Know your market

Craig Hook, outsourcing partner at Ernst & Young South Africa, and David Purnell, technology partner at Ernst & Young South Africa.

Africa is a developing market that presents enormous opportunity for financial gain both to foreign corporates and to entrepreneurs within Africa.

Pitfalls for new entrants include a lack of understanding of the environmental conditions, political stability and strategies, technological development, financial culture and legislative requirements.

For example, the vast majority of people in Sudan need food and shelter rather than mobile phones and in Nigeria it takes up to 400 days to obtain a business licence as you "progress" through 16 procedures.

Some countries may not have adequate transport infrastructure to ensure the mobility of service providers and in each country there are different levels of and "tolerance" towards corruption.

Infrastructure

Infrastructural development is not at the level that UK-based organisations are generally accustomed to – accordingly a degree of unexpected inefficiency may arise.

Fixed-line telecommunications infrastructure in most African countries is bad. Mobile operators will need to provide power and security for base stations, and make their own arrangements for back haul capacity. Up-front investment to establish capacity will be high, but most mobile operators are now making money.

To overcome these pitfalls you need an in-depth understanding of the country supported by a comprehensive business plan with a focus on all aspects including:

• the business environment including upstream suppliers and customer base
• the financial implications including accessibility to finance;
  a detailed marketing plan incorporating the size of the market and marketing strategies.

It is essential to develop alliances with local businesses and to thoroughly understand market forces and market drivers.

Making contacts