Archive for the ‘Distribution’ Category

Mirror-Mirror, Who am I? The rise of African doll brands that empower Black girls

During the past few years, people of color all over the world have started challenging their absence in a positive light in the media, entertainment, books and toys. Black people, and Africans more specifically, feel invisible or highly under represented. The lack of visibility has severe effects on image, self esteem and success.

Experts say that self confidence starts at an early age. The images, words and overall culture we expose young minds to have a long term influence on the trajectory of their lives.  Who best than people of color themselves to produce and create articles that celebrate them and put them in the best light?

Several Africans, men and women, are active in the business of creating dolls or barbies that African girls can identify with through different skin tones, body shapes, hair texture or different outfits representative of various cultures. These dolls are mostly assembled in China, produced in low quantities and generally sold locally.

So far, five brands are emerging in both francophone and anglophone Africa:

Queens of Africa Dolls (Nigeria): The dolls and materials are designed, through fun and engaging materials, to subconsciously promote African heritage. Queens of Africa celebrates being an African girl in the 21st century by drawing on the strengths and achievements of ancestors and bring them up to date to empower and inspire today’s generation of African girls.

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Momppy Mpoppy Dolls (South Africa): Fashion forward with an afro, the doll seeks to be a trendy and attractive alternative to Barbie for girls of African descent.

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Sarama Dolls (Côte d’Ivoire): Dolls dressed in traditional Ivorian gear, they celebrate various cultures in Côte d’Ivoire.

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Naima Dolls (Côte d’Ivoire): A mix of dolls and barbies, with different shades of brown, hairstyles and outfits (modern and traditional) that exist in baby, male and female versions.
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Nubia Kemiat (Cameroun): The doll with natural hair is a cultural story teller that narrates tales in Africa and throughout the world.
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Local entrepreneurs are partnering with (department) stores or e-commerce sites to ensure greater distribution across the country and increasingly all through the world. Although, the middle class is  enthusiastic about such empowering cultural products, prices and availability remain barriers that brands need to address to develop mainstream products.

Japan’s Indian Strategy for the African Consumer Market

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One of the most high-profile events Kenya has hosted since independence begins this week when heads of state from across Africa and the Prime Minister of Japan Mr Shinzo Abe jet in for the Tokyo International Conference on Africa Development (TICAD). It will be the first time that Ticad has been held outside Japan and it is an honour to Kenya to have been picked to host this event. ~ Daily Nation editorial

The Nikkei Asian Review has been preparing for days with longform articles on the African consumer market, and other opportunities for Asian businesses. While Indian B2C investments have been closely analysed (and embraced), it is clear that the East Asians are eyeing each other as their closest competitors.

Africa was once dominated by Western investors, due to ties forged in colonial times. But Chinese companies have muscled their way in, and Indian, Japanese and South Korean players are arriving and thriving. This intense competition is no longer just about extracting minerals and materials. It is about tapping the next big consumer market.

Their articles are well researched and provide ample insights for businesses contemplating these new markets. Here are some highlights that caught my eye:

Vivek Karve has a clear picture of the ideal African market. The chief financial officer of India’s Marico, a maker of hair and body care products and other fast-moving consumer goods, said his company targets countries with “per capita GDP under $5,000, many mom-and-pop shops, low penetration of multinationals and political stability.”

There’s little handwringing over lack of data or missing middle class metrics. Inadequate infrastructure and informal retail in Africa is no different for your average Indian FMCG brand than their domestic market, thus the concept of the ideal market being one full of little mom and pop shops.

Marico’s strategy for achieving that includes promoting local brands familiar to African consumers, rather than pushing products that are popular in India. It uses multiple distributors to cushion itself against credit risks.

The Japanese, having already faced off with the Koreans in India’s large, diverse, and fragmented markets, are ready to take a leaf from the Indian playbook for their foray into the African market.

The gap between Asian and Western rivals is expected to narrow over time, with China making up much of the ground. About 3,000 companies from China — Africa’s largest trade partner since 2009 — are doing business in sectors such as infrastructure, resource development and telecommunications.

And even this focus on infrastructure development and large scale investments is changing. The Chinese idea is to boost purchasing power across Africa and turn the continent into a massive consumer market.

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Nissin Foods launched locally sourced sorghum noodles in Nyama Choma flavour in Kenya

The Japanese are preparing the ground to apply their own strengths in Africa. Japanese companies see Africa as a lucrative but daunting challenge — one they would rather tackle with a partner or subsidiary that is familiar with emerging markets.

This, again, is where India comes in. Toyota Motor, Honda Motor, Nissin Foods Holdings and Hitachi all export from their factories in India to Africa. The Japanese government is actively working to help companies make inroads in India as a springboard to Africa.

A couple of years ago, the Ministry of Economy, Trade and Industry compiled a list of potential Indian partner companies with strong African operations in 16 fields, including beverages, consumer goods, retail, electronic parts and auto components. Godrej Group and Marico were among them.

The lessons of the last quarter century are driving a new collaborative strategy. My rupees and yen are on Asia.

Will Direct Access to China-made Goods Disrupt Trade in West Africa’s Consumer Market?

jmsamallThe first e-commerce platform for direct trade of China made products has just been launched in the West African country of Togo. Squeezed together with the Benin Republic between the larger, and better known countries of Nigeria and Ghana, Togo is a small francophone country of around 7 million people. Per the article:

“We want to be the pioneer of e-commerce in Togo and to capitalize on the strong multifaceted cooperation between China and Togo, a premier trade hub country in West Africa”, Yuan Li, founder of JMSA-MALL, told Xinhua Friday in Lomé.

“We are promoting a direct trade of genuine Chinese products with fair price between the African customers and the sellers in China,” he explained.

From electronic devices to farm machines, the platform offers a wide range of Chinese products, which are sold in Togo as well as other countries like Benin, Niger, Ghana and Burkina Faso in the region.

All major credit cards are accepted for payment as well as the local mobile money payment system – Flooz. There’s a generous return policy, and shipments arrive at a local brick and mortar shopfront for pickup and returns. That is, if the item ordered isn’t already available in stock at their local warehouse. Furthermore, JMSA-MALL offers local SMEs an opportunity to sell their wares through their platform. On the surface, this looks good – by cutting out the middleman, they can offer lower prices.

Yacine Bio-Tchane, our Beninois colleague also has a footprint in Lome, Togo. She and I discussed the potential impact of this launch in the local context, as well the broader implications in general. Here are some thoughts:

Will this ‘Direct to Consumer’ (DTC) platform have impact on local traders who travel to China for goods?

Yacine made the observation that since the platform sells everything from electronic devices to farm machines, if some pricey and heavy items are not readily available in Togo but for which there is a demand can be bought online, users will take advantage of that opportunity. Going to China, identifying the right product at a good price and shipping it back to Togo is timely and costly (1). The e-commerce platform significantly reduces transaction costs, which makes it very interesting for local buyers.

Chinese products are known to be cheaper (in price and sometimes quality) than other products so they are highly competitive and accessible to many Togolese, especially given the low purchasing power. If, instead of going to the market and walking around in search of those products, anyone can buy it online, people will prefer doing so. However, while Togo has 67% penetration of mobile phones, less than 10% of the population has access to internet. This implies that few consumers have access to the ecommerce solution but it could trigger an increased use of internet from traders interested in China made goods. Although the article doesn’t say who the top buyers are (nationality), it would not be surprising to see that increase in demand is being pulled by Ghana.

Direct trade of China made goods

On the other hand, given the costs, time, and hassles of going to China to source and ship products back home for sale, this platform might be attractive to local traders themselves, both in Togo, and regionally. As Yacine observes, demand might not be from Togo itself but rather the neighbouring countries. As the founder of the platform says himself, Togo is a critical trade hub in West Africa for China.

China has increased trade and diplomatic relations with Togo in the past decade. It is even said that China has become the first financial partner to the country. Chinese companies operate in industries, agriculture, commerce and construction. They create employment and compete with local companies in selling certain products such as fabrics.

The fact that this e-commerce platform is a B2C marketplace backed by a local warehouse full of China made goods is a signal of this investment. For Yacine, the strongest message the launch of this platform has sent is that the Chinese are fully settled in Togo. That kind of long term investment, coupled with their increased investments in industries is a game changer. China is no more a simple partner coming in for projects but has now become an important actor with influence on consumer behaviour. This is a big pivot in its brand.

west_africa_2_storyGeographically, Togo is well positioned to easily access both anglophone and francophone West Africa. E-commerce has been taking off exponentially in the giant market of Nigeria, but has yet to gain traction in other neighbouring countries. Ivory Coast has seen some gains, but it’s in an early stage. Traditionally, the Chinese have waited for markets to mature before flooding it with their lower priced variations – the mobile phone market is one such example. The launch of this platfrom seems rather early from the e-commerce (and mobile payments) perspective but not from the point of view of global trade and market forces.

China’s manufacturing industries are feeling the pinch of shrinking global trade, and the problems of over capacity. The domestic market has been one major focus for development; this initiative seems like an attempt at creating another. Consumer goods trade between Africa and China has not entirely been under the radar – both African and Chinese airlines were the first to respond to demand. Further, there are other changes afoot that directly impact West Africa, as this recent article from CNN shows:

Over the past 18 months, although concrete numbers are hard to come by, hundreds — perhaps even thousands — of Africans are believed by locals and researchers to have exited Guangzhou.

A dollar drought in oil-dependent West African nations, coupled with China’s hostile immigration policies, widespread racism, and at-once slowing and maturing economy, means Guangzhou is losing its competitive edge. […] As China becomes less profitable, many Africans feel the downsides of living there more acutely.

If the mountain cannot support Mahomet, could it cut costs by building warehouses fronted by online marketplaces? Warehouse centres for China made goods are not new to the African continent, southern Africa has quite a few, while Tanzania’s China funded logistics hub has just been flagged off. The JMALL founder’s opening statement positions Togo as another such ‘trade hub’ in West Africa. Is this e-commerce platform a pilot to test regional B2C marketing cost effectively?

Chinese e-commerce giants like Alibaba have shown the way with their agent led efforts to open up the challenging rural markets of the mainland’s hinterlands. It’s only a matter of time before a different kind of intermediary springs up in Togo (and elsewhere) offering similar agent services to facilitate trade. This time, however, it’ll be from the comfort of their home countries, as they assist traders and consumers with online purchases. Taken together with ongoing investments in mobile money payment systems, financial inclusion initiatives, and the utilization of the agency model – China seems to have grasped an excellent opportunity space to begin exploring.

 

(1) Here’s a documentary following a Congolese trader during her shopping spree in Guangzhou, China, looking to fill her container with tradeable goods. It offers us insight on her customer experience.

This article has been translated into the French by Yacine Bio-Tchané

Platforms that aggregate small businesses can integrate the informal with the formal economy

Continuing my thoughts on Nilekani’s vision introduced in the previous post, I want to use this post to focus on the key element of what captured my imagination from his article “The New Road to Nirvana“:

So manufacturing is squeezed on one side by Chinese overcapacity and on the other side by extreme automation. So the service sector is where the action is.

The era of large companies as we knew them is also over. It will be a world of platforms that aggregate small companies.

Amazon and Flipkart will aggregate goods made by lakhs of vendors and provide a platform to sell them. Similarly, Ola or Uber will aggregate millions of drivers who will work on the platform, Practo will aggregate doctors and patients and so on. Aggregation by platforms is the way that jobs creation will happen.

This platform aggregation will also lead to formalisation of the economy. India’s economy is largely informal. But once, say, a taxi driver becomes part of Ola, then in fact he becomes part of the formal economy.

He is able to use data, get a loan, buy a car, start paying taxes. So the formalisation of a few hundred millions of Indians will spur growth and that is where our focus should be.

My larger point is that it is now all about domestic not export, services not manufacturing and platform aggregation not big companies.

I will be writing further on this concept and exploring its implications for the African context, particularly East Africa.

 

The Kenyan informal sector’s well-trodden paths of upward mobility

IMG_4417Studying the dynamics of the informal economy of a particular region in Western Kenya has been an eye opening exercise in questioning one’s own assumptions and frameworks. Other times, I noticed answers to questions I’d never even thought of asking (an outcome of holding implicit assumptions).

One of these was career paths and ambitions.

The most obvious paths are the ones with tangible indicators of upward mobility. You begin with the bicycle, adding a cushioned seat at the back, and dream of purchasing a motorcycle, which can also double as a micro distributor at the last mile of delivery. Then, you dream of a car and taxi.

I was wrong. The decision to select one’s choice of vehicle is a professional one, and each of these transportation mechanisms is a distinctly separate cluster of owner/entrepreneurs. There isn’t much cross vehicle mobility as you’d imagine. There are older gentlemen who preferred the simplicity and the low running costs of a bicycle, saying that anything one earned after a big solid breakfast in the morning was pure profit.

However, this is not to say that the fundamental paths to expansion and growth of opportunities were as closed. They are just different from what we imagine, looking on from the outside, and the drivers for decision making are fundamentally characterized by the patterns of flow of time and money in the informal/rural economy.

For instance, in Malaba and Busia on the western Kenya/eastern Uganda border, one does not begin in Malaba. For the penniless youth emerging from his father’s shamba deep interior where no tarmac goes, its Busia that provides the facility to earn seed capital. They call this kibarua, and there’s a yard near the truck loading docks where they can join the available pool of labour. Its the first step to earning an income in the economy the world calls informal. Women prefer to grow something to sell – be it chickens, eggs or a wide variety of fruits and veg. One lady sells partially treated roots and branches that’s the seed for locally brewed beer.

Once one has amassed some cash, one can buy stock to sell, or invest in a growth vehicle for cash flow. A dairy cow is a growth vehicle, with almost daily cash flow. The challenge for growth on the farm is lack of cash money. Women dominate the informal wholesale and retail trade, just as they’ve been documented to do in West Africa. They are newcomers to trade, having been noticed in this region only in the past 10 or 15 years. They’re smarter, shrewder, and know how to leverage their extensive social networks. They are a growing demographic, particularly in Kenya, Uganda, eastern DRC, South Sudan, and Rwanda. Burundians, it seems, are happy to live on their farms and let their Rwandan friends do the hard work of buying and selling them stuff.

Then, one can move from tabletop sales into retail and wholesale. Its an interesting example of leapfrogging the middle income trap – by the time the market woman with a cloth covered with merchandise can grow her stock to rent a permanent store, she has also become a micro-wholesaler who will break bulk down to the smallest denominations for her micro retail customers to sell on their tables and mats.

Their next ambition is to become that micro-region (a radii of 50km) re-distributor. That is, by the business practices of the global FMCG majors, they want to be registered and counted. The local Coca Cola distributor has probably a hundred such wholesalers scattered around a 100km radius. The scale of operations is limited by the cost of fuel and transport.

Now, many who don’t wish for the extensive groundwork that the former ambition requires, move on to trade from Malaba. Its where the larger regional trade flows take place, not just the multiple micro-crossings of Busia (which by the way annually cross 33 million US dollars). In just one border market, there’s annual biashara worth $5 to 10 million. There will be one or two outliers to this due to natural and geographic advantages.

The energy of biashara is obvious in the market. And every market day along the better roads, the scale of trade was far more than anywhere upcountry, even the roads to Nyeri and Nanyuki. These trading ties go back centuries to before the white man came and the kings of the Buganda loved teh stuff the Indian Ocean traders brought to the Swahili Coast.

The best paid profession is that of a long distance trucker. Yet, intriguingly, young men aspire to reach this position only to acquire the networks of a broker and to retire from the dangerous business of driving heavy inflammable loads for a living.

There many such paths to live a good enough life, educate the kids in town, take care of mums back home on the homestead. The informal economy does indeed offer the lowest barriers to entry into business.

 

Reframing the informal sector in the African consumer market: The real African middle class

malishopThis is Ruth’s shop, on the side of the highway, approximately 5km on the road to Kisumu, from Busia in western Kenya. Not quite directly part of the borderland’s economy, that trades incessantly with each other, these businesses still manage to feed off the energy of the hustle and bustle of biashara, as it flows through the complex webs, as seen by Walther in W/Africa.

Her home, abutting her husband’s wholesale business in soft drinks (they’re registered with Coca Cola) is next door to her shop, hidden in this photograph. She buys a minimum of 10,000 shillings of goods each Thursday, just from Bungoma, and that’s only one of her many source markets. The malimali shop is the village general store or variety store. The 5 and 10 mashed with a mini department store. We bought two of her sandals. I would have paid $7 in Singapore for them and it only cost $1.80. They were made in Kenya, I think.

This is the sign of the emerging middle class that the bean counters can’t find in their datasets. This class of business abounds in the small market towns dotting the countryside and the economically stronger parts in the interior. They are wholesalers and retailers, sometimes both, as nobody wants to turn away a customer, no matter how small their wallet might be. Its an inclusive market and one that we might learn something from. It sometimes has a feeling of a socially responsible capimercantilist society.

Bright Simons was the first to point this fact out, in HBR a few years ago. He was right, as I’ve just validated through a recently completed study on the rural/urban economic linkage in western Kenya.

Changing flows of trade

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Secondhand clothes from India in rural Kenya. 1st Feb 2016 Photo Credit: Niti Bhan

This unassuming pile of clothes caught my attention on market day in Busia, Kenya. They are mitumba (secondhand clothes) from India. This is a recent development, apparently, as traditionally mitumba tends to come from the ‘west’ (as can be noted by the name on the bag shown below). Clothes sourced from India have begun showing up in the market only in the past year or so.

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Where did it come from? Secondhand bag in rural Kenya. 1st Feb 2016

The business model of drinking water in urban Ghana

In Accra, Ghana, packaging potable water into single serve sachets for the mass market (the prepaid economy) is a business model that has evolved extremely rapidly in response to customer demand and purchasing power.

Bottled mineral water for the elite trickled down in quantity and form until the man on the street can buy a glassful for pennies. From the article The cost of pure water:

“I think we’ve seen almost an entire product life cycle in just a decade,” Stoler said. “Initially it was more of the autocrats drinking sachets. Very quickly, within a few years, it seems to have shifted to lower income and the poorest of the poor… You don’t go to a conference or symposium and get served sachet water.”

Stoler believes the “warp-speed evolution” of the industry has quickly made the product better and cleaner. Due to the enormous demand, bigger producers like Voltic have stepped in and are using the same water they put in bottles, sold to the rich, in the sachets sold to the lower and middle classes. And with lots of competition in most areas, and billions of bags being consumed each year, the customer base is quickly becoming more discerning about what they buy.

“This is one of those weirder examples of almost pure capitalism,” Stoler said. “You have this gap in supply, so the private sector steps in and fills the demand. Customers start to understand that there’s differentiation in product quality. Better quality producers rise to the top, the market incentives produce better quality products, and without tons of over-regulation, the market has ended up with a pretty good product.”

His work shows that the intelligent Ghanaian customer base has helped evolve the experimental, and perhaps unhealthy, product that Osei sampled into a cleaner one. In a recent study focusing on two poorer neighbourhoods of Accra, Old Fadama and Old Tulaku, Stoler found no faecal contamination in any sachet sample.

Reading the article further, you’ll note that this service is typical of the way the informal sector quickly senses an opportunity to be satisfied.

Portrait robot du nouveau consommateur africain

L’avènement de la croissance soutenue en Afrique au cours de cette dernière décennie (en moyenne plus de 5%), notamment malgré la crise financière internationale qui sévit depuis 2008, a créé une classe moyenne. Le profil de ce groupe d’individus varie selon les définitions des uns et des autres. Mais on peut retenir que ce sont les personnes qui gagnent entre $2 et $20 par jour. La proportion est estimée à environ un tiers de la population africaine.

Le groupe CFAO, leader de la distribution spécialise sur les pôles équipements, santé et biens de consommation en Afrique, a récemment publié une étude intitulée « Les classes moyennes en Afrique, quelle réalité, quels enjeux ? ». L’étude couvre cinq pays : le Maroc, le Cameroun, la Côte d’Ivoire, le Nigéria et le Kenya. Il est étonnant que l’Afrique australe ait été omise de l’étude. Pourtant la Zambie (en dépit de la crise de la monnaie le Kwacha) ou même l’Angola sont des pays porteurs qui auraient révélé des profiles intéressants de consommateurs.

L’étude a porté sur les « spécificités et les habitudes de consommation » de 4 000 foyers répartis dans ces 5 pays.
Les résultats donnent l’autoportrait qui suit :
 Salarié
 Employé dans le secteur privé (mais cumule un emploi informel)
 Privilégie la consommation locale
 Fréquente les hypermarchés/supermarchés au moins 1 fois par mois pour se procurer des articles de qualité
 Préfère les transactions en espèces, moins d’1/3 les cartes bancaires et le paiement mobile (Kenya principalement)
 Dépense ¼ de son revenu dans l’alimentation
 Gère rigoureusement son budget, sauf lorsqu’il s’agit des nouvelles technologies (télévisions, smartphones, équipements informatiques, etc.)
 Investit dans l’avenir, surtout dans l’éducation des enfants

Source : http://www.cfaogroup.com/fr/actualites/l-etude-cfao-sur-les-classes-moyennes-en-afrique-revele-le-portrait-des-nouveaux-consommateurs-africains.

J’aurais ajouté quelques particularités telles que :
 Le niveau d’éducation : la classe moyenne est constituée pour la majeure partie de diplômés du tertiaire
 Cosmopolite : une grande partie de la classe moyenne voyage occasionnellement à l’étranger ou a vécu/étudié à l’étranger
 Fortement influencée par les réseaux sociaux qui leur sert d’information, de divertissement et de découvertes de produits/marques/tendances culturelles
 Développe une culture d’achat de promotion de produits en ligne

Ce type d’études est extrêmement utile pour les acteurs du secteur privé et les investisseurs potentiels.

La ruée vers la Côte d’Ivoire des marques internationales

Abidjan c’est la capitale économique de la Côte d’Ivoire. C’est près de 5 millions d’habitants ou plutôt de consommateurs. Et c’est depuis quelques années la nouvelle destination des organisations internationales, banques et institutions financières étrangères, grandes marques internationales dans quasiment tous les domaines. On peut parler d’euphorie.

L’offensive des uns et des autres dans la grande distribution, la restauration rapide, les cosmétiques ou les divertissements au cours de l’année 2015 donne le tournis. Rapidement, j’ai entendu les annonces d’ouverture prochaine de centres commerciaux, de supermarchés ou hypermarchés, de KFC et Burger King, de deux FNAC ou le lancement de multiples espaces beauté accueillant les marques Maybelline, Inglot, MAC, Chanel, et Clinique. Sans compter la multitude prêt-à-porter qui ouvrent dans de nombreux coins de rue.

Tout ça pour 5 millions de consommateurs (principalement) qui gagnent en moyenne autour de $1 700. Certes, les ivoiriennes et ivoiriens consomment beaucoup. Il y a cette classe moyenne locale et cette minorité (visible) d’expatriés qui ont le pouvoir d’achat et la capacité de dépenser plus de $200 en une journée sur une gamme de produits divers. Mais combien sont-ils ? Et à quelle fréquence font-ils de tels achats ? En d’autres termes, il reste à savoir si la demande est en phse avec l’offre.

La pauvreté n’est pas un souvenir lointain en Côte d’Ivoire malgré les avancées notables à travers le pays. Elle touche plus de d’un tiers de la population. Ces avancées ont un coût qui est répercuté dans le panier de la ménagère. La cherté de la vie touche toutes les couches de la population. Malgré la culture de fréquentation et d’achat dans les supermarchés, ces achats sont occasionnels pour la majorité.

Il est ainsi opportun de se demander comment tous ces produits, plutôt high-end, seront absorbés par cette minorité aisée. A la longue, ces sociétés seront-elles rentables ? N’oublions pas aussi qu’il existe déjà des produits similaires sur le marché qui font leur bout de chemin.

J’ai eu à côtoyer une société prête à quitter la Côte d’Ivoire car elle peinait à se positionner dans une activité pourtant porteuse dans le pays. Mais il s’avère qu’elle était arrivée trop tôt dans le pays, à un moment où l’activité n’était pas encore mature je dirais. Est-ce une prédilection pour beaucoup de ces nouveaux venus sur le marché ivoirien ? Ou la performance économique des prochaines années accroîtra la demande donnant raison à ces précurseurs ?

Wait and see.