Business in Africa as we know it is fraught
with its peculiar challenges and an air of uncertainty by reason of several
inherent challenges including infrastructural,
educational, power problems, security, health, and the list goes on.
The global perception is partly that of gloom and also that of boom the more favouring the gloomy picture. Interestingly, while Europe and the Americas have been pretty reluctant with making significant investments in the continent, China and other Asian countries have been rather aggressive with their partnerships and investments in Africa over the past three years.
The global perception is partly that of gloom and also that of boom the more favouring the gloomy picture. Interestingly, while Europe and the Americas have been pretty reluctant with making significant investments in the continent, China and other Asian countries have been rather aggressive with their partnerships and investments in Africa over the past three years.
The fact
still remains that these businesses when they do eventually set up shop in
Africa, they come face to face with the realities of the African business
climate that a lot of times they did not anticipate or perhaps were not
properly prepared for. Over the past decade and longer, several multinational
companies that previously had interests and physical presence in Africa have
gradually faded away from the scene due to several reasons.
In my interactions with multinational companies
I have observed some mistakes that multinational companies in Africa most often
make when doing business that sometimes even leads to the collapse of the
business even when they are still very profitable and show potential for
growth. I came up with a list of seven mistakes and suggestions on possible
solutions multinationals still doing business in Africa or intending to
penetrate the African market can use to beat the odds and even compete
favourably with local competitors. Though my list is not exhaustive, I believe
it can however serve as a background checklist.
I highlighted seven of these mistakes to
include:
1.
Too much Focus of energies and resources
on the wrong things:
A lot of multinationals pride themselves
in certain activities and traditions that do not really translate into
increased revenue for them, and which they do not realize are actually
detrimental to their profitability when operating in Africa. Some of these
activities include conferences, advertising and brand promotion, trainings,
luxury parties, etc. the point here is that rather than focusing excessively
on all of these activities which do not directly or necessarily affect the bottom-line,
rather companies should channel these resources at activities that will drive
productivity and profitability of the business such as
2.
Poor Management:
A lot of times, some
multinational companies in a bid to hire highly qualified employees, they tend
to focus on academic and paper qualifications relegating experience and proven
performance. It is a very cool thing for corporate organizations to show off
their employees sporting posh credentials and being trained in big named
institutions and facilities. This does not necessarily mean that the
employee(s) are delivering on the results and
often times as a result of
incompetence and poor management it reflects in their low bottom-line and poor
turnover.
3.
Elitism & Profiteering:
A number of multinationals penetrate the
African market with the hopes of profiteering and taking advantage of the vast
population and vast resources of the continent for their gain. Some even go the
extent of making or limiting their products and services to certain classes of
individuals (mostly the high income earners) either by way of pricing or
perception. As such, their products and services are believed to be meant only
for certain elite groups. The fact remains
that a larger percentage of the population on the continent are low income
earners and it falls to reason that companies wishing to be and remain
profitable on this terrain must strive to always keep their products and
services affordable to the larger population.
4.
Lack of Flexibility & Adaptability:
It is very easy for companies to run their
business operations in Africa as though they were in Europe or America without
taking into consideration the peculiarities and uniqueness of the African
business terrain. They make the mistake of “copying and pasting” the business
operational models which they used in their foreign operations in their African
businesses and as such they face the challenge of their systems not being
workable and very rigid and unable to adapt to the realities of the market due
to lack of flexibility. Multinationals should adapt and adjust their business
models and operations to suit the African business climate in order to be and
stay profitable.
5.
Negative Government Policies:
It is a sad reality that more often than
not, some negative government policies stand in the way of the productivity,
profitability and expansion of companies and business in general in Africa.
Some of these policies may sometimes relate to land use, taxation, employee policies,
regulatory policies, etc. These things stifle growth and productivity not only
for multinational companies but also for local companies as well as they also
face the same or similar challenges and shoulder similar burdens. If African
governments will be more responsive and forward-thinking, their policies would
be targeted at encouraging industrial and commercial development and would see
the birthing of new industries and enterprises as well as the influx of the
much needed “foreign investment” creating the much needed jobs and expanding
their economies.
6.
Lack of Thorough Territory Grasp:
When most multinational companies intend
penetrating an African country, typically not much feasibility study is done
internally, most of the feasibility is outsourced to big name consulting
firms–most of the time overseas based–who churn out figures and statistics that
say whether or not their business would be successful in the terrain. As a result of them not having first hand,
thorough, in-depth, realistic and factual knowledge of the business terrain in
the territory they choose to operate in, when they do eventually begin
business, it is not long before certain unexpected and unforeseen issues,
expenses, challenges and realities present themselves and since they were not
adequately prepared for these, they fold up. Multinationals need to carry out
proper, thorough feasibility studies; where they need to outsource this to
consulting firms, it is advisable to consult reputable local firms with wide
reach and sufficient information.
7.
Corruption:
It is a known fact
that poverty is a very real problem in Africa. It is not unusual to find that a
number of local employees see working for these big reputable companies as an
opportunity to loot/steal funds from them. This makes the multinationals lose
credibility in local employees and prefer hiring expatriates over them and
still placing strict constraints on their local employees in an effort to curb
corrupt practices and limit misappropriation. However, the fact is that where
there is sufficient financial motivation and incentives for employees, the
tendency for them to engage in fraudulent, corrupt or unethical practices is
very much unlikely. The reality is that some multinationals in an effort to
stay profitable and competitive tend to underpay their staff compared to global
and industry standards. As such the tendency for corruption and sharp practices
is very high.
Written by Precious Nwanganga © 2013
Email him on buzzfizzle@gmail.com
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