“Business is all about managing risk. We felt it was sensible to have multiple revenue streams and not to be dependent on one market.
The other thing is we have got some great skills in Africa and we can provide services from Africa back into Europe and into the UK.”
Legg explains that with increasing connectivity with the rest of the world, more African businesses are better placed to offer products and services to Europe.
“Africa is an ideal [because we are in the] same time zone, most people have an English language education [and] so, the standard of English here is much higher than in Eastern Europe or even India.”
Legg notes that African businesses expanding across the continent need to know and understand the culture, customs and work ethic in their host markets.
“If you are an entrepreneur and you are looking to expand into a new country, don’t act like a foreign company, act like a local company.”
Challenges and risks
The group recently signed its first contract in Kenya and is looking to lock in some more business. However, finances pose a challenge.
“There is almost so much opportunity and we can’t expand fast enough with the resources that we have at our disposal,” says Legg. “But we are reluctant to borrow money and we are reluctant to go to private equity companies or VCs because we don’t want to relinquish control. We don’t want to be dictated to by faceless financiers. If we want to go and raise funding we want to do so from a position of strength.”
When starting a business, Legg says, one should look at how it is going to make money, know the business drivers and work out a realistic strategy.
“It has got to be realistic. I have seen so many business plans which are hockey sticks. You need to have a gradual growth,” he says. “If something is not working be prepared to let it go… and try something else. Always try to live within your means. Above all, don’t give up.”
Legg says a common mistake young tech-entrepreneurs make is to build businesses without a clear plan on how they will monetise, hoping that if they build it people will come.
“When the money runs out entrepreneurialism flies out of the window… you can’t ignore the finances.”
Legg notes that “Africa is now becoming hot”, adding that coming here five years ago gives him an advantage over other investors who are now realising the potential in the continent.
However, foreign investors should be aware of the risks of doing business in Africa such as currency volatility and political instability in some countries.
“The markets are [also] much smaller in terms of what can be achieved from a revenue perspective. If we achieve $5m we think, ‘wow that is great’. But our equivalent in the UK would probably be nearer $50m. So the financial scale is smaller.”
While the solution would be to target regions as opposed to individual countries, Legg warns that investors should not “treat Africa as one”. Companies need to understand what features are common across the continent or region and understand what works in individual markets.
“Things that work in one country may not work in another. For instance, BBM is of no interest to Ghanaians but it is big in Nigeria. We also know that Barclays Premier League is popular across all of Africa, but in South Africa the local league is more popular. There is not a one-size-fits all strategy.”