The challenges of doing business in Africa

As we continue sharing with you the ins and outs of doing business in Africa, Shelley Galliver, Dawn International’s marketing and business development director, shares with us the challenges Dawn has faced in the course of its work in the African continent, and how to overcome them.

What are the main challenges associated with doing business in Africa?
Each African country poses different challenges that you may not have encountered before. However there are some ‘usual suspects’ that come with the territory:
• Corruption is rife in many countries and as a listed business; we operate in an ethical manner. This often means we end up landing product in country, more expensive than people who don’t follow the rules. Or loose big contracts due to unscrupulous tender processes. 
• The inspections and export documentation becomes more cumbersome all the time, and again rules for each country are different. Getting trucks through some of the borders can also pose a challenge.
• Logistically, once product is in country, it is very hard to bring it back. So you need to be 100% sure what you are buying for that country, will definitely sell and sell fast; turnaround times on stock is critical.
• Staff is always a challenge, to find good people, who fit your culture in the business. And then once you have good people – the challenge becomes to keep them. Also if you use a local to head up the business, ensure you have good auditing and business processes to control the business. And if you use a South African, you are paying ex-pat salaries, housing, cars etc. which is a huge cost.
• Single commodity economies are a real challenge, as when times are good, it is a great place to have a business, but when the economy turns as we have seen in the past year; the fall of the oil price, the drop in the copper price; these countries become extremely difficult places to trade and finding sales becomes difficult. And with existing business and overhead structures in place, it becomes hard to sustain branches in this environment.
• Currency availability then also becomes a big issue; being able to pay your suppliers in SA when there is no currency on the ground. It means the banks don’t release the funds etc.
• Power and water issues: all our branches have had to spend money putting alternative energy in, as the power is unreliable. However the cost of running generators when fuel is expensive is also a huge cost to the business. Water is also an issue in most places, often being without water.
• Culture: every country has an ingrained culture and it translates into products and services. Sometimes this works in your favour as a supplier of South African manufactured goods and sometimes it doesn’t.
• Politics: in election years in African countries; this often causes an unsettled business environment, and spending becomes limited. Political tensions can make business very hard.
• Financial systems: having top class financial systems that can adjust to the local countries requirements (tax and currency), take into account currency rate changes on good purchased, but still consolidate up at group level. Also having the system support in country is often key.

How can these challenges be overcome?
Many of these challenges can’t be ‘overcome’ in a sense that they are out of your direct control. All you can do is make good calculated decisions about what countries you have a presence in, and how large that presence is. What products you stock and how much you invest in that stock on the ground. Employ the right people, as the wrong people can cause more damage than anything. Know the country well before setting up and understand the various cultures and needs of the end consumer. Understand whether the brands have power in that country or not, and what your margins will look like. The key in Africa is to understand all the challenges and complexities of each market and each country and then make an informed decision on whether a local presence is worth the investment.