Why South Africa should not be the entry point to reach Africa’s emerging consumer markets

By | May 26, 2012

This post is about something I’ve been musing upon for some months now, ever since my 2011 project which took me around rural and small town Kenya visiting with a variety of cyber cafes. Since then, many other well respected Kenyan professionals that I’ve spoken with, either in person or online, have confirmed my suspicions that my conjectures are valid.

South Africa is not the best place from which to enter the emerging consumer markets of Sub Saharan Africa.

This was the strategy touted for Wal-Mart when they bought into their foothold earlier last year. That once the “African consumer experience” was gained in South Africa, they could leverage that knowledge to expand northwards to other major urban metros. I beg to disagree, most strenuously.

While I’ve yet to gain first hand immersion experience in West Africa, I do have the exposure to both urban and rural markets, particularly lower down the income stream in South Africa as well as in East Africa, via Kenya. That first observation alone triggered the thinking behind this post today – the market days in rural Kenya are considered to be little different from those in rural Tanzania or Uganda, and market towns dotting the landscape are familiar to travelers across the region.

This does not exist in South Africa. There are no organic societies in rural South Africa, where farmers and pastoralists have lived their way of life for eons, nor do people point out their grandfather’s banana trees or his third wife’s kitchen on the sprawling family homestead.

South Africa, particularly rural South Africa, is an artificial construct. Homelands were created some 60 or 70 odd years ago and not simply the kind of land clearing that was done in the Settler Country of East Africa either but deliberately carving out the least fertile land with the scarcest amount of natural resources. A simple drive through the Eastern Cape will show you odd clusters of homes with no natural resources nearby to give rise to any reason for their existence unlike the naturally emerging population clusters near rivers and farmland as can be seen elsewhere. Few in rural South Africa can claim with the pride of the Swahili in the north Coast that the coral block home in Lamu has been in the family for over 500 years.

Education is another area where there is a huge difference. Adult black South Africans who were schooled for the most part prior to the fall of apartheid have experienced only the truncated ‘bantu education‘ crafted specifically for them, unlike the Kenyans for example, who have always had access to the same curriculum and programs as any other resident of their country. While there are many more such differences, society and education are the two most critical.

This matters. A lot.

This difference in history and reason for being influences so many consumer choices, buyer behaviour and mindset of the people that if a company bases their Sub Saharan market entry strategy on their South African experience, there is a danger that they will be taken by surprise when they expand to other regional markets.

Here are some snippets as food for thought extracted from recent news articles:

Historically South Africa was designed as an appendage of Europe , with Africans as cogs in the wheel. The other Africa was sold to local blacks as inferior and the countries best avoided. It is still not unusual to hear black South Africans refer to other African countries as “Up there””. Xenophobia has become synonymous to South Africa. But things are gradually changing as other Africans become better known with time and as other African countries join the success list, politically and economically.

South Africa, well steeped in racial history had always sought to identify with the first world, while the first world itself have re-discovered Africa’s massive potential. That outlook has seen the Zuma administration join the economic grouping Brics and the G20 to the neglect of a strong African economic union.

Black South Africa woke up belatedly to discover that the flights from Johannesburg flying North to the rest of africa was filled with white South africans freed from the shackles of apartheid , busy taking adavantage of massive opportunities that had opened up in a growing Africa. MTN South Africa, has made a fortune in Nigeria. Its shareholders are largely white.There are more than eighty South African companies registered in Ghana.

And more to the point, this comment “South African companies find it hard to rule Kenyan market” in an African forum puts the challenges forth a little more bluntly while another recent article clearly states:

Dapo Okubadejo, who is a partner and the head of financial advisory services at KPMG, said: “There is a huge problem with SA companies; they come with a huge big brother attitude. In Africa people see them as being not flexible and this creates a lot of sensitivity,” Okubadejo said. He added that it was a mentality that affected investments.

Okubadejo cited Telkom’s failure to establish itself in Nigeria as an example.

I am making this point clearly now because it is a matter of concern, particularly when there are enough barriers to understanding the emerging African market opportunity that exist for global multinationals as it is.

South Africa is an offical BRICS now and certainly considered the most sophisticated economy on the continent, but it is no longer the largest as Nigeria rapidly snaps at its heels nor representative of the consumer culture that may be prevalent across the rest of the region.

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