Rough Seas

 

With Sub-Saharan Africa’s collective Gross Domestic Product having quadrupled over the past fifteen years – to over £1 trillion – it’s no surprise that a raft of well-known Western companies are increasingly diving in for a piece.

The standard model is simple. A local population, allegedly desperate to mimic their European and North American counterparts, would be willing to pay grossly inflated prices, for the privilege in markets with little domestic competition.

However, a recent study by Boston Consulting Group suggests differently. While Western companies are making money, the crucial point is that they are losing market share to the underestimated local competition.

According to BCG, the local companies have several key advantages including superior market knowledge, which enables them to design and deliver products specifically for local tastes. Additionally the local companies will have more efficient distribution channels, which help them to price competitively. In other words, they are simply better at business.

But hold the palm wine. One standard piece of advice for the foreigners is to simply wait. The play book usually notes that many of the most successful Sub-Saharan enterprises, are family-owned, family-run, and rarely survive into the second generation. The late Nigerian commercial genius Moshood Kasjimawo Abiola is often cited. At one point he owned and ran an airline, newspapers, real estate, fisheries and retail outlets, and was reported to be the richest man on the continent.

Unfortunately his business empire effectively passed away with him in 1998. But that narrative is challenged by several multi-generational conglomerates, such as Dantata and Ibru in Nigeria and Bahkresa in Tanzania. In addition, more modern enterprises have wasted no time in listing with local stock markets, and forming strategic alliances up and down the value chain in order to protect their turf, often with government approval and support. Game on.

 

Twitter: @marshanalytics

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