Expanding South African business into Africa
07 April 2016
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Hello and welcome to another edition of Old Mutual Live Business, my name is Chris Gibbons. In this edition we examine the question of whether or not South African businesses should expand northwards into Africa and how to evaluate the opportunities that may or may not exist. Not just in our neighbouring countries, but perhaps slightly further afield. We’re joined now by an expert in this field, Dr Tendai Mhizha who is a faculty lecturer at GIBS, one of South Africa’s top business schools, CEO of Research Bureau International and Integra, a Pan African Strategy Consultant.
Tendai, welcome to Old Mutual Live Business, thanks for joining us. First off, do any opportunities still exist? I was under the impression that most of the big players at least had already staked their claims like Shoprite and MTN for example, what’s your view?
There are still plenty of opportunities out there
Tendai Mhizha: My view is that there’s still a lot of pie left out there. The South African market as we look at it is pretty saturated in many of the category areas. If you look at the less developed markets, north of the Limpopo, you find there’s still a lot of opportunity out there. It’s just a matter of how you look at it.
NG: Okay, so maybe I’m not an MTN, perhaps something more middle of the road, but still a good company with good products, making some money here in South Africa. How would I go about evaluating opportunities further north?
TM: Okay, I think the first place I would start is by actually realising that we do need to invest in market research. There are quite a lot of market research open public domain documents which are available and many people don’t want to put the investment in.
As long as you’re prepared to invest in that information, gone are the days of looking at macroeconomic indicators to evaluate markets. Like GDP per capita and things like that. It really is in the granularity of understanding the consumer and understanding the local market norms. Where you actually find those gaps and those opportunities.
How do South African businesses perceive the rest of Africa?
NG: Are we still making the big mistake, the classic mistake of thinking Africa generically, Africa is a country, oh no, hang on, Africa is not a country is it?
TM: It’s not a country! No, I think we are still making that mistake. You know, we look across and say, well, we need to find new markets, let’s go into Africa. The question today is into Africa or not. Not all African markets are worthwhile going into.
It’s a case of actually looking for your particular product or category, at what’s happening in the marketplace and discerning carefully which market to choose. There’s also tools like the Pan African Living Standard Measures that one could use to actually get a little bit more information about markets. How they consume media, how products are consumed as well.
NG: Were you involved in developing the Living Standard Measurement?
TM: Yes, I was, I’m actually the author of them, it was my PhD subject. But I collaborated with many people in designing that Living Standard Measure. It runs from 1-17 and it compares apples with apples across the sub-Saharan Africa.
NG: When I read that, I was surprised to note that it didn’t exist before.
TM: That was the reason, I was actually at a conference in Mauritius for the Pan African Media Research Organisation, PAMRO and kept on being asked: what is the equivalent of the South African LSM in Nigeria LSM 10? I kept saying, there isn’t one because it’s based on different variables. At that moment I decided, I’m going to do that as my PhD subject, I’m going to create a tool.
Pin pointing your market
NG: If I take a look at an African country or perhaps a region, East Africa, within that Kenya. That’s the tool that will allow me to dig down and really slice and dice or as you term it, the granularity of the various markets.
TM: Absolutely. It gives you already a view of the landscape and it also helps you to forecast volumes. To forecast where there’s an adequate market for you to invest in. Sometimes you look at a country that has a larger GDP per capita, like an Angola, for example. But all the money, the huge disproportionate distribution of wealth. So all that money is actually sitting at the top. When you look for middle market product, there isn’t one.
NG: One key factor that I think needs emphasizing and that is language. Language is so important, there’s not just English spoken in Africa.
TM: Yeah, absolutely and I think that’s something that we have to, it talks to the commitment of an organisation that wants to go out of the continent. When you have ourselves, like taking SAB, taking Castle Lager out to Germany, we’re not going to do the advert in English are we? It’s the same principle.
I think it’s just a lot more costly to work in local languages. You know, we’re talking about languages as in different dialects. But it’s just, the English language itself. What kind of colloquialisms you use when you’re in a particular market that talk to the local consumers. It’s completely off-putting when something doesn’t sound like something that they can relate to.
NG: Of course then there’s French and Portuguese.
TM: Absolutely and a little bit of Spanish somewhere there.
Get stuck into your market yourself
NG: Indeed there is, you’re quite right. So there’s no substitute Tendai, for actually getting onto a plane, going there to see for yourself is there?
TM: There isn’t. You can’t do an ivory tower approach because the market is so different from anything that you know. Each market is completely distinct. You see it, when you drive across a border, say from Zimbabwe to Botswana, it’s like a line is drawn.
The minute you cross that line, everything looks and feels different. It’s almost difficult to explain that. But there’s nothing like getting out there into the market and talking to people. Talking and talking and asking questions and being prepared to listen to the answers.
NG: I was reading a story a couple of months back of one of Africa’s youngest billionaires, Ashish Thakkar who did just that. He got on an airplane, armed with a suitcase full of samples, month after month, country after country. He’s built the Mara Group into something absolutely enormous.
But this is the point, he also made sure that he was doing something different. In his instance, he was giving Nigerian computer resellers credit when no one else would, for example. That’s a business basic, if you’re not doing something different, stay at home.
TM: Exactly. I love what Ashish did and one of the things that interests me about Ashish’s business, the Mara Group, is that they’re so diversified. He’s operating in so many different areas from seller telephony to different things, mostly in the tech world. But in other areas as well. The idea of being interested in smaller markets for different things is very important. Then looking at the cumulative of those across different markets. That’s an interesting idea.
Where you should start
NG: Now, someone listening to this podcast, this conversation Tendai, sits back and says, gee, I thought it was going to be simple. All I do is load a truck and point it north. You guys have convinced me that this is really much more complicated than I had ever dreamt of, where do I start?
TM: Where I would start would be getting on a plane, even before I looked at any data. It would be getting on a plane and just feeling a market. Getting a feel for your product, for your category, for your services. Once you’ve done that, then starting to have a look at what are the hard figures. The different indicators that you can look at.
But back to the same thing about being there, being in market and talking to the people who are there and also talking to the regulators. Oftentimes we only look at the consumer side, but most of the African countries, regulators are quite open to having people come and visit their office. Try to understand what it takes to do business within their countries.
NG: Excellent advice there from Dr Tendai Mhizha, faculty lecturer at GIBS, one of South Africa’s top business schools, CEO of Research Bureau International and Integra, a Pan African Strategy Consultant. Tendai, thank you for being with me on Old Mutual Live Business.
TM: Thank you so much Chris.