Africa is a diverse and demanding continent on which to do business—but it can hold immense rewards for those companies that get it right. With some 54 countries and an estimated 800 million people—or nearly a seventh of the world’s total population—Africa is a highly attractive prospect for business growth. Because most countries on the continent suffer from a low level of development and are home to relatively immature markets, the potential for growth is enormous.
One of the major success stories in recent years in terms of telephony has been the massive adoption of cellular communication. Introduced in 1994 in South Africa—considered the "California of Africa" having the continent’s leading Gross Domestic Product and most developed infrastructure—cellular telephony has enjoyed unprecedented adoption. Today, the three operators active in the market have an estimated combined client base of 20 million users. The total number of fixed lines, by contrast, numbered an estimated 5 million in 2002 and has not grown by any substance since then.
The staggering success of GSM communications has been achieved across Africa; in total, the continent has an estimated 62 million users (according to www.cellular.co.za), and continued growth is anticipated as networks continue to be rolled out.
However, the notable challenge facing companies doing business in this—and other—markets includes the reality that Africans in most territories suffer from extreme poverty. Specific to the cellular industry, that results in very low average revenue per user (ARPU). This demands that successful operators generate their revenue from high-volume, low profit transactions. But with a penetration rate of almost 8 percent across the entire continent, the successful operator stands to make substantial profits.
Market dynamics
The reality of doing business in these environments is that operators have unique market dynamics that must be dealt with. They face the constant challenge of churn. Customers have options—and usually several SIM (subscriber identity module) cards that are used carefully in accordance with the lowest available rates.
There is also the further enormous challenge of language. While there are some cases of a lingua franca—such as Swahili in much of East Africa and French in parts of West Africa—there is a seemingly endless number of regional dialects in many countries. The Democratic Republic of the Congo, for example, has more than 200 ethnic groups; Uganda’s 28 million people speak a variety of different languages ranging from English and Swahili to variations of Niger-Congo and Nilo-Saharan languages and Arabic; and Cameroonians use 24 different African language groups in addition to English and French.
This reality demands a very different approach to volume customer management than that of single-language European or U.S. markets.
And while telecommunications serves as a ready example of the demand for infrastructure and services in Africa, there are overarching realities that any business tackling markets on the continent must consider. The World Bank indicates that most people in Africa earn a gross national income (GNI) of less than $765 (in U.S. dollars) per year.
The low level of infrastructure in Africa is, perhaps, best demonstrated by a quick overview of some of the countries. At the poorest end of the scale is the central African state of Burundi, with a GNI of $90 per person. Its economy is dominated by agriculture, with 93.6 percent of the workforce occupied in this sector, while industry accounts for 2.3 percent and services, 4.1 percent, according to the CIA World Factbook. Western Africa’s Gabon is considered a middle-income country, with per-capita income four times that of most sub-Saharan countries. However, its labor force is concentrated in agriculture (60 percent) with 15 percent in industry and 25 percent in services.
Other significant problems in Africa include the widespread prevalence of disease, poor accessibility with little in the way or rail, road and air infrastructure—and political upheaval and the associated risks.
Clearly, then, business in Africa is not for nerds. But that low level of development delivers one thing that the safe markets of Europe and America cannot: the potential for enormous growth off a low base. And another vital consideration for companies seeking to do business in Africa is that, while the people may be poor, they are not unsophisticated or averse to the introduction of technology-powered services.
A sterling example of how astute companies can generate profits in Africa while delivering a service that adds value to people can be found in Senegal—again, in the telecommunications industry. This tiny country is positioned on the northwest coast of Africa; with a low level of development, the majority of the workforce is occupied with agriculture (77 percent). Notable, however, is the willingness of this workforce to adopt and use technology and services that have not been successful in developed markets, such as wireless application protocol (WAP). Also notable has been the ability of an astute organization to deliver a technology-enabled service that creates value for the user.
A company called Manobi has applied the technology to give market traders in the agrarian industry a facility to assess prices before they travel to market to sell their goods. Despite the fact that most of these farmers and traders are subsistence operations, they perceive significant value in the service, given that prices are subject to fluctuation and knowing the best time to make the journey to sell gives them the opportunity to benefit from improved profits.
Africa is paradoxically daunting and yet alluring; across its diverse territories, great potential exists for a wide range of businesses and it is, in many ways, an entrepreneur’s dream. With advanced intelligence and astute business models, it is possible to tap into enormous value by delivering services that people need. But the application of customer management is likely to be fundamentally different in Africa when compared to the developed world.
