Trading with Africa: one size doesn’t fit all

 

In the second part of our interview, Stewart MacRae, Regional Managing Director (Russia, Emerging Europe, Middle East, Africa & Turkey) at international spirits company Edrington, offers guidance on operating in Africa and shares what other businesses might learn from his experience. Read the first part of our interview with Stewart on emerging markets here.

One size doesn’t fit all

Africa is often thought of as a single place, but differences in the individual countries are huge. Comprising of 54 independent countries and with a population of more than 1bn, its diversity offers both opportunities and challenges in equal measure.

I’ve heard people say, “Well it's Africa”. In reality, Africa’s 54 individual countries have over 1,000 different tongues. There’s Portuguese, English and French, and that’s just languages – there are regional dialects on top of those to consider. The cultural nuances of each individual market you work in also means that local partners become incredibly important, as they can help you navigate the peculiarities of each area.

Man On Bridge

Tailor your business model

There are huge differences between individual African economies too. Your business will have to be flexible. Take infrastructure, for example; there are places where you’ll be surprised at how high-quality the road system is. This is because the Chinese have invested heavily in road infrastructure necessary for supporting mineral extraction.

However, as you get deeper into the continent, the quality of the infrastructure reduces, which can pose a challenge for distribution and the movement of people. We get around these challenges by going from a truck, to a van, to a car, until we're down to what we call ‘runners’; people on motorbikes with maybe half a dozen bottles to deliver to the end stores.

Your business will need to assess whether various distribution methods would be economical, and how you might transport high-value goods without the aid of more structured vehicles.

With regards to soft infrastructure, such as communications, African countries have taken a very different approach to the West. Nigeria, for example, has essentially bypassed the landline communications stage and moved straight to mobile. When you go to Nairobi in Kenya, everybody does their banking on a mobile phone through M-PESA, so they’ve gone one further and skipped the stage of physical banks and fixed line telecoms. Far from being ‘emerging’, they're actually miles ahead of the UK in that respect.

"Although it can pose issues, the vastness of Africa and the diversity of the countries within it can be a real strength."

African village

Managing the ups and downs

The other big challenge we’ve faced in Africa is economic volatility. You enter markets in Nigeria, Angola and Mozambique and you're really excited, things are going really well, the economy's growing strongly, our Famous Grouse brand is on fire and then suddenly the oil price halves, the currency devalues by 400% and your product that was costing $10 now costs $50 and nobody's there to buy it.

In that situation, we take the long view and look for the future opportunities. Sub-Saharan Africa is one of the fastest growing regions in the world; Nigeria alone is adding the population of Scotland every year, so things will always turn around eventually. When it does you want your brand to be in a stronger position.

We're lucky that we work with very good partners who we trust to help us get through the downturns, and we've managed this without exception in all these markets.

Seeing the good through the bad

Although it can pose issues, the vastness of Africa and the diversity of the countries within it can be a real strength. When Nigeria, Angola and Mozambique became difficult, we focused our attention much more onto East Africa; Kenya, in particular. As an oil-importing service driven economy, when the oil price goes down, people's disposal income actually goes up as less is spent on fuel and heating for example.

That is perhaps the key to understanding the African market. Things happen that you can’t plan for but if you're used to dealing with emerging markets it’s just daily life. There are always challenges, but where there's a challenge there's an opportunity; make sure that you are close to it, that you understand it and that you act on it very quickly.

Man On Bridge

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