AFRICA: Open for Business in Africa
Recent Gauteng Business News
Africa has a population of one billion potential new consumers set to more than double by 2050 and consumer spending is expected to hit US$1.4 trillion by 2020. However, Africa attracts only five percent of world foreign direct investment.
Sian Browne, Africa Supply Chain lead at Ernst and Young, says companies are also attracted by the potential lower costs in areas such as land, equipment and labour.
Many international brands are already established in Southern Africa with some using these operations as springboards.
“South African companies are also spreading into Africa in search of more consumers,” Browne says.
However, she says companies entering the Africa market will confront major supply chain challenges unlike any they may have experienced in more developed markets.
“Many companies in particular those with perishable goods, that have time sensitive supply chains have difficulty understanding some of the issues with border crossings in Africa, both in respect of infrastructure, and bureaucracy ” Browne says.
She says establishing partnerships with third party distribution and logistics companies and leveraging off their existing capacity and experience is important
“All these issues need to be built into the operational blueprint so organisations can determine their inventory levels and adjust their pricing accordingly,” Browne says.
Business in Africa Differs Greatly from Country to Country
Further, she points out that tax and regulatory frameworks in Africa tend to be very different from one jurisdiction to another; unlike for companies operating in markets such as the European Union where there is greater uniformity.
“Officially corruption is not the way of doing business but is another market reality. Companies must set out clear anti-corruption policies and establish governance structures so they can monitor, detect and stamp out any such activities within their organisations as well as their supplier base,” Browne says.
She says companies also need to consider making the best use of local suppliers as organisations that use domestic suppliers are viewed in a positive light.
In addition to taking more care when selecting suppliers, a further sign of the growing maturity of the market is that there is more emphasis on managing suppliers instead of being managed by them.
The Environment Key for Business in Africa
Environmental and sustainability issues also need to be at the forefront of supply chain planning.
“The supply chain’s ability to reduce its environment impact is an important consideration and means putting in place robust recycling programmes and including external suppliers within these structures,” Browne says.
One of the major lessons existing operators have learned is the extent of the skills challenge in Africa “In the supply chain context, while a number of local universities and tertiary institutions provide supply chain and logistics training, companies are competing for a limited pool of qualified and experienced personnel. “Therefore, it is necessary to have a real commitment to employee development to create a sustainable skills base,” Browne says.
She says companies are also moving beyond picking the low hanging fruit in Africa and working to open up new revenue streams.
“Companies established for business in Africa have a massive opportunity to extend their market share and utilise local market knowledge to open up new opportunities,” Browne says.
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