Growth in sub-Saharan Africa relied less on mineral extraction and was increasingly becoming consumer driven, which was important for the franchise sector, FNB chief economist Sizwe Nxedlana said at the FNB Franchise Summit that took place in Johannesburg earlier this month.
He noted that being innovative, adaptable and flexible, franchisors and franchisees were ideally positioned to capitalise on the rise of the Africa consumer.
“Despite the abundant potential, there are many critical considerations that need to be considered when venturing into new markets – most importantly, the suitability of the offering,” he said.
Nxedlana noted that, in terms of accessibility and ease of doing business, a franchisee should begin closer to home, in the Southern African Development Community. He explained that, even though countries such as Botswana and Namibia had relatively small populations, the size of the middle class in those countries was healthy enough for a franchise to thrive.
He pointed out that major challenges for franchisees in African countries were the different cultures, the different ways in which business was conducted and logistics issues.
“Obviously, franchisees should avoid conflict areas in Africa, such as northern Nigeria, Somalia and Sudan. There is lots of oil wealth, but it is too unstable to conduct a profitable business there. Other geopolitical hot spots, such as the Democratic Republic of Congo, are challenging countries for a franchisee.”
Nxedlana added that conflict and civil war on the African continent had been significantly reduced, with the management of macroeconomic institutions showing noteworthy improvement.
“There has also been a gradual improvement in the way fiscal and monetary policy institutions are run, as well as in institutional infrastructure, which is reflected in growth rates,” he said, adding that African institutions started to better use their gains from natural resources.
Nxedlana noted that this would lead to increasing diversification in African economies and, therefore, more sustainable gross domestic product growth, which was less volatile because it depended less on the primary sectors.
Further, beauty conglomerate Imbalie Beauty CEO Esna Coleyn said at the summit that global trends and research dictated how a business should be run and what products should be sold.
She noted that this led to businesses becoming more innovative, unique and remaining loyal to their customers.
“Technology and innovation go hand in hand and we continually look at creative ways that link our products through innovative systems with people and our customers. Looking at the changing landscape, we were the first franchise to launch mobile apps for our beauty salons, which have helped to keep our customers up to date with our latest products, news and promotions,” she added.
The health, wellness and beauty industry is considered to be the fastest-growing sector in South Africa, largely because of the highly competitive and economic climate, as well as the influence of social media on the way business is executed.