South African Entrepreneurs, jump the rope of FDI!

I still believe, and I am certain that the key to the growth of Africa's economy, is to increase intra-African trade and investment. South-South cooperation is the means by which Africa can overcome underdevelopment; we are still at 20% while Europe is at 85% in terms of intra-FDI (Foreign Direct Investment). Most of the underperformance of economic sectors in Africa, besides telecommunications and finance, is due to their reluctance to engage massively in FDI across the continent. A business development consultancy firm like ours, which specializes in trans-border investments, aims at getting companies, especially SMEs and start-ups, to jump that rope with confidence because the three main obstacles preventing a SME from implementing a cross-border or greenfield investment in another African country are: risk (fear), insufficient knowledge of the market, and the government's regulatory framework.

 

Fear of the unknown leads to staying in your comfort zone when you have the right product, the right skills, and the capital to conquer that new market eagerly awaiting your offer. It is like going on vacation to a foreign country, on a safari in Kenya or South Africa (where there are lions, hyenas, and buffaloes in the bush), but you are so excited about the trip and confident because you already have the assurance that everything will be fine. People have been there before, that's for sure. MTN, UBA, Shoprite, Econet, Ecobank, Dangote, etc. have operations across Africa, but they are multinationals, not SMEs, you might say. Well, Pakistanis can open a stuck shop in Empangeni (KZN/South Africa), so no wonder, a year later, all the stuck shops in the city are theirs. They did market research and a feasibility study like you do, but above all, they saw a demand in a niche market characteristic of African countries.

Business development firms specializing in FDI are like instructors and travel guides who make your trip (investment) enjoyable through their understanding of the country (their know-how of the specific market) in which you are about to enter. African countries, in terms of their business ecosystems, have specificities that are not up to the standards of developed countries. The behaviors of customers toward a product are very surprising, which leads to success beyond expectations when your product has a demand or you create the demand. Ivoiris (which later became Orange Côte d'Ivoire) can attest to it with their success when they entered the GSM market in the 1990s in Côte d'Ivoire. South African SMEs have the potential to conquer any market in Africa. Are they ready to expand beyond their comfort zone (the local market) given the drop in demand and costly business operations due to power outages?

 

A study by Mundell proved that American companies obtained higher returns when they engaged in FDI.

 

Chinese SMEs sell their products in Africa, conquering the primary and medium sectors, but they do not bring their technology to Africa; it stays in China.

 

Is it a South African syndrome to focus on the local market? FNB (First National Bank), the most innovative bank in Africa, proves us right compared to UBA (United Bank for Africa), which is a leading multinational bank in Africa. The economic crisis, which is supposed to encourage companies to explore new horizons to mitigate their losses on the local market, still does not encourage many South African companies to explore new markets, where demand and purchasing power are higher. In Nigeria, Ocean Basket is a high-end restaurant where people line up. Most countries in Sub-Saharan Africa are unfamiliar with franchise businesses; local fast food businesses like Dabali Express in Côte d'Ivoire are an example of the changing demand for what is currently available in South Africa. It is amazing to realize the difference in service when buying a part for a car in South Africa compared to how it is done in other African countries. The business environment and product supply in South Africa are the best in sub-Saharan Africa, but Africa's demand for South African products and services is still on hold due to the current energy crisis, which is believed to be a catalyst to induce South African SMEs to leave their comfort zones. Instead, they decide to shut down their operations, saying, "Let's wait for the return of electricity, then we will reopen our businesses."

Not everyone can be like Naspers or Black Koffi, but you can be like Dangote, UBA, or Davido. When you have conquered Africa, the world will recognize you, starting with your own country. Africa is the future in terms of businesses because of its underdeveloped state and predominantly young population, with most governments trying hard to attract foreign investment.

 

Although politics should be considered when engaging in business in Africa (quite similar in developing countries, e.g., Tik Tok Saga in the US), we have noticed a huge improvement from African governments in their regulatory framework in order to stimulate foreign investment. The investment landscape in most African countries is conducive to foreign investment, sometimes more than local investment. Some still think that what comes from outside is better, but we can call it "umbutu," the culture of welcoming foreigners, which is rooted in African tradition. African countries have state investment agencies that facilitate the registration and implementation of business their operations; in this case, South Africa, Rwanda, Mauritius, the Ivory Coast, Kenya, Morocco, etc. are excellent examples to follow.

I can cite two examples of successful SMEs with South African products. After working for a car tracking system company in West Africa, a lady decided to start her own business selling tracking systems. When it was suggested to her to source from South Africa, a first order of 1 million rand was placed, and her stock lasted for three months.

A farmer contacted us about chicken feed from South Africa. His first order lasted 2 months because he had to share it with his business partner, who was amazed at the size and growth time of the chicken.

We have records of successful businesses in media outlets, security device systems, wine export, construction equipment, mining materials, etc.

What an amazing feeling I had while promoting South African products in Cote d'Ivoire due to my university friend's (now advisor in cabinet) reaction when I told him there is a bank in South Africa with no fees and no branches called "Bank Zero" and you can open your account just like you do with "Binance." His immediate concern was, "Are they willing to come to Côte d'Ivoire?" These are just a few of many examples of how Africa is waiting for South African companies to take over, sitting at the same table in the BRICS with China, India, and Russia. Therefore, I have no hesitation in proposing the technology of small modular nuclear energy to two West African governments, as the owner of the company, Dr. Dudley, clarified that there is no financial requirement from the African government willing to receive the project, only to provide the land for the site; this is the level of what South Africa can offer Africa.

 

I believe in intra-African trade and investment, so I am always overwhelmed when I see entrepreneurs from all over Africa come to South Africa to research and source new products for their local markets. This is how Africa can win the fight against poverty and underdevelopment. It is more expensive to travel through Africa than to fly to Europe. The freight industry in Africa is expensive due to low trade between African countries.

The need to encourage SMEs and start-ups to embark on the exploration of their own continent and make money has motivated my company, "Maison Catalogue." "We realized that if we can break the reluctance of companies and entrepreneurs to explore another African market, as we are certain of our knowledge of this part of Africa and African governments' efforts to create a better investment landscape for foreign investments (e.g., the bilateral visits of Presidents Ouattarra and Ramaphosa in their respective countries), then any business venture can thrive anywhere in Africa—FDI is not just for multinationals."

 

I am grateful to the French for their spirit of "tourism entrepreneurship," from which I draw my inspiration. Jérôme M. left France with 10,000 euros for Côte d'Ivoire on holiday, then set up an import/export business that he transformed into a successful company. As Africans, we must not be stuck within our borders when it comes to our continent. We will be amazed at how you can make a difference anywhere in Africa and still be successful in business. Your future success story in Africa may be outside your country; jump the rope!

 

 

Marius C. Oula