Sub Saharan expansion – Part 1: The Business Case

Updated: Sep 17, 2020

Welcome to our 4-part series on expansion into Sub-Saharan Africa. MɅD Associates have been involved in a number of projects which had the aim to expand into new markets in sub-Saharan Africa (SSA) or to improve traction in SSA. In this series we provide some practical insights to assist those considering entry to, or building growth strategies for SSA countries (excluding South Africa)

Part 1 covers creating a convincing business case for investment and treating the investment with the respect that it deserves. In this piece we present the common success factors we have witnessed summarised into three categories.


Due diligence

Financial oversight is often too weak, and companies don’t perform thorough due diligence. The logic is that small investments don’t justify the cost of more detailed due diligence. The process therefore skips over the post-acquisition realities of applying accounting policies and audit standards, the cost of new systems and head office oversight, and the true appetite for initial losses are often not appropriately considered in the business case.

In all the cases we have been involved in, the buyers overpaid for the assets acquired and did so knowingly and willingly. However, the full extent of “premium” paid for the acquisition almost always only became clear after a year or two of on-the-ground experience. We go into more depth on due diligence in part 2 of the series.

Market Strategy

‘Me-too’ market strategies, market irrelevant offerings, or a lack of investment to connect with the market are the most common mistakes that investors make. There are striking examples of South African retailers and financial services businesses creating retail outlets in places like Lagos that were “show rooms” of western retail perfection but void of customers because they had nothing that catered to local needs or local tastes. This is not just a matter of unattractive offerings but these spaces were so foreign that they were intimidating. Few customers even dared to enter.

Investor’s attitude

A deep understanding of the required strategy for market success is often linked to the investor’s attitude to it’s required parenting role. South African owners have developed a fear of over-extending or meddling. As a consequence, they leave poor, and in some cases corrupt, management unsupervised. The South African head office lives for a while in “ignorant bliss” of the true local financial situation (because it is “too small to give it more attention”) until the situation is beyond repair.

Investment in SSA is never a passive affair and even where investors take minority stakes an active market strategy must be part of the plan.

In part 2 of our series, we will be looking at entering the market and which approach is the best for you and your business.

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