Africa has rapidly gained attention as the next investment hotspot often referred to as the “the final frontier. Currently, African countries stand out on their own as highly attractive investment opportunities linked to Africa’s youthful population and the world’s fastest growing populace and home to seven of the top 10 fastest-growing economies in the world, attracting ever raising foreign direct investment.
Multinationals coming into Africa have been enticed by the great economic potential therein seen in Africa’s continuously strengthening economies. It is therefore no wonder that several international entities are seeking to expand into Africa to tap onto the opportunities therein. These entities however, struggle with the challenges that come with embedding into a totally new market whose economic structure, political and regulatory frameworks as well as distinct cultural disparities present challenges at set up and in day-to-day business operation.
Global enterprises who seek to penetrate the African markets must therefore undertake various market tests to determine their success potential these new economies measured despite their variables internally and externally. There is no doubt that for one to succeed in developing markets you must be willing to learn and understand the continent’s unique micro and macro environment and their impact on doing business.
For instance, some African economies have governments whose economic policies favor and encourage international trade and investment with the condition that international investors must partner with local enterprises for them to be licensed to operate within such a market. Understanding and adhering to such requirements will certainly save multinationals from the hustle and losses that would come from attempting to go it alone blindly and suffer the repercussions both legally and financially.
The logistics and supply chain environment is one that is bound to boggle any enterprise setting up in Africa. Though most companies may be coming from stronger and perhaps more organized structures localizing your supply chain model to the specific markets will go a long way in ensuring ease of penetration and operation. Job Kemboi, the Siginon Group Commercial Manager says, “We have seen a number of multinationals setting up in the region and when it comes to understanding the local environment, they often struggle with some of the rules regulations and timelines given to get regulatory go ahead as well as customs hiccups when it comes to cross border trade. It is therefore imperative that they work with an indigenous competent and experienced supply chain service provider who is well versed in the market will provide guidance that will ensure that they do not experience any penalties or delays at the ports or when handling their goods locally or across the African borders.”
Siginon Group is a transport and logistics company that boasts of over 35 years’ experience in the East Africa and Great Lakes region. The company owns almost 500 cargo trucks a set up that may however defer with more advanced economies such as the US where trucks are owned by individuals and the driver most often being the owner of the truck. The Siginon Group model of truck ownership is replicated by majority of the service providers across Africa with several logistics firms investing heavily in their trucking assets and equipping them with competent individuals to serve as drivers, fleet coordinators, safety teams, workshop, and other related roles.
Over 50 percent of Africa’s population is expected to have discretionary income by 2020. With an increasingly young population and a steadily growing economy, the time is right for companies to consider doing business in Africa. Expanding into the African marketplace may come with various considerations before an enterprise makes the first move. As a first, developing a localization strategy that aims to meet the target market’s unique cultural, economic, and government regulatory requirements will help unblock the potential bottlenecks that could hinder market penetration. Through partnership with local service providers, multinationals will find niche local enterprises whose services are benchmarked against global standards of excellence thus provide an assurance of quality, adherence to regulations and customer satisfaction.
Ultimately, multinational companies will need to be able to adapt, embrace and innovate to the African environment rather than trying to mould it to suit the organization.