities.