Unlocking Africa’s franchising potential

Updated on 16 October 2014

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Unlocking Africa's franchising potentialSouth African companies would do well to look for growth opportunities north of the border, in light of South Africa’s less than inspiring economic prospects.

FNB’s Franchise Leadership Summit held yesterday in Johannesburg, gave franchisors, franchisees and leading business owners the opportunity to do just that.

On the summit’s agenda were the various ways which franchisors and franchisees can position themselves to capitalise on the rise of the African consumer.

“With reliable support systems and ongoing research, franchising is seen as an industry with no boundaries and if successful it could be a profitable business venture in any industry,” says Morne Cronje, Head of FNB Franchising.

In his economic overview address FNB Chief Economist, Sizwe Nxedlana, explained that it was not all doom and gloom for South Africa, and that while the economy is struggling, there is a lot of healing taking place “with spots of strength”.

Nxedlana explained that while the consumer side of the economy was robust, the supply side continues to under-perform with issues like electricity and labour not helping the situation.

“Africa is for patient money, don’t take shortcuts”

Africa – Investors’ dream or nightmare? 

A panel discussion on what it takes to expand a business into the rest of Africa revealed that while the rest of the continent is a lucrative and largely untapped market, it is not without its challenges.

“Africa is for patient money, don’t take shortcuts” said panelist, Dave Hendrie, a sales and marketing expert with extensive experience working for various multi-nationals including SAB and Simba-PepsiCo.

Hendrie said the mistakes that most business owners make is not doing enough research into the specifics of each market.

“You cannot run your company’s African strategy from your office in Sandton, you have to get out there”, he said.

Business owners who are exporting their goods outside the country will also find themselves having to contend with the issue of logistics, he added.

“Distances are huge and there are no shortcuts with documentation”, Hendrie said.

Also on the panel was Grant Patisson, former Massmart CEO and a director at Taste Holdings. Pattison said business owners should not be put off by the logistics issue and that it does get easier.

“All goods will move, but its inefficient,” Pattison said, explaining that there are opportunities for enterprising individuals to exploit these inefficiency challenges.

Business owners also shouldn’t ignore the administrative issues that come with doing business outside South Africa.

Jason Muscat, FNB Economics Industry Analyst explains that: “both franchisors and franchisees will also have to contend with varying levels of infrastructural development – electricity, water, road, real-estate, supply chain – different regulatory and tax regimes, as well as the impact of foreign exchange movement.

Where to invest in Africa

According to RMB’s Where to Invest in Africa 2014 report, the top 10 most attractive destinations remain the same as last year and include: South Africa, Nigeria, Egypt, Ghana, Morocco, Tunisia, Libya, Ethiopia, Tanzania and Kenya.

South Africa is still the most attractive country in Africa, but it continues to lose ground to Nigeria, which has leapfrogged into second place, replacing previous number two, Egypt.

The Spur story

Keynote speaker Pierre van Tonder, CEO of the Spur Group, explained that the group had learnt from experience that it was important to look at each country in isolation instead of “copy and pasting” a local business model into a foreign market.

“The number one rule for Africa is each country has its own set of rules,” he said.

The Spur group currently trades in 12 African countries and is the leading sit-down restaurant in most of those countries including, Uganda, Zimbabwe, Zambia and Lesotho; it is second in Nigeria.

But it has not been without it’s challenges, says van Tonder. “The expense of building a restaurant centre in Africa is unbelievable”, he said.

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