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Global small businesses not yet viewing Africa as a growth opportunity

12th December 2014

By: Zandile Mavuso

Creamer Media Senior Deputy Editor: Features

  

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About 40% of global small and medium-sized enterprises (SMEs) do not perceive Africa as a growth opportunity, despite the positive economic growth stories and growing middle class in the region, says Economist Intelligence Unit (EIU).

EIU, having conducted the study on behalf of logistics company DHL Express, notes that, while many multinationals and State-owned companies are actively taking advantage of the opportunities that Africa offers, SMEs remain apprehensive and are choosing to trade with other emerging markets instead.

However, DHL Express sub-Saharan Africa MD Charles Brewer says, despite current challenges to attract global SME interest, the findings of the study highlight the untapped potential that still exists in the continent.

“According to the study, which surveyed 480 SME executives and experts from business lobbying groups, SMEs are deterred by Africa’s low average consumer spend, cultural and infrastructure challenges, as well as inefficiencies such as corruption and political risk in the region,” Brewer indicates.

He adds that the quality of a target market’s infrastructure, the stability of its politics, administrative costs for establishing a local presence and cultural differences in doing business were all cited by the executives surveyed as factors that deterred them from entering these new markets.

“The unfamiliarity of foreign markets received particular attention, with 84% of respondents describing understanding a target market’s culture or language as important or very important in determining its attractiveness. This also explains why most SMEs often expand into markets that resemble their own,” notes Brewer.

Owing to the multitude of cultures, languages and customs on the continent, vast amounts of research need to be done into each region, and the services and products need to be specifically tailored to each country.

Nonetheless, Brewer notes that a number of multinationals and corporates have experienced great success in Africa and the good news for SMEs is that they have the advantage of being more agile to adapt quickly and exploit the opportunities available.

Being a business that has enjoyed great success in Africa, he indicates that DHL Express works with thousands of SMEs across Africa and has witnessed how these businesses are able to successfully establish a presence in the region.

“With the support of the right partners, a well-designed supply chain, clear understanding of their competitive strengths and the right mindset, SMEs can break through any border and make the world their market,” Brewer highlights.

He also states that if more SMEs deploy expansion tactics to enter the market, such as piggybacking on another company’s existing retail network, this could lead to further growth in the African market.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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