A good way to segment the African market is by looking at regional trade zones. There are five main regional blocs in Africa, which correspond to the Regional Economic Communities (RECs) of the African Economic Community (AEC), an organization seeking to promote economic development among African states. These five RECs are:

  • SADC (Southern African Development Community);
  • COMESA (Common Market for Eastern and Southern Africa);
  • EAC (East African Community);
  • ECOWAS (Economic Community of West African States);
  • ECCAS (Economic Community of Central African States).

Some companies have succeeded by approaching African regions one by one. Bidco is one of them. Advocating for owning its own distribution channels, Vimal Shah keeps an eye on market associations: “In the East African community, we are 140 million. By 2050, we will be 250 million. If I can buy, produce, and sell in this market, that’s a huge growth potential.” Vimal is less attracted to some of the other African blocs: “In West Africa, free trade within ECOWAS doesn’t work. And apart from COMESA, there is no free trade agreement in North Africa.”

For Funke Opeke, West Africa has equivalent potential, even in the absence of an operational free trade system. Funke heads Main One Cable Company, a company that raised and invested $240 million to install a high-speed submarine cable along West Africa. When I asked African business school students which CEO they admired most, Funke was mentioned several times.

And when I asked them why, they talked about her successfully completing a large-scale project and being focused on other major achievements. The Main One cable initially reached Ghana and Nigeria, two markets that already offer significant development opportunities in themselves. Funke nonetheless expresses her plans in regional terms:

“We designed our system with the whole west of the continent in mind. The entire region shares the same development challenges and growth potential with high-speed internet. We consider the rest of the continent, particularly its southern tip, to be particularly well-served now. When we brought the cable to Togo, it had no direct access to any cabling system. Now Togo provides access to some landlocked countries.

It’s the same in Benin, where existing high-speed internet was not working well, and the country was not well connected to the internet. On Monday, I’m going to Senegal to discuss with the new government if we can finish the line the Senegalese need to connect the country. We’ve always had the ambition to be more than just a purely Nigerian or Ghanaian company, and the infrastructure we have allows us to distribute throughout the zone. There is a lot of migration and cultural similarities in this region.”

For James Mworia of Centum, focusing on one region is not so much a question of market size. It allows him to identify and seize opportunities that escape others, more dispersed. “We ask the right questions starting at the regional level,” says James, “where we have the right relationships and where markets naturally cluster. We wonder how we can reduce logistical costs in this region, how to share infrastructure like electricity. Currently, Kenya imports its energy from Ethiopia. That’s where we see short-term opportunities. Once we have the region (the EAC), we can wonder how to collaborate with SADC. If things don’t move at the regional level, they are unlikely to happen pan-African scale.”

This mix of proximity, opportunities, and networking strengthens a strategy focused on a single region. It allows a company to seize opportunities in places where others dare not tread, such as South Sudan. Freshly independent following the 2005 comprehensive peace agreement, this country is an active investment hub for the rest of East Africa. James Mworia is among those investing there. “We established our insurance company in South Sudan in 2005. The peace agreement hadn’t even been signed yet, but we had a good understanding of the market. In the first year, we made nearly $1 million in profits selling all kinds of insurance.”

Focusing closely on the regional level also allows James’s company to spot more targeted opportunities at the local level. He cites the Two Rivers project as an example: “We recently received market research results on the purchasing power of the main catchment area. Within fifteen kilometers, there are 4,000 households earning over $4,000 per month, and 74,000 above $975. This corresponds to the average income according to all prevailing calculation methods. Reports from major international consulting firms …”

This text is an excerpt from the book “These Businesses That Succeed in Africa” written by Jonathan Berman

We invite you to read the following article “THE GOOD VISION: A FRAGMENTED WHOLE“.

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