Five tips for heading to Africa

Directions for use Stirring, the African market remains that of promises, with a growth rate of almost 4%. To take advantage of this, international groups have every interest in positioning themselves, knowingly.

Recent events bear witness to this: Africa is the continent of the unexpected. After the wave of the Arab Spring which swept away several African leaders, the popular uprisings of recent months in Algeria and Sudan have caused the fall of two leaders long reputed to be indestructible, Abdelaziz Bouteflika and Omar El Béchir, and plunged these Key States in a period of uncertainty.

An instability which is found on the microeconomic scale. Evidenced by Orange’s recent setbacks in Niger. Established in the country for more than ten years, the operator’s subsidiary saw its offices placed in receivership, at the end of last year, by the Nigerian tax department. At stake: a tax adjustment of more than 22 billion CFA francs (33.5 million euros), disputed by the French group. Settled amicably, the dispute, which is just one more episode in the tumultuous relationship between Orange Niger and the local authorities, was not without consequences. Yet number 2 on the Nigerien market with more than 2 million customers, Orange announced, on February 27, has requested the initiation of a preventive settlement procedure with the Niamey Commercial Court to avoid a cessation of payment.

Stirring, the continent remains that of promises, even if the ten poorest countries on the planet are African. For the past fifteen years, Africa has posted an average growth rate of almost 4% each year. The new Continental Free Trade Area in Africa (ZLECA) aims to increase intra-African trade by more than 50% and aims to merge more than 1.2 billion consumers, with the economic added value of more than 2.500 billion of dollars.  Enough to arouse the interest of States (China and the United Arab Emirates in particular) and companies. Today, the transformation of the continent is based both on the appetite of private international investors – their contributions are now more than twice greater than public development aid – but also on the emergence of African groups, with dimensions, if not pan-African, at least regional. To find sources of growth, international development enthusiasts have every interest in positioning themselves. Informed.

# 1 Manage big risks, without prejudice

Beware of clichés in the treatment of risks, immediately warns Jean-Michel Huet, Africa specialist at BearingPoint. Corruption is the risk most cited by those surveyed for the International Development Observatory of the consultancy, but  “it is not the most critical risk, nuances the expert.” The specificity of corruption in Africa is concentrated on a few people when in other countries it is much more distributed ”. In this area, the application of the Sapin II law has played a big role in African business. Companies associated with local partners – sometimes essential in certain countries, such as Algeria or Angola, or business sectors, especially those related to the exploitation of raw materials – are subject to the obligation to implement places a compliance program.

Monetary, security and political risks come first among the risks classified by companies already established on the continent. However, no country in the CFA franc zone is cited with monetary risk. With its fixed parity thanks to the euro, the CFA franc guarantees stability. In terms of security, it is also a partnership and other “business” oriented approaches that are acclaimed for preventive measures. In fact, ”  French companies highlight the importance of having a reliable local partner to control local risks  “, underlines Jean-Michel Huet.

# 2 Rely on local relays

According to a study carried out by BearingPoint on the factors of failure to settle in Africa, the lack of local partner – and therefore of ability to put the new entrant in contact with the right network – is the element cited after the problems of ‘political instability. ”  Having the right contacts, locally, and at the government level when you have a regulated activity, is vital,  ” says the consultant. To find them, the regulars traditionally send their general secretary or their legal director as scouts.

The Basic group has long sent its HR manager to the countries of the continent where it intended to set up, to set the scene. ”  He toured the HRDs of other foreign companies, European or American, to identify what needed to be done to recruit intelligently in these countries and avoid the pitfalls in terms of networks and people,  ” says Jean-Michel Huet.

In a logic of increasing Africanization of the troops in place of the expatriates, to reduce the costs, but also to profit from a better knowledge of the ground and the economic and social context, the function was used as an armed arm of many international groups. “The Africanization of posts often began with that of HRD,” notes Deffa Ka, manager of the Paris office of Fed Africa. He served as a bridgehead to set up a real recruitment and skills development strategy for highly qualified local talents, based on a good cultural understanding. “

# 3 Africanize the business

Beyond the employees, the local partners bring the knowledge of a market, several points of which are worth recalling.

In terms of digital practices and mobile banking first. In 2020, 660 million Africans should be equipped with a smartphone, according to Deloitte, more than one inhabitant of the continent on two. Between 2017 and 2018, the number of Internet users on the continent increased by 460% (Hootsuite) and almost three-quarters of African online buyers say they have maintained or increased their Internet shopping habits during the ‘past year (Médiamétrie). African digital practices are therefore ahead. In Côte d’Ivoire, almost all water and electricity services are paid by telephone; in Kenya, 50% of financial flows go through telephony, a world record. ”  Perhaps mobile banking is the “, Analysis” Le Moci “, in its special issue on Africa (December 2018). Therefore, recommends BearingPoint, ”  innovating in Africa means offering more disruptive solutions, adapted to people who have access to new technologies without having to meet basic needs”.

Another differentiating element to take into consideration: the local signature. Translating brand names, or even company names, into dialect is what the Eranove group has done for its subsidiaries, an example in more than one way of integrating the continent’s business model and its specificities.

Finally, the development of local competitors entails a new requirement: that of more competitive prices. “  These new players stress BearingPoint in its report“ Une Afrique, des Afriques ”,  are shaking up the competitive landscape, thanks to their in-depth knowledge of the markets (customer needs, infrastructure, economic fabric), but also thanks to price competitiveness which weakens the position of Western players. French companies, notes the consulting firm below, are attached to their qualitative image. Beware, however, not to underestimate the competitiveness of competitors because  “African markets are more oriented by demand than by supply  “!

# 4 Determine a regional organization

To be successful, having the right strategy is not enough. It is still necessary to have an adequate organization to deploy it. Many international groups are still looking for martingale in this area.

Most of the financial holdings of African departments are often outside Africa, whether in Paris, London, Brussels, or even Dubai, to enjoy fiscal and legal stability and guarantee the fluidity of financial flows… On the continent,  “there are two structuring movements, explains Jean-Michel Huet. Some divide Africa into four zones – north, south, east, west -, set up a holding company in one country and a few regional headquarters with multiple skills, from HR to marketing to finance; others prefer to have several regional sub-offices which each group together the skills of the same trade. Abidjan sees himself then specialized in marketing when Nairobi takes care of human resources. ” One, adopted by Atos and Société Générale, or the other, implemented by Allianz, only the future will be able to say which is the most efficient.

# 5 Identify your hub

In any case, having a solid back base is the sine qua non for the establishment and development of any business in Africa. For international groups, it is, therefore, advisable to choose a keystone place with the greatest care to avoid any future disappointment.

Ideally, this city should meet, like Abidjan, Casablanca or Johannesburg, multiple criteria and allow to take advantage of a pool of highly qualified talent to meet recruitment needs, have a fabric of local suppliers, enjoy ” legislation that does not hamper money transfers, be located at a crossroads of transport, especially air, and depend on a politically and fiscally stable country. “The welcome given by local governments to international groups is one of the first criteria for choosing to settle in a country. Without flexibility and intelligence from the local administration, almost nothing will be possible, ” concludes Jean-Michel Huet.