Understanding the African market: key lessons
- Last updated: November 1, 2024
As globalisation spreads, it becomes harder and harder to conceive that your approach to business — which may have conquered some of the toughest markets — may not work everywhere. Yet, if you are looking to expand to Africa, your typical “plug-and-play” approaches will serve you poorly. There, the business landscape is not only different – it is actually unique to each African country on the continent. All 52 of them.
The key, therefore, to a successful expansion on such a promising continent is understanding how African markets and bureaucracies work – and how you can make the most of the advantages they offer.
1. Each African country is different
Africa is no monolith: no two African countries are exactly alike. Even countries in the same region can vary greatly from one another. Take Senegal and Nigeria, for instance. While they are neighbours and are both Western African countries, they are extremely different. Since Senegal was colonised by France, the culture, language, and labour law among other things, bear a distinct French heritage. The labour law, for instance, tends to involve more employer contributions than the labour law in neighbouring Nigeria – which was colonised by the British empire and so has a more British influence in terms of worker and employer rights.
Senegalese and Nigerian culture are also distinct. Nigeria is renowned for its local movie scene, known as Nollywood. This has a significant cultural impact, shaping the local market and carving interests that locals gravitate around. Such knowledge is key to success when expanding to the country, because understanding shapes investor decisions and helps you to build more relevant offers.
2. Understanding the country's abilities, resources, and regulatory approach
All African countries do not offer the same opportunities for business. Some African nations are rich in natural resources like gold, crude oil, diamonds and cocoa while others possess natural resources that may not be so ardently sought-after. However, a country possessing these natural resources does not necessarily mean that you, as an investor, will be able to easily tap into them. There are several reasons behind this, mainly how developed the local infrastructure is and how easy it is to do business in the country. Just because a country has abundant natural resources does not mean that there will be a straightforward path to success. In fact, the opposite may sometimes be true.
In Mauritius for example, beyond the real estate market, natural resources aren’t necessarily plentiful or heavily relied upon. In fact, in 2023, agriculture, forestry, and fishing only made up 3.838 % of GDP, according to the World Bank collection of development indicators.
One might think that this would make the country less attractive to investors, but that is not the case. Because Mauritius has a highly-developed financial services market and is the #1 African country for ease of doing business in Africa (a ranking which accounts for ease of setting up a business, obtaining permits, and electricity coverage among other things), this offsets the fact that it is not as rich in natural resources as other countries like Ghana, known as the “Land of Gold” or Angola and Nigeria, the continent’s top oil producers.
Conversely, this does not mean that the latter countries are not worth expanding to. It all depends on what your goals as an investor are. Whichever they may be, knowing what a country’s natural resources are, how easily accessible they are and understanding the local economy, infrastructure and regulatory approach are key to a successful African expansion.
3. Maintaining good relationships
In Africa, doing business goes hand-in-hand with maintaining good relationships with people.
“You have to build relationships with people in these democracies. Africa is not, generally speaking, a place you can […] walk in, be all business, and walk out.” Reminds Nana Frimpong, Chief Operating Officer at Social Impact Inc., and member of the Africa HR Solutions Advisory Committee.
“A lot of times and in specific countries, building a relationship, building some level of rapport with the people that are helping you can be the 180° difference between having your paper sit at the bottom of a pile somewhere to just having it move along the process as smoothly as possible.”
Because many bureaucratic processes are still done manually, there is a considerable human contact aspect to consider when expanding to Africa. A friendly exchange with the people in charge could make all the difference between a process being expedited and it taking weeks, or even months to be completed.
But these relationships are usually forged over time, so how can a newcomer to the continent build this kind of goodwill with relevant contact people in Africa?
Choose an established African EOR
Building trust and relationships takes time, which is a luxury when you are looking to expand to an African country. But when you work with a well-established African Employer of Record (EOR) like Africa HR Solutions, you automatically benefit from the relationships and goodwill we have cultivated over time, across 46+ African countries. Because we are local experts, we understand the ins and outs of bureaucratic processes: we know when and where to keep pushing to ensure that your administrative procedures are seen through as quickly as possible.
Looking for more information about our EOR offers, and how they can support your expansion in Africa? Find all the explanations you need here.
4. Local talent
How will you fuel your activities once you have expanded? Having a deep understanding of your labour needs is important when expanding to Africa – so that you can more effectively source talent. In some industries, for instance, talent may even be a more important consideration than natural resources. As such, you should ensure that the country you are planning to expand to can support your labour needs in terms of skills, education, and even linguistic abilities (especially important if you plan to do business internationally from Africa). Once more, knowing the particular African country you wish to expand to is key to success. If you have a need for both English and French-speaking personnel, for instance, Mauritius would be a good choice, and Cameroon may also fit your needs. But if you were to consider Ghana while having a need for French speakers, the endeavour would be more difficult.
Looking to expand to Africa without all the trouble?
Africa HR Solutions simplifies the expansion process for you through our Employer of Record offer. We take on all the responsibilities of employee onboarding, compliance with local law, and payroll, among other things, for you. No need to manage pesky administrative issues: our experienced local teams will happily do it for you, leaving you to focus on your core business.
Looking to learn more about how Africa HR Solutions can help you? Chat with one of our team members.