Out of Africa: How to Get the Most from Market Intelligence Studies in Africa

By Stuart Maclachlan & Stephane Rosenwald

In contrast to first world countries, Africa is a continent on the rise. Development is rapid and dramatic, as Africa plays ‘catch up’ through a vast array of industries including telecommunications, infrastructure, energy, banking, housing and education.

The challenge for market intelligence practitioners is to stay abreast of these changes in an environment where information is a highly perishable commodity and communications infrastructures are often unreliable.

Market Intelligence Challenges as Large as the Continent

Diversity
One cannot paint African countries with the same brush. Their histories, cultures, geographies, languages, fiscal policies, legal and administrative systems differentiate them immensely. For example, Namibia in Southern Africa is a vast country, but with a small scattered population. A large portion of the population lives in the Northern Region of Namibia. Here, fast moving consumer goods (FMCG) manufacturers face the challenges of containing distribution costs, maximizing return on investment and developing effective ‘go-to-market’ strategies with products that will meet the needs of a largely cash strapped population. Competition in the capital, Windhoek, is fierce. There, FMCG manufacturers need to understand the local market and consumer dynamics in order to avoid producing another ‘me-too’ product.

In Mauritius, an island in the Indian Ocean, FMCG manufacturers face a different set of challenges. Here, man¬aging logistics, forecasting and inventory plays an important role in ensuring that products are always available. Mauritius is a French speaking ex-colony of France that enjoys strong links to French culture. It is one of the wealthier Southern African countries, and has a relatively high GDP per capita. Until recently, it also had a preferential trade agreement with the EU on sugar and textiles, which has since lapsed. The Mauritian government is now trying to transform its economy to a knowledge-based one, with a focus on information technology and seafood. The challenges of generating quality intelligence in Mauritius revolve around understanding the European influences that have intrinsically shaped the distinct Mauritian consumer behavior.

Lack of Structured and Reliable Information
Internet penetration in Africa in 2009 was 6.8 percent, compared to the world average of 25.6 percent. Evidently, on¬line and other advanced communication infrastructures to house and transfer information in Africa are not as available as in the developed world.

Quality information is mostly unregistered or even considered classified in some areas. There are no universal standards and protocols. In many cases, local economic and financial reporting and information systems are opaque. In some places, money can still be a taboo subject and families who own private businesses are not eager to disclose information. Sources will also be different from one country to the other.

Information is often only available through networks of people. It is typically those who are well placed or who are in positions of power that are able to extract reliable information that can support foreign investment decisions.

There is often a strong correlation between the level of economic development in any country and the level of quality information available. It is for this reason that high quality information can be very difficult to acquire in Africa, particularly in the poorest economies.

Corruption
In many African markets, bribery and corruption can be rife.

Mozambique was ravaged by a war that ended in 2002 and by subsequent massive floods that displaced millions of people. Unemployment, poverty and malnutrition levels are very high, with 70 percent of the population living below the poverty line. Informal markets account for 60% of the retail trade in Mozambique, with Mammanas (informal hawkers) controlling the retail market, bypassing duties and value added tax. This makes obtaining reliable, accurate information through legitimate channels very challenging. Market intelligence professionals must have a local network of trustworthy and informed people they can rely on.

Bureaucracy
Formal or informal agreements must often be obtained for important matters. No large project can be developed without the support of key personnel at the administrative or political levels. Even where corruption is not particularly high, there seems to be a strong tradition in Africa on knowing the right people in order to gain access to direct or indirect knowledge.

Rapid Change
Due to rapid market changes on a global level and Africa’s increasing globalization, the need for valuable market intelligence is becoming even more pressing.

Permanent In-Depth Local Knowledge
In Africa, it is crucial to work with people who have been operating for some time in and who have deep knowledge of local markets. This includes being attuned to the local history, current operating environments, supply chains, market strengths and weaknesses, threats and opportunities, information sources and stakeholders.

In many African countries, it is simply impossible to rely solely on secondary data sources in the public domain. In South Africa for example, Tiger Brands, Nestlé, Kraft and Cadbury only account for 41 percent of the sugar confectionery market, while the balance of the market is proliferated with many small manufacturers and local distributors that trade largely through t he wholesale channel. These local manufacturers and distributors fly under the radar without even a Web site from which to gather basic competitive information.

Local Networks
Being able to go rapidly to the right place and/or to the right person to gather the relevant qualitative information and support is key. It is imperative to always know whom to speak with for specific types of information. The risks of going through intermediaries include time inefficiency and receiving inaccurate information.

It is critical to work with partners who have rigorous reconnaissance processes to build a bank of information on the market using cross-financial teams of experts. Other than knowledge of the local industries, they need to have constantly updated sources, cartographies of local stakeholders and concrete access to key people.

Information investigation and Validation Processes
In opaque and fast moving environments, setting up systematic and rigorous market intelligence processes in Africa is a must. Investigative and validation processes must be used to ensure you make truly value-added decisions on sound and tested parameters.

As a result of the heavy reliance on primary information from expert sources, it is necessary to employ cross-examination methods to cross check all your information. For example, hypotheses may be generated on key competitors from expert interviews, but a structured process of gathering sufficient evidence must be used to convincingly support or refute these hypotheses.

A Comprehensive Approach
Conducting business in Africa requires knowledge not only of the industry, but also of how things work in general. Those new to any African market may be unfamiliar with the processes needed to get things moving in the right direction and the right people to get in touch with in order to avoid delays or interruptions. Achieving real results can be challenging when dealing with what may seem an administrative labyrinth to outsiders.

Choose to work with a partner who is also capable of getting involved in and assisting you through your operational details with local administrations, customs, suppliers, partners, potential employees etc. This is one aspect that is quite unique to operating in Africa. Often, it helps to have a local partner that has deep local market intelligence experience in order to keep things moving in the right direction.

Confidentiality and Ethics
In geographies that can sometimes be described as lawless, operating along clear lines of ethical standards is even more critical. Your partner must have strict ethical codes of conduct and have in place, concrete training programs for their local staff on how to operate on the ground in an ethical manner.

Many of Africa’s countries have sound economic fundamentals and offer largely untapped potential. The African landscape however, is constantly progressing and changing. As a result, information in general is a highly perishable commodity.

It is critical to monitor news and signals in order to identity the trends that will shape the future of business in the continent. Numerous progressive companies have learned to overcome the challenges of doing business there, with the right market intelligence support, to enjoy positive return on investment.

Stuart Maclachlan is Chief Executive at Global Intelligence Alliance (GIA) Member company for South Africa, Butterfly Effect Intelligence and Stephane Rosenwald is President at GIA Member company for North Africa, RV Conseil.

For media inquiries, send an email to media(at)globalintelligence.com.

About Global Intelligence Alliance

Global Intelligence Alliance (GIA) is a strategic market intelligence and advisory group. GIA was formed in 1995 when a team of market intelligence specialists, management consultants, industry analysts and technology experts came together to build a powerful suite of customized solutions ranging from outsourced market monitoring services and software, to strategic analysis and advisory.

Today, we are the preferred partner for organizations seeking to understand, compete and grow in international markets. Our industry expertise and coverage of over 100 countries enables our customers to make better informed decisions worldwide.

www.globalintelligence.com