Let's Invest in Africa Now

The inside of a Big Square outlet.

Kenya’s restaurant industry has been booming over the last few years. Local brands are opening outlets in major cities to meet growing demand from the middle class, while international players have also entered the market. Investors too, seem to be taking note. Last year, private equity firm Emerging Capital Partners (ECP), bought a majority stake in a homegrown coffee chain. This interest among investors and entrepreneurs is expected to continue.

“The middle class is growing and we need to invest in companies that service that middle class. I think the excitement in our industry will only grow,” said Morne Deetlefs, the owner of casual dining restaurant Big Square.

We are seated at a construction site where the South African entrepreneur is overseeing the building of his second restaurant in Gigiri, in the heart of Nairobi’s diplomatic zone.

The first Big Square outlet located in Karen, an upmarket area in Nairobi, has already carved a niche for itself barely a year since it opened. By the end of 2013, Deetlefs plans on opening a third Big Square outlet in another prime area, called Lavington. Next year, he hopes to expand to the middle income suburbs in Nairobi.

“I definitely don’t want to be a brand that is exclusive. When creating a brand, you need to choose your best locations first. Once you are known, you can now start venturing into other areas,” he said.

Deetlefs, who was previously managing director at a firm that runs fast food, bakery and convenience retail outlets in Kenya, said he started Big Square to fill a gap in the market.
“I saw an opportunity… The timing is right. I think in the next five to eight years, the whole of East Africa will be a different place… look at the development going on and the growing middle class,” said Deetlefs.

Deetlefs reckoned that there “is scope for national growth”, citing the emergence of business hubs in major urban centres across Kenya.

“Next year we want to be in ten locations,” said Deetlefs. “It is achievable. I am optimistic about the market. Look at what is happening at other players in the industry. They are all growing.”
According to Deetlefs, investors have realised that the restaurant business could be profitable and are willing to finance innovative businesses that meet market demand.

“If you create the right opportunity, people will invest. I am not focusing on the money. I am focusing on the brand. I am focusing on the business. Once I can prove that this is fruitful and I can get other people excited about it, the money will come,” he said.

Despite the increasing number of restaurants and coffee houses in major urban centres in Kenya, Deetlefs believes the market is big enough and there is space for brands that differentiate themselves from the rest.

“I think differentiation for me is big. It makes your story so much easier to sell. If you want to create a brand, you have to [be] different and create your own niche,” said Deetlefs “Anybody can create a one-off restaurant, but if you really want to be successful, you have to open more outlets and to do that you have to offer a branded experience.”

The big goal for Deetlefs is to take Big Square across the region and even beyond the continent. “Why can’t an African brand go to America? Why can’t an African brand go to England? We would like to do this. Why not?”

As he expands Big Square, one of the biggest difficulties Deetlefs expects to encounter is recruitment and the training of staff. Finding talent, he said, is a challenge many businesses face in the region.

“You don’t have the money to employ the people you really want to employ. I can find locations, I can most probably find finance to build the shops. One shop is easy, but after you start growing into multiple units, your team becomes the biggest challenge,” he said.

Despite the hurdles that come with entrepreneurship, Deetlefs finds it fulfilling.
“If you are an entrepreneur, it’s in your blood. I have tried quite a few things in my life. Some worked and some failed. I have worked for a few companies, but what I really love is what I am doing now. It makes me happy.”

According to Deetlefs, after years of trying his hands at many things he has become better at strategic planning and learnt to work with people who compliment his strengths and weaknesses. He added that although he has learnt a lot in his lifetime, his experience has not made “the risk less frightening”.

“A lot of people don’t talk about fear and the risk factor in being an entrepreneur. There is a lot of emotional roller coasters in being an entrepreneur. I live in a foreign country; I am here with my whole family. The risk for me, I think, is even bigger. If it doesn’t work I have to pack up and go back to my own country,” he said.

Deetlefs advised other entrepreneurs to confront their fears. “I think when it comes to fear, you have to face it and just pull through.”

For those aspiring to venture into business, having an understanding of the industry they invest in is critical.

Deetlefs noted that although Africa has immense opportunities worth investing in, it will take years before things really take off. “I think the challenge is that it’s difficult to do business in Africa. It’s damn difficult,” he said.

“Africa is not going to change overnight. It will take a while. As the economies grow, the pressure to make it easier for businesses to thrive will increase. It will gain momentum quicker than it has in the past.”

These challenges notwithstanding, Deetlefs believes now is the time to invest in Africa’s emerging economies.

“If you wait another five years, I think you will miss the bus. The time is now.”

Source: How We Made It in Africa

‘Inclusive Business is the Key to Africa’s Economic Growth’

Prof Walter Baets

A report launched at this year’s World Economic Forum places inclusive business front and centre of economic thinking going into what is considered a decisive era for Africa’s development and the world. The time could not be better, says Professor Walter Baets, director of the UCT Graduate School of Business, but such a major project requires major shifts in thinking.

“Africa needs to re-dream business, including more people, encouraging people to be more economically active and redistributing wealth in novel ways, while nurturing dignity and self-respect,” says Baets. “If the continent wants to move ahead, merely adopting prescribed ways of doing things or adapting them slightly is not enough. We need to take what we know, dissect it, probe it, stretch it, turn it upside down and inside out and make it better.”

The report, Realising Africa’s Wealth – Building inclusive business for shared prosperity, promotes inclusivity as the ‘key to boosting economic growth and sustainable development’ across Africa and details key constraints and opportunities for inclusivity in the business environment. It suggests four areas of support for business: providing awareness, knowledge and technology for operating in low-income regions; implementation support in terms of logistics, transaction and marketing; providing micro business support and assistance; and, financial motivation in the form of incentives and investment.

Baets says inclusivity is not a new concept for business but that it has mostly been sidelined in the past.

“Its appearance on the agenda this year is not out of choice but necessity as business as usual continues to take us toward a dead-end. If we don’t change our thinking now and start making the drastic changes needed on a global level, we’ll find ourselves in serious trouble,” he says.
Inclusive business argues for the inclusion of low-income communities in its value chain – both as producers and consumers – not at the cost of profitability, but for the gain of society and the environment.

“Unfortunately the same crippling assumptions about this simple concept continue to rear their heads in talks about economic development that have been preventing the wide-scale adoption of the inclusive model,” says Baets. “A prevailing assumption is that the World Bank’s prescribed way of developing emerging economies is the most effective. In fact, there is very little proof that they are indeed successful enough to elicit such loyalty to them.”

According to Baets, there are many examples of countries that have progressed well without applying International Monetary Fund and World Bank growth strategies notably Brazil, and most high-growth African countries.

The other assumption is that government is responsible for driving inclusivity and that it should do everything to create the necessary environment for it and that the best vehicle to advance this is entrepreneurship.

“Of course, government should work to create the conditions that nurture this transformation, but true inclusivity is a massive project that really should be driven by business – government may have the mandate but business provides the means,” says Baets.

According to Baets, a major paradigm shift is required, one that challenges the way business approaches old problems as sustainable development creates a complex labyrinth of opportunities and pitfalls for business. And managers will play a pivotal role in this transformation of the corporate agenda.

“There is a need for new perspectives if the themes of responsibility, sustainability and corporate growth are to be reconciled,” he says.

Baets says it won’t be the WEF or the World Bank or governments that change things for the better, it will be those business leaders who shun tradition for positive progress and who take the long term sustainability route rather than the win-now route.

“To start, we must give up our accepted assumptions and confront the collective rationale that says there is still time. There isn’t.”

Source: How We Made it in Africa

A Ghanaian Chief advises Entrepreneurs to save with Credible Financial Institutions

The Paramount Chief of Lower Dixcove, Nana Kwasi Agyemang IX, on Wednesday admonished entrepreneurs and businesses to utilize their resources judiciously by saving with credible financial institutions.

He entreated petty traders and entrepreneurs to investigate the credibility of financial institutions before transacting business with them so that they do not run at a loss.

Nana Agyemang gave the advice at the opening of an ultra modern office complex of GHAMFO in Takoradi to coordinate and administer its activities.

He commended the GHAMFO Investment Savings and Loans Limited for distinguishing itself as a credible financial institution over the years and offered financial support to women in particular to boost their trade.

Ms Elizabeth Tawiah, Chief Executive Officer (CEO) of GHAMFO, said the company had 15 branches in Western and Central Regions.

Some of the branches are located in Sekondi, Daboase, Aiyinase, Tarkwa, Agona Nkwanta, Dixcove, Mankessim, Simpa, Dompim, Akwidaa, kojokrom, kokompe, Essiama, Takoradi and Nsuaem.

Ms. Tawiah said the company started as a non-governmental organization in 2007, which trained women in batik, tie and dye, soap making, sewing and catering.

After sometime, the NGO developed into a micro support scheme and offered financial support to women to improve their businesses.

It later methaphosized into a financial institution and offered services such as fixed deposit, loans, educator savings plan, old-age savings plan and kiddies savings plan to its customers, she said .

The CEO said the company aimed at ensuring financial independence to the needy and underprivileged in society.

Source: Ghana News Agency 

Nigeria's rescued Banks Recapitalise

LAGOS - Nigeria's Union Bank on Friday became the last lender rescued in a $4 billion 2009 bailout to get recapitalisation approval, bringing to a close a reform programme set-up two years ago to end the country's banking crisis.

Old generation lender Union Bank is the last of five rescued lenders to have concluded shareholders' meetings in order to approve deals with new investors.

Union said its shareholders approved a $750 million injection by a group of private equity investors led by African Capital Alliance who would own 60 percent of its equity.

Unlike Union Bank, the remaining four have voted to merge operations with healthy rivals, a process the lenders say will take 12 months to complete.

Rescued Intercontinental Bank will merge with Access Bank, Oceanic Bank will be recapitalise by Ecobank Transnational Inc (ETI) and merged with its Nigerian subsidiary Ecobank. Privately-held Equitorial Trust Bank will merge with healthy peer Sterling Bank

Finbank will merge with FCMB

"We expect the conclusion of the M&A to result in seven banks dominating the banking sector over the medium term. These banks are expected to account for around 80 percent of the banking sector assets, 70.5 percent of the banking sector deposits and comprise 72 percent of the banking sector loans," analysts at Stanbic IBTC Bank said in a note to clients.

"In our view, this should increase the strain on the mid-tier banks."

Mid-tier banks in Nigeria include Diamond Bank, Skye Bank and Fidelity Bank, all of which have growth ambitions, analysts say.

The shareholders' meetings were keenly watched.

Last month, central bank revoked the licenses of three other lenders for failing to show an ability to recapitalise ahead of the deadline, effectively nationalising Afribank, Spring Bank and Bank PHB.

Analysts said the take-over of the rescued lenders by healthy peers marks a new beginning for the industry amidst stiff competition and that central bank will now focus on policy and regulation.

Banking shares reacted positively to the news pushing the main index up 1.13 percent, its single biggest rise this month. The index of Nigeria's top ten bank rallied 2.05 percent.

Stanbic said it expected the mid-tier lenders to build-up scale by trying to acquire one of the nationalised banks in order to survive industry competition.

Wema Bank , the last of the nine rescued lender, has since scaled down operations to become a regional bank with lower capital requirement.

Source: Reuters

Ghana Financial services record 76% growth

Growth in the financial services sector in the country picked up in the second quarter of the year, recovering from a 23. 8 per cent decline in the second quarter of last year to an impressive 76 per cent growth rate in the second quarter of 2011.

The 76 per cent year-on-year growth in the financial and insurance sub-sector of the services sector is an impressive turnaround from the sub-sector’s unexpectant slump in growth in the second quarter of last year.

The 2011 second quarter Gross Domestic Product (GDP) the monetary value of goods and services produced in the country figures released by the Ghana Statistical Service, indicated that the phenomenal growth in the financial and insurance sub-sector consequently caused the services sector to record a growth rate of 14 per cent in the period under review as against the 4. 1 per cent recorded in the second quarter of 2011.

The Head of the National Accounts and Economic Indicators at the Ghana Statistical Service, Mrs Bernice Serwah Ofosu-Baadu, explained to the Daily Graphic in a telephone interview that the growth in the sub-sector was mainly as a result of massive improvements in the loan recovery rates of financial service companies and clean premium books kept by insurance institutions in the country within the period under review.

The data we have show a tremendous improvement in the net income (the difference between interests received and interests paid) of the banks and insurance companies in the second quarter of 2011, as against the same quarter last year, Mrs Ofosu-Baadu said.

She, however, declined to give figures on the said rise but noted that the banks had the highest weight in that sub-sector.

According to her, the exact cause of the rise was difficult to explain since unlike agriculture, financial and insurance activities, especially regarding the interests received by these institutions, is not a seasonal event where we can say it was their season in the second quarter of 2011.

Mrs Ofosu-Baadu said the reversal in the subsector’s growth rate was expected but we did not expect the growth to jump that high.

We actually cannot predict what will happen in the coming quarters; anything can happen as the financial and insurance activities have nothing to do with seasons, the head of national accounts and economic indicators said. 

Source: Daily Graphic

Recognize And Manage The 5 Stages Of Small Business Growth

A corner dry cleaner and a fast growing software company may not seem similar, but experience and research has shown that they both go through the same struggles. They may act differently, have different organizations and use different management styles, but they face common problems that happen at similar stages in their growth.

Understanding the stages of small business growth and inherent problems can help you assess where you are in the growth pattern, and help you anticipate what’s going to be required to succeed. Owners, for example, will have to spend an extraordinary amount of time during the initial start-up period, and then have to learn to begin delegating work and authority as the company grows.

1. Existence stage

During the start-up phase, to move from an idea to a business takes customers, cash and stamina. You do everything. You’re the primary source of capital and energy, and if you have help, you supervise them directly. Your only goal is to exist and survive. Formal planning is seldom a part of the process.

At this stage customers are what you need. Not business cards, a letterhead, or a company car. Companies fail at this fledgling stage because they have intricate, detailed product plans and no clue how to identify, attract and sell customers. A company with a clear marketing plan and a vague product plan is more likely to succeed than the reverse.

2. Survival stage

If you make it through the start-up and have proven you have a product that people can and will buy, then survival becomes your primary concern. You have to be able to make enough money to cover your costs. And you need to be able to finance growth.

Mom and Pop businesses rarely grow past this stage. Founders often think of the business as an extension of themselves, and can’t imagine not being at the helm. Owners are satisfied with marginal returns for their effort and investment, and are unable or unwilling to delegate responsibility.

It’s not uncommon for companies to grow broke at this stage. They don’t have enough money to cover the costs of building new products or hiring more people to provide more services. Cash forecasting is job one. Now is the time to start thinking of replacing yourself with someone who knows how to manage a business, not just start one.

3. Success stage

Once a company is economically healthy and is generating average or better profits to ensure success, the company can stay at this stage indefinitely. Financial management, organization development, and delegation to a growing management team requires more than seat-of-the pants leadership. Few founders have the temperament to successfully continue to lead an organization beyond this stage.

At this stage, you have to decide if you’re going to disengage or go for growth. Entrepreneurs often have new business ideas they want to try, newly-prominent business leaders think about running for political office, and others simply want to enjoy the benefits of success and pursue hobbies or other outside interests. If you don’t disengage and decide to grow your company you need to focus on using cash and borrowing power to finance the expansion.

4. Takeoff stage

If you opt to grow, delegation and financing will become your key problems. You’ll need competent management to handle growth, a complex business, and an evolving business environment. There’s always a danger that the business climate will change, but dramatic change just as you start an aggressive climb can be devastating.

If you fail to grow, you might be able to fall back to “just” a successful company. But companies (think Sun Microsystems ) have found themselves back at the survival stage after an unsuccessful attempt to takeoff.

This is a pivotal time. You need to decide if you want to become a big business or sell the company at a significant profit. Recognizing your own limitations is crucial. Just because you managed, literally and figuratively, to build a successful company doesn’t mean you have what it takes to go forward. Success has a dangerous way of making you feel omnipotent which can lead to rapid expansion you can’t finance or a complexity you can’t manage.

5. Maturity stage

Controlling your substantial financial resources will be one your biggest challenges if you manage to create a mature company—you’ll probably have a whole division trying to do just that. But the biggest challenge of all will be cultural. In a rapidly changing world, flexibility and agility are crucial. Improvisation is something jazz bands are good at. Orchestras, not so much.

Airplane manufacturer Lockheed understood that and created a special, in-house design group known as the Skunk Works, which produced the fastest airplane in the world (SR-71), and the highest flying aircraft in the world (U-2).

Knowing what challenges you’re likely to face in the years ahead can help you mitigate their impact. In the words of serial entrepreneur Ben Franklin, “If you fail to plan, you’re planning to fail.”

Source: America Express, Open Forum