Structuring and closing deals across African markets often demands more from South African based sales teams. Distance, economic and cultural market realities, regulatory requirements (or the lack thereof) and subtle variations in the way business is done, can all impact significantly on the outcome of a deal in Africa.
Africa – not a ‘copy and paste’ continent
Africa is not a market for ‘cut and paste’ replication of business models or products – an approach taken by many when launching their products and/or services on the continent. It requires adaption of these models, services and products to fit the local market conditions.
For example, where South African consumers are accustomed to monthly subscription models, consumers in many African markets prefer a flexible, no-obligation per-day model, even if this ultimately costs them more monthly.
In many cases, this is because people live on less than a dollar-a-day and they simply don’t know if they will have the disposable income to be able to afford the subscription tomorrow. Social realities such as these must be appreciated.
Understanding the market is key
The best way to get to grips with the on-the-ground realities in another African country is to visit the country regularly, experience and discuss the conditions there and listen to what local stakeholders are saying about challenges and opportunities.
It is crucial to understand the client’s operating environment and customise your offering accordingly, to ensure that your solution can genuinely work to help the client address market challenges. This approach requires more thought and research because of these complicated conditions.
Be flexible or you won’t do the deal
Added to the above, in many pan-African regions, potential business partners are loath to make significant upfront investments – particularly when entering relatively unchartered territory such as video on-demand, not only because of potentially high set up costs, but also because the time and demand for market uptake is so indeterminable.
Successful business across African markets depends on networking, relationships and trust. It is this consistent and collaborative dialogue with prospective partners that ensures positive outcomes are achieved.
Business models must be flexible and be structured around a model that best suits the local partner without compromising your own business requirements. These could take many forms, either an Opex model, a co-investment or a small-scale proof of concept.
This flexibility can often pave the way for bigger things later on and have regularly proven in our business to be the catalyst for closing the deal.
Communication, in general, across Africa’s vast distances can prove challenging. All processes can take a lot longer than we are used to in South Africa and one should also be sensitive to subtle differences in the way in which these sales and communication interactions are handled.
Bulldozing your way into the market is not the answer, this will likely bring an abrupt end to talks around opportunities and products even though there was an appetite for both.
The keys to successful negotiations and deal closing are mutual trust, collaboration and market knowledge.
Across Africa, possibly more so than in South Africa and more developed markets, business is further built on broader industry networks and relationships.
A business seeking expansion into Africa must leverage its existing networks for introductions and can expand these subsequent collective partnerships, where relevant or possible, to drive even greater synergistic objectives and achieve mutually-beneficial outcomes. Once all challenges have been overcome, you should not be afraid to push for the deal.
However, you may have to wait twice as long for an answer in Africa as you do in South Africa. Where a deal might be concluded in six months in South Africa, it could take up to 12 or even 18 months to be finalised in many markets across Africa. Patience, once again, controlled persistence and communication remain crucial throughout the process.
How South African Small Businesses Owners Can Overcome Economic Uncertainty
Here are three things you can do to overcome these economic challenges.
South Africa’s entrepreneurs haven’t had it easy. The current political landscape coupled with global uncertainty has brought with it significant business instability.
This is evidenced in Xero’s 2017 State of SA Small Business Report which found that 68% of small businesses view economic instability as their number one challenge, while 38% are concerned about their cash flow.
Within the small business community, the report also highlights a growing frustration with the government’s lack of support to help keep them afloat. Despite being set up to do just that, 89% of small businesses don’t feel that The Department of Small Business provides the right support.
This lack of support extends across government: 48% of entrepreneurs would like to see more funding, 44% want less red tape, 43% call for more tax breaks, and 36% want better access to finance. While these requests are perfectly reasonable, they’ll only take effect if the government gives them the go-ahead.
Implementing more measures to support small businesses will take time. This means 2018 is going to be just as challenging as 2017 – if not more so.
Here are three things you can do to overcome these economic challenges.
Smaller businesses are typically more agile than their larger competitors. This is a huge advantage when navigating an unpredictable market. Macro-economic challenges are, for the most part, beyond your control. Rather than try and ‘fix’ the situation, move with the market and adapt to its changing nature.
The best way to maintain customer relevancy is to review your offer regularly and look for ways to improve it. You could consider lowering your prices – as long as it doesn’t upset the books. Or think about investing money back into the business to yield greater returns.
There’s no one-size-fits all approach, so just make sure you do what is right for your business. Part of this is ensuring you stay fresh in the eyes of your customers by continuing to respond to their evolving needs.
2Invest in new technologies
Investing in the most up-to-date technology will pay off in the long run. For South Africa’s small businesses, technology is only growing in importance: where 19% said it was essential last year, that number has increased to 49% in 2017.
Cloud accounting software, for example, can help you understand your company finances and track budgetary health in real-time. Knowing exactly where your funds are and how they’re being allocated, enables a much faster response time – this is critical during unstable economic times.
Technology can also help you build a more competitive business by reducing wasteful expenses, automating time-consuming data entry tasks and streamlining processes for greater efficiency.
The more knowledge you have, the easier it is to put measures in place that will enhance your company’s operations.
3Deliver superior customer service
Purse strings might get tightened during tough economic times, but there will always be demand for certain products. Ensure you give your customers a superior user experience when they engage with you, and they’ll return.
It’s not always possible to compete on price. Bigger, more established companies generally have the capital reserves to undercut their rivals. But, small businesses can always compete on value. If you can offer a superior customer service, then you’ll receive customer loyalty in return – this is priceless in a volatile economy.
The past year has been incredibly challenging – and it’s unlikely to get easier as we move into 2018. But, the most successful entrepreneurs don’t let the economy thwart their ambitions – they equip their business to weather any storm. The sooner you innovate and adapt your business, the better your chances of success.
SAB-Commissioned Research Shows SA Poised To Reap Entrepreneurship Rewards
Every country has both significant opportunities and challenges.
Every country has both significant opportunities and challenges. It is becoming increasingly evident that corporates have a big role to play in addressing both.
Companies, particularly large ones like The South African Breweries (SAB) with all its scale and resources, not only do they have a responsibility but a duty to invest in a better world for all.
We know that entrepreneurship can have a huge impact on the growth and development of countries. That is one of the main reasons SAB is backing entrepreneurs 100%. The level of their impact was reaffirmed by recently released research by the Global Entrepreneurship and Development Institute (GEDI).
Not only is the environment for entrepreneurship in South Africa more conducive to small business development than many had previously believed, it also places the country ahead of some of our partners in the Brazil, Russia, India, China and South Africa (BRICS) economies and several others.
This is pretty significant, given that the South African government’s National Development Plan (NDP) envisages that 90% of jobs will be created in small and expanding firms and that by 2030, the output from these firms would have grown substantially.
The GEDI research indicates it is commonly believed that South Africa does not nurture small businesses. This is mainly because self-employment makes up a comparatively small share of the total, relative to other African countries where it dominates employment.
It is, however, interesting that the report found that high levels of total entrepreneurial activity correlate globally with lower GDP, prosperity and development, and vice versa. Once you scratch beneath the surface, this begins to make better sense.
In less developed economies, it is harder to grow a small business beyond a basic survivalist enterprise. That is often where the story ends: These businesses never grow, therefore, they never employ more than a handful of people each.
By contrast, South Africa has a number of high-growth and high-tech start-ups that have carved out a place among the top companies on the planet and one of the continent’s only two “unicorns”, private, venture-backed companies valued at $1 billion or more, in the form of Promasidor Holdings.
By looking at the entrepreneurship ecosystem rather than at individual entrepreneurs, the GEDI research found South Africa to be the leader on the Continent when it comes to entrepreneurial activity. Furthermore, the potential is enormous. So, once South African start-ups have weathered the initial turbulence that comes from establishing a small business, they have the ability to grow significantly and even potentially compete globally.
In a nutshell, South Africa performs better where it counts: in entrepreneurial aspirations, innovation, high growth, internationalisation and risk capital – the main pillars that lead to economic growth.
The good news is: We have the capability to cultivate world-class, high-growth, highly innovative businesses from scratch and push on to achieve global competitiveness. The unfortunate news is that we have bottlenecks in the system that make it very difficult for entrepreneurs – especially those from disadvantaged backgrounds – to get a start in the first place.
If entrepreneurship is a two-stage rocket, we are good at getting the ones that make it past stage one into orbit but too many fail to launch at all.
That is largely a function of our dual economy: Poor education and skills, lack of social capital, limited access to risk finance, markets and knowledge networks. This leaves many aspirant entrepreneurs stranded at the idea phase, while a culture that prizes formal employment and shuns risk makes entrepreneurship a seemingly unattractive option.
All this is changing though.
SA’s Broad-Based Black Economic Development (B-BBEE) legislation is designed to promote inclusion, encouraging big corporates to consider emerging suppliers for integration into their supply chains and stimulating investment in enterprise development, education and skills training, among others.
There is a huge pool of funding available, which, as we learn more about the bottlenecks in our entrepreneurship ecosystem, is being deployed more effectively.
At SAB, we have one of the longest-running entrepreneurship programmes in the country – SAB KickStart – which focuses on youth-owned businesses.
It complements the SAB Foundation, an independent trust that primarily also promotes entrepreneurship and social innovation. There are also recent additions, SAB Thrive, a black private equity fund set up by SAB to transform the company’s supplier base through acquisition, business development and fostering entrepreneurship, and SAB Accelerator, an incubator with the aim of growing SAB’s supply chain to be inclusive of black-owned, especially black women-owned businesses. And then there are the agriculture projects, where we are investing R610-million over five years to establish thriving barley, hops, maize and malt industries in South Africa to strengthen rural employment and job creation.
These initiatives, and our commitment to create 10 000 authentic, real and sustainable jobs through entrepreneurship within five years, demonstrate our desire to make a difference in society and our faith in the ability of entrepreneurship to drive growth and employment.
In fact, we commissioned the GEDI research because our daily interaction with emerging entrepreneurs led us to question the prevalent assumptions about the deficiencies in the system.
In the 23 years since the launch of SAB Kickstart, we have developed a deeper understanding of what it takes to propel small businesses past the launch phase. As such, we have refined our support systems to boost them to scale.
We have also built a multi-pronged programme to provide support, finance where required, mentorship and skills, access to markets and supply chains across the entire trajectory of a small business – from idea phase to developing the skills to manage a business, to achieving the scale, quality consistency and sustainability that a large corporate like SAB requires of its suppliers.
We have the capacity – and we have ramped up the budget – to significantly expand these programmes and with the introduction of SAB Thrive and Accelerator to complete the circle, but it is also about a change in approach.
Whereas we have concentrated, up to now, on the entrepreneur, in future we will focus on the job-creation potential of candidate businesses. We have also changed the way we think about procurement to make inclusion a serious consideration when we choose our suppliers.
The GEDI research shows South Africa is an entrepreneurial leader in Sub-Saharan Africa and has made considerable progress in overcoming structural factors to produce some of the most innovative and successful enterprises on the Continent.
South Africa provides the institutional support necessary for high-growth businesses to emerge and thrive, while government policies work to close historical gaps. With the addition of targeted, co-ordinated policies to address remaining bottlenecks, the country is poised to achieve greater growth through entrepreneurship.
We can achieve far more if we work together, if we make small business development an area where corporates share data and lessons learnt, link suppliers into one another’s supply chains and work more closely with government to ease the regulatory burden for small businesses.
If we can bridge the divide between the thousands of entrepreneurs struggling in the early stages of business development and the dynamic environment at the apex of the system, we can create high-growth enterprises in numbers that would change our employment outlook and harness the demographic dividend of a youthful nation.
As a responsible corporate citizen, we are committed to continuously building on the foundations we have laid over past two decades to drive sustainable entrepreneur development. Entrepreneurs are our future!
Can We Make The Rand Grand Again?
The USD/ZAR currency pair (US Dollar/South African rand) is closely correlated with the EUR/ZAR (Euro/South African rand) with an 83.9% correlation.
The USD/ZAR currency pair (US Dollar/South African rand) is closely correlated with the EUR/ZAR (Euro/South African rand) with an 83.9% correlation. Simply put, the performance of the USD and the EUR with respect to the ZAR are one and the same. When the USD or the EUR appreciates, we are likely to see similar trends taking place with respect to the USD/ZAR and the EUR/ZAR currency pairs.
As of Thursday, 17 August 2017, the USD/ZAR exchange rate was 13.169. The 52-week trading range for this currency pair is 12.298 on the low end and 14.748 on the high-end. 10 years ago, at the height of the global financial crisis (August 21, 2007), $1 was trading at R13.17040. The USD appreciated sharply against emerging market currencies, notably the ZAR, in the years following the crisis. Between 2007 and January 2016, the USD gained on the ZAR. It reached a high of R16.44437 on 14 January 2016, before retreating sharply to R12.43849 on 24 March 2017.
Unbeknownst to many millennials in South Africa, the ZAR was not always trading at its current levels. Before Jacob Zuma assumed the presidency, and gross malfeasance engulfed the South African economic system, the Rand was a force to be reckoned with in global financial markets.
South Africa was considered the bright star of emerging market economies in Africa. Gold, platinum, coal, iron ore, tourism and other factors helped to create a positive image of the South African economy.
Economic Malfeasance Impacts Credit Ratings
Enter the Gupta scandal, Nkandla, multiple successive votes of no-confidence in the president, and ongoing fears about nationalization, the exodus of multinational corporations, and a crumbling infrastructure – the result is evident in the Rand. The South African economy continues to absorb swelling numbers of illegal immigrants, many of whom are living in squatter camps where rising levels of ethnocentrism are brewing. A flare-up is imminent.
International credit ratings agencies have downgraded South Africa’s rating over time, with the following ratings and outlooks from major agencies:
- Moody’s assigned a Baa3 rating to South Africa with a negative outlook – June 9, 2017
- S&P assigned a BB + rating to South Africa with a negative outlook – April 3, 2017
- Fitch assigned a BB + rating with a stable outlook – April 7, 2017.
These credit ratings are extremely important to international investors says Weiss Finance professional, Sal Caputo, ‘They determine capital flows into South Africa. Investors, pension funds and sovereign wealth funds look towards credit ratings for their investment decisions in foreign countries. If we wind the clocks back to 1994, Fitch assigned a BB rating, Moody’s a Baa3 rating and S&P a BB rating to South Africa’s economy. While the ratings appear similar today, the sentiment (the outlook) is decidedly negative this time around.’
Pre-Global crisis, in 2006 the USD/ZAR was trading at 6.1392. Put into perspective, R100,000 would buy you $16,288.76, 11 years ago, and that same R100,000 is the equivalent of $7,588.17 today. These figures do not take into account the real money depreciation, or how much more you could have earned by investing that $16,288.76 over 11 years. The differences are dramatic. Inflation in South Africa is currently recorded at 5.1% year on year (June 2017).
This is good news in that it means the real purchasing power of the South African rand is not being adversely affected by rising prices. This is the lowest inflation rate for South Africa in 1.5 years. Conversely, the inflation rate in the United States for the 12 months ending July 2017 was measured at 1.7% – 3 times less than South Africa’s rate.
Clearly the value of the South African currency is being eroded away every year. The current interest rate at South African banks was measured at 6.75% on July 20, 2017. This means that investments in SA banks yield real money growth to capital. Provided inflation is kept in check, and the SA infrastructure is renovated, upgraded and maintained, good governance can help the SA economy to get back on track.
A Thought: In the 1960s, the South African rand was grand, as it traded at a mere R0.72 to the USD. Things have certainly reversed since then, but the Rainbow Nation has the ability to turn a new page and make the Rand proudly South African once again.
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