Sub Saharan expansion – Part 4: The Investment Journey and Stakeholder Management

Welcome to the fourth and final instalment of our 4-part series on expansion in 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 4 covers the relationship between investor and stakeholder on the path to developing a successful endeavour.

Building common ground needs to be a continual activity occurring while the business case is being built and not once it is done. Management are generally keenly aware of the need for change management when it comes to implementing strategy with lower levels of the organisation but tend to be less aware of this need with their boards and their executive peers. Be prepared to go through phases of change management. If the investment is right, be prepared for cycles of great enthusiasm followed by great doubt, resetting of strategy, and starting all over again.


In our view the following sequence of steps are vital to creating buy-in:


Agreement on investment philosophy and corporate strategy:

At this stage it is important to understand where this opportunity ranks and fits in the overall corporate strategy. It is also important to understand what the corporate competency set is and is not.


Agreement on market opportunity:

Not just the country economics but the target market, the competitive space, the trends and unfulfilled needs. Is your executive team excited about the opportunity and do they understand it? Bring key influencers to the country of expansion and set them up in meetings with local business people, expats working in the country, market research companies, local innovators, regulators and economists. Let them have a first-hand experience.


A mistake commonly witnessed is this task being handed over to the “investment team” or the “Africa team”. This works well when things are going well but is simply unsustainable when help is needed.


Agree the corporate approach to new market expansion:

Identify who will lead this and take accountability for it – from an executive perspective and divisional perspective. Who will be involved or has a stake in this? Key players will include technology, innovation functions in product, etc. If it is not you and you alone, ensure weekly updates and personal conversations at least bi-weekly. Achieve alignment on the minimum level of leverage and resourcing required, as well as where the cost will be carried. Align also on product development priorities and sign-off procedures, flexibility within marketing practices and branding.


Agree on all parameters and communicate these over and over and over again. Most of these stakeholders have very powerful home market priorities and incentives competing for attention and so the effort to embed the Africa priorities in their minds must be ongoing and consistent.


Agree the target market very clearly:

The selected target market is relative to all other options not being targeted. Each market presents it’s own set of “opportunities” but to keep strategic direction you need to focus on one or few. The distraction associated with inclusion of a broad range of stakeholders is that everyone will have a different opinion on where best to focus. You need to have properly understood the facts about each opportunity leading to the reasons why you chose the specific focus. Unless you have understood each opportunity, stakeholder opinions will introduce a lot of unnecessary and expensive digging of ‘rabbit holes’ instead of executing while the opportunity is still ripe.


It is important to consider options broadly and not just focus on your industry. For example, while investigating Tanzania’s rural household behaviour we found a study about cooking ovens that provided more insights to living circumstances and preferences than the field research conducted.


Agree on your local customer value proposition:

The key question is how to build market dominance within a reasonable time period. New investors, like new competitive entrants, need to know how they will extract value better than local competitors. If you are a retailer of any kind, how do you create a retail entertainment experience that fits the culture? Technology will play a big role but it doesn’t have to have all the bells and whistles if you truly understand and focus on the pain points, nor does it have to be extremely expensive if you leverage partners already in the market.


Define a market approach that broadly addresses each stakeholder:

Failures in market expansions often stem from a pure focus on ROI and target market in the business case and not the cost of broader stakeholder management. See all stakeholder groups as key partners in finding the right acquisition, the right partners and also the right employees. As a foreign investor you also need to consider the perception that modern investors are similar to old colonialists, out for their gain at the expense of the local people. You should be clear on the role you plan to play to realistically enhance the local economy through the new opportunities you will create. Industry development is of key importance to regulators who often lack the teeth to force changes in how local players behave.


Agree on your value chain operating model:

Think about the practicalities of investment and where it would be most effective. What do you need to own versus outsource, partner to develop, partner to leverage or eliminate all together? The more integrated your strategy with local businesses and stakeholders, the quicker execution can gain traction and the higher your chances of success.


Finally, agree on your implementation approach, timeline, metrics and potential exit strategies:

Phase the implementation and link ‘go/no go’ decision points to clear metrics to keep everyone comfortable. Committing to small steps and limited investments is easier than large and permanent commitments. Be clear about exit options at each of the identified decision points and also plan scenario driven exit strategies far into the future. Geographic exits are as complex as the initial investment decision for all the points discussed earlier in this paper. Be clear on responsibilities within the group and on milestones. Use an integrated, collaborative planning tool to keep all up-to-date and honest.


Thank you for joining us on this 4-part series looking at expansion into sub-Saharan Africa. We have placed a lot of emphasis on depth and thoroughness throughout this series. Our bias is in part a consequence of our role as advisors and as consultants brought in to try and address omissions made previously. The investment cycle is however a continuous process requiring rigour and constant feedback and measurement.


SSA is a growing and dynamic region with the potential to generate strong returns for investors who treat the countries that they enter with the deep respect that they deserve.


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