Africa Center Nonresident Senior Fellow Aubrey Hruby cowrites for How We Made it in Africa on how the key lessons for businesses entering Africa stem from the differences between operating in a developing country and developed country markets:
Using a developed market mind-set – which benchmarks everything to how it works at home in San Francisco, Dallas, Toronto, or Manchester – causes companies to often misevaluate an opportunity in an African market and adopt costly strategies. Understanding African markets, and all frontier markets, for that matter, requires empathy, a good read of history, and an openness to local cultures and context. By 2020 one billion people are predicted to live in slums globally. Companies that cannot do business in the narrow alleyways, the dense and informal housing, among the mass of people who characterize the slums, will be punished by the market. The developed market mind-set is not only a large driver of misconceptions about Africa; it is also one of the most important obstacles that businesses seeking success on the continent need to overcome.
The developed market mind-set assumes that life and business in the United States or Europe is the same as the rest of the world. It assumes that there is electricity when you need it; that there is (generally) good road, rail, and aviation infrastructure; that there are excellent data sources to inform decisions; that there is an ecosystem of supportive businesses; that trash gets collected; that drivers follow traffic laws; and that contracts get enforced. These things are the exception not the norm in the rest of the world. The vast majority of humanity lives in countries defined by different realities – countries where systems don’t work, where trust (the lifeblood of business) breaks down, where traffic chokes the street, and where informal economies carry the day.