Africa unite

Andrew Seymour says vendors are finally forming a credible strategy to address the whole of the continent.
Africa unite
By Andrew Seymour
Sun 05 Aug 2007 09:19 AM

In the last month alone, the importance of Africa to the prospects of companies operating a region-wide model from inside the Middle East has been clearly illustrated.

PC vendor Acer recently revealed it will earn US$3.5m from a contract it has won to supply desktops to the education authorities in Ethiopia, while storage integrator Pro Technology has added to the existing African office it operates in Sudan by opening a showroom in Libya.

Creative - the manufacturer of digital music devices and other entertainment products - is currently in the process of trying to identify potential distribution partners to work with in Africa. Bosses from the vendor's Singapore HQ have instructed Creative's Middle East team to begin building channels into markets such as Kenya, Ghana, Nigeria and Sudan.

This is all taking place against the backdrop of other big-name brands, such as Cisco and Toshiba, appointing authorised distributors to develop channels in specific African markets during the past 12 months.

Of course, you can argue that countless vendors and distributors have been growing their coverage in east, west and central Africa during the past decade, but there is still a healthy dose of companies that are only just beginning to evaluate how they should go about chasing some of the opportunities on offer.

Modest purchasing power, differential trading behaviour and the intricacies of constructing viable routes to market in some of the African countries will understandably make many suppliers think twice about the level of investment they commit. But others, such as Creative, clearly believe the long-term potential of this far-reaching region warrants an attempt, at least, to try and serve these markets more purposefully.

Just look at the handset market in Nigeria, where shipments of new GSM phones are forecast to rise almost 60% this year, according to IDC research.

If that prediction bears fruit, Nigeria will become the largest market in Africa for GSM phone sales, ahead of South Africa even. And the fact that just 25% of the population owns a mobile phone offers further evidence of the market's enormous potential.

For some parties, however, the possibility of developing a channel in Africa places them in a compromising situation. With the prominence of such an effervescent re-export business in Dubai, there are plenty of vendors already doing very nicely from product being inadvertently sold into Africa. And that puts them in a difficult spot. Do they endeavour to establish official in-country channels with the expectation that it expands their total addressable market? Or are they too fearful of it disrupting the flow of sales that already comes their way via re-export or sub-distribution routes?

Let's say you're a reseller in Kenya who suddenly discovers that the computer accessories you've been sourcing from Dubai are now available through an authorised in-country distributor, either at the same price or cheaper. Why waste money on transportation or logistics costs if you can buy that product locally at no additional charge? Great news for resellers. Possibly not such great news for the vendor who suddenly sees a nice chunk of revenue from Dubai gradually begin to dry up.

Vendors clearly have a lot of thinking to do when it comes to their African strategy, although I am still convinced that as the year progresses we will see more suppliers awarding authorised contracts in markets such as Cameroon and Ghana.

The financial outlays certainly won't match the kind of investments vendors are making in Saudi Arabia or Egypt, but it will still signal the strategic role that many of the emerging African markets have to play in the wider MEA context.

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