Business in Africa: find a good local partner

Moneyweb Business Insights

Philip Myburgh, Standard Bank’s head of franchising in Africa: partner with a local who has long-term vision, is committed to the brand and understands the market.

Africa has fast grown into an investor destination, where franchises are involved. We speak to Standard Bank’s head of franchising in Africa, Philip Myburgh. Philip, what opportunities are out there in franchising on the continent?PHILIP MYBURGH: The opportunities are wide. I think we have to be careful [not] just to look at Africa as a whole instead of looking at the countries individually. So when we look at opportunities we should dial into very specific countries because they are very different in their cultures, in their economic growth, etc.

But, just widely speaking, we see opportunities in the wider retail space, we see a lot of opportunity in the quick-service restaurants, and the sit-down restaurant space, where there are a lot of underserviced markets from that perspective.

TUMISANG NDLOVU:  You speak of the retail and the food outlets being some of the front runners in the franchising sector. What are the current trends and do they go beyond retail and food outlets?

PHILIP MYBURGH:  Just looking at the current trends I think there are numerous countries where the locals in those countries have seen the opportunities from a brands perspective. They are getting exposure to foreign brands on television, they are travelling themselves, they are getting exposure to those brands in those countries that they visit. And then they think about how they can bring those brands into their respective countries as there definitely is a need from that type of market’s perspective. So ja, there is lots of opportunity.

I think with regard to other sectors there obviously is franchising scope across the various sectors, so you are looking at automotive, you are looking at fuel retail, etc. There is almost not a single sector where we haven’t seen some sort of growth. But that’s just very widely speaking.

TUMISANG NDLOVU:  Now, Philip, some South African companies have made headway in franchising on the continent. What does it take to make to make it big on such a scale?

PHILIP MYBURGH:  The biggest thing for me in terms of the success factor is finding a good local partner, a very good franchisee in that market that you want to go into, that understands the local market, has got the contacts, got an idea of what the market requirements are. If you just think you are going to come from a South African’s perspective or from an international brand’s perspective and dunk into that country a recipe or a model that has been working in your country, then you’ve got it wrong.

You’ve got to partner with someone locally, someone that’s got a long-term vision, someone that’s committed to the brand and then, as I said, understands the market. That to me is the biggest success factor. The guys who haven’t done it have come back with bloody noses. I think the examples are well known. So it’s very important that you manage those risks appropriately.

TUMISANG NDLOVU:  Having said that, Philip, what are the challenges of doing business on the continent so far?

PHILIP MYBURGH: Lots of challenges, but also lots of opportunities. Just to focus on the challenges, infrastructure remains a challenge in many of these countries – roads, rail, etc. It’s very difficult for some of these operators to get their goods to the market and to get them there in a time and quality that they have in mind for a customer experience… And that infrastructure challenge flows into the supply-chain challenge and it flows into the cost of doing business in Africa as well. So ultimately the price point that some of our clients and some of these brands have in mind, we are targeting these respective markets, is often much higher because of the cost of the supply chain that is so high.

The other challenge is finding good partners. It’s one thing to say that the key to success is finding a local partner; it’s quite another to actually find good local partners because in many of these instances they are few and far between.

And then it’s understanding that culture. Every single country has a different culture and then even within those respective countries you have an array of different culture and ethnic groups that you’ve got to focus on, in their individual needs.

And then perhaps just two last points which are also big. One is the legislative environments are not what we are used to in South Africa or in the rest of the Western world. So you cannot rely as much on legislative environment, and you’ve got to mitigate that risk appropriately.

And then lastly one of the biggest ones is to really look at the economic fundamentals of each country individually. Yes, there is an Africa growth story, but every country’s fundamentals from an economic perspective are very different.

TUMISANG NDLOVU:  Based on those challenges, Philip, in your experience what are the common mistakes made in this area?

PHILIP MYBURGH: The biggest one is obviously seeing the continent as a whole. As I said, each country is very different. Secondly, I think there is a mindset of South Africanisms, if I can call it that, where we think just because something has worked in South Africa that we understand naturally the rest of Africa – which isn’t a fair assumption to make. One should very much tackle each opportunity in its own right and develop a product based on that market opportunity, and not think that what you develop in South Africa will necessarily work in some of those countries. Yes, there are many similarities, especially to the rest of the SADC countries and our neighbouring countries specifically from a South African perspective. But again, every country is very different and you need to respect that.

TUMISANG NDLOVU:  Lastly, Philip, any tips for potential franchisees?

PHILIP MYBURGH: I think you’ve got to make sure that you partner not just with the right brand. So you’ve got to understand that you’ve got to partner with a  franchisor that’s also got a long-term vision, that understands the challenges that Africa has, that is able to support you within that very unique environment that some of these African countries challenge you with. So partnering with the right franchisor is very important.

But then also to partner with the right financial advisers, to partner with the right firms that support you from a legislative perspective, etc. So make sure that from a support services perspective you also partner with someone who can truly add value to this journey of yours.

TUMISANG NDLOVU:  That was Philip Myburgh, the head of franchising in Africa at Standard Bank, talking about doing business on the continent. NDLOVU: