Africa’s positive economic outlook is under pressure. The International Monetary Fund (IMF) cut Sub-Saharan Africa’s growth forecasts to 3 percent for this year and 4 percent for next year in an April report – off prior expectations of 4 percent and 4.7 percent respectively. Despite this, companies in South Africa, Morocco, Nigeria and Kenya have been among the most prominent and arguably most successful African companies gaining a foothold in the continent.
According to research by Deloitte Africa, whose work in Africa spans over decades, these “African Champions” are able to benefit from their home ground advantage and deep understanding of the ins and outs of African markets, as well as their agility to adapt quickly to the challenges and ever evolving business environment on the continent.
The professional services company will join other top companies around the world at the World Economic Forum on Africa, holding in Rwanda from May 11 to 13, under the theme “Connecting Africa’s Resources through Digital Transformation”.
According to Deloitte, building a winning business in Africa is a long-term play and there is no universal recipe for building businesses in Africa or anywhere in the world.
“It is rather the combination of various soft and hard skills paired with the right timing and a solid understanding of the market-specific opportunities and risks that enable companies to become champions in their respective sectors and geographies,” says Managing Director: Emerging Markets & Africa at Deloitte Africa, Dr Martyn Davies.
It therefore stressed the importance of companies attempting to become “Champions,” to do so with their eyes wide open. Each jurisdiction comes with its own challenges and opportunities, the company says.
There are a number of “cross-cutting” factors that need to be harnessed to achieve business success. First among these is taking advantage of their first-move advantages in markets with high growth potential.
“Companies that move first into high-growth markets can influence the operating environment and can achieve major brand recognition,” says Davies. However, he adds that companies that are able to adjust their service or product offering to the local conditions and environment tend to have better prospects of success in African markets.
“Given challenges such as unreliable infrastructure, limited purchasing power of large shares of consumers, insufficient penetration of financial services, offerings tailored around these challenges have the potential to present opportunities for companies with both innovative business models and service offerings,” says Davies.
Another key ingredient for success is partnering with experienced local partners, as this is vital for businesses entering a market or sector.
The diversification of product or service offering and geographic reach also allows firms to grow by tapping into a larger market outside of their home market or traditional sectors, Davies notes.
According to the according to the Deloitte Africa research, often African Champions became national champions in their respective sectors first, before they expanded across borders.