Kosaluchi (Luchi) Nwokeneche-Mmegwa (MBA '20) is from Lagos, Nigeria and graduated with a degree in Public Policy from Princeton University. Prior to HBS, Luchi worked in investment banking and private equity for Goldman Sachs & Co. in the New York City office.
The Africa Rising narrative is perhaps the most cited rationale by investors and firms seeking to explain their ambitions for operations on the Continent. Yet in the intervening decade since The Economist published its namesake issue, many investors and firms have found it frustratingly difficult to succeed in Africa, whilst at the same time others have found significant success and are doubling down on their initial investments.
What separates the successes from the failures? What lessons should the next generation of Africa-bound business leaders take note of as they plan their entry/operational strategies?
These were some of the questions that we explored in the “Africa Rising: Understanding Business, Entrepreneurship, and the Complexities of a Continent,” one of the Short Intensive Programs (SIPs) offered this January. Guided by Professor Caroline Elkins and serial Nigerian entrepreneur Hakeem Belo-Osagie (HBS ‘80), our class used case studies and discussions with leaders from the business, advisory, government, and social enterprise sectors to better understand the nuances of building successful enterprises in Africa.
What separates the successes from the failures?
For me the key recurring themes across the successful businesses we discussed were time, relationships, and tailored strategy.
Setting up and growing a business is time-consuming in any market. In many resource-constrained African countries, those processes tend to take even longer to execute. Yet many businesses who have failed in their attempt to enter or thrive in African markets tended to set unrealistic time expectations for their operating teams and/or made unrealistic promises to their investors. Against this backdrop of unrealistic expectations and limited adequate-term capital, poorly-resourced businesses were either forced to scale back their plans or exit markets entirely.
Because of a combination of cultural context and a lack of robust systems to ascertain the trustworthiness of unknown market participants, building and maintaining strong relationships (with regulators, domestic lenders, other members of one’s corporate ecosystem, etc.) is essential to establishing and growing businesses in African markets. Many of the failed entry attempts we discussed were led by organizations who either failed to identify suitable local partners or failed to bring aboard local talent capable of navigating and building relational goodwill in the markets in which the ventures were meant to operate.
In years past, African nations have (sadly) needed to repeat the refrain that “Africa is not a country”. In the 21st century, people seeking to build businesses within African nations should also remember that “a given African country is likely composed of numerous distinct urban and/or regional markets.” Winning in a given country requires serving these distinct markets, and each market is likely to need a tailored go-to-market strategy. The successful businesses we discussed were thoughtful about the sub-national markets they wanted to serve and developed tailored strategies to win in those markets.
What lessons should the next generation of Africa-bound business leaders take note of as they plan their entry / operational strategies?
The key lessons I took away from the program were: don’t limit yourself to the “conventionally-derived” realm of the possible when coming up with product/service ideas for African markets; developing solutions to counter talent scarcity can be just as (if not more) important than addressing capital scarcity for many businesses; African markets are on the move and non-western participants are committing significant resources to winning in those markets.
The gulf between sophisticated African consumer preferences for products and services and resource and capacity constraints in many African markets has created unconventional windows of opportunity across several market segments. In the program, we discussed several examples of unconventional business models formed to bridge some of these gaps (amongst them were agent-based banking, employer-paid education services, and tech-enabled farmer collectives). In each case, the disrupting ventures built solutions in reaction to market realities rather than seeking to force-fit existing models from other markets into an African context. Winning in such an environment requires that the next generation of Africa-bound businesses display the uncommon humility of admitting that they may not have the answers but are instead willing to listen to the consumers they are trying to serve.
Much has been written on the need to address the capital scarcity plaguing many African markets. Indeed, there are many challenges that capital alone can address, such as infrastructure and working capital. Yet as many African-focused ventures enter higher-skilled sectors, they are being forced to contend with talent scarcity in addition to capital scarcity. In response to this constraint, Africa-bound business leaders will need to come up with differentiated strategies to overcome talent constraints and cultivate a pipeline of talented managers and team members capable of sustained high-quality execution.
Having spent a few years in the US before coming to HBS, I have been repeatedly asked different variations of the question “is it the right time to enter African markets?” The underlying premise of such a question is that other non-African market participants are also waiting to enter the market. During the program, we learned of the diverse group of Chinese and Indian entrepreneurs (distinct from often reported state actors) who are presently building businesses across Africa to serve both domestic and export consumers. Against this backdrop of significant inbound interest, the next generation of Africa-focused business leaders should not remain on the sidelines waiting for “an invitation.” As has been previously outlined, success in African markets requires a great deal of contextual learning and patient execution. If one is able and willing to work through those processes, fortune will favor the brave.