Entering the door to Africa – A qualitative study on the obstacles and facilitators of the southern African market

Abstract: Background Sub-Sahara Africa has seen tremendous economic growth the last years. Between 2001-2011 six of the world’s fastest growing economies were in Sub-Sahara Africa. This makes the region a very attractive market for firms and investors interested in growing their business. Purpose: The purpose of this thesis is to identify the key factors that affect growth for firms that are active or planning to become active in the Sub-Sahara region. This thesis aims on highlighting some of the challenges and opportunities that exist in the region and further help to bridge over some of the differences that exist in these markets. Delimitations: This thesis will be delimitated to southern Africa. The thesis will however cover questions concerning issues that stretch beyond theses geographical limits as well in order to try to paint as a full picture as possible. Method: The thesis is based on qualitative interviews with 15 persons with extensive insights in the southern African economy. The results from the interviews will be filtered through a theoretical framework that has been constructed based on a thorough literature study. Conclusions: From the interviews four threshold factors could be identified. These were: Culture - Cultural differences is something that is impossible to learn from distance; knowing the culture allows the firm to tailor their offer to the specific market and learn the ways of doing business in the region. Skills – The skillset in the southern African region is very low and there is a scarcity of highly educated people. Planning for this problem is essential to minimize its impact. Financial Capital – There is a scarcity of capital in the southern African region affecting both the demand in the market and the possibility to find funding. Providing creative financing solutions is key. Broad-Based Black Economic Empowerment - This regulatory system only exist in South Africa with the purpose to change the inequalities that emerged during the apartheid era. BBBEE pervades the entire South African economy and not having a strategy for this will be a huge disadvantage. To overcome most obstacles a firm should use one of two alternative strategies. The first strategy is for firms with limited experience and financial muscle. These firms should joint venture with a more experienced partner in order to gain experience and someone to share risks with. The second strategy is for experienced and financially strong firms. These should engage in direct investment. This allows the firm to more efficiently exploit all the opportunities in the local market and to become embedded in the local culture.