With the world economy going through a substantial shift, I’ve been caught in the middle of my own shift. The last year has been one of transition of going from “working for the man” in the developed world to becoming entrepreneurial by trying to build a business in Africa. In this post I will highlight the challenges and opportunities of what I believe to be a successful path.
Go home and watch the changes: The first step is to put yourself in the environment of where you want to build the start-up and watch and experience the trends and forces that are shaping the landscape. For me it was to return to my native home to Tanzania for an extended period of time (the original purpose was for my sister’s wedding). On return to Tanzania, I found that some things were still the same- some one can tolerate, others you may find are a big hindrance to starting a business. It is important to observe these carefully before making the plunge into any type of business.
– Unreliable utilities (mainly power blackout problems)
– Corruption and red tape (starting a business, import/export process)
– Personal Safety as a concern
– Cultural attitudes (Tanzania was a socialist country and many workers still behave in that mindset)
– NGO dominated landscape (more actors if anything, e.g. Gates and Clinton Foundation)
– Lack of skills (managerial and technical)
– Lack of Trust
Other aspects were changing rapidly- for me the ones that were very apparent and significant to make me think of opportunities:
– Rapid urbanization
– Strained road infrastructure and hence traffic and more accidents
– Increasing new and diverse expats/foreigners (Americans, Chinese, Arabic and Indian), NGO workers and entrepreneurs
– Increasing wealth and income divide
– New products and services (domestically produced and imported)
– Access to technology (more than ever, mobile phone, mobile banking, cheaper broadband, arrival of netbooks)
Identify a persistent problem area that overlaps with a passion:
The key is persistence- there are some ideas that either disappear because of new services and products; others are just not ripe in terms of timing and other market factors. Some ideas become more and more feasible though as the forces identified above take hold. There are few key sectors areas in East Africa that I observed with high potential:
– Food, food, food: Most sub-Saharan countries are not starving on aggregate- it is just the access and distribution of food products that is the problem (increasingly due to access to affordable and reliable transport). Take a drive outside to the rural farms and you can see how agricultural products are cheap- but it’s just the sheer need of someone to bring them to market. I believe this to be an important domestic market as well as one for export as more and proportion foreigners and emerging middle class in African urban areas increases. I believe there is scope to move up the chain too, for instance creating new processed foods such as yogurt and cheese in addition to a franchise fast food model. I met a former NYC Private equity individual who was about to open his 4th Subway sandwich chain, capitalizing on the rapid urbanization of Dar es Salaam’s now estimated 4M residents- a small yet increasing portion being middle class.
– Entertainment: Let me start with a question- What does boredom and the spread of HIV aids have in common? Let me ask it another way- what does a low-income single man with a job do in the evenings in his free time in the city? Now compare this with a married man? A single man in an urban area has many evening temptations- well, now the concept of “micro-movie theatres” has emerged- where entrepreneurs armed with TVs, DVD players whilst renting out small living rooms and halls are charging access, as little as $0.50 per person to watch a movie- the price goes up for premium content such as live soccer premier league matches. Many of these activities are probably illegal in a global contest due to piracy concerns- but this also highlights a huge need an opportunity for affordable entertainment. Whilst there is the usual Hollywood movie content- increasingly Nigerian soap operas and movies which are more popular due to the cultural fit. I came across this opportunity when talking with Dar es Salaam taxi drivers- who told me about how prior to these options, they would be such utter boredom for single men that they’d fall victim to temptations of prostitution and hence risk HIV infection- now they have another cheaper and less risky alternative to pass the time as well as being able to enrich their lives culturally. Specifically, this sector has some very attractive areas riding on this trend from supplying cheaper and more reliable devices (think projectors, tablets, theatre PCs), to distribution of content from Hollywood and the emerging areas such as bollywood and nollywood. With more eyeballs increasingly glued to screens come other opportunities such as targeted and relevant advertising.
– Healthcare: You may start to roll your eyes if you are living in the USA and are constantly being inundated with stories about the healthcare debate. But there is another similar healthcare debate that has been going on for the longest time I can remember- and that is how to enable affordable healthcare access for the African masses. It is more apparent in East Africa since there is often no effective health insurance coverage model nor an effective nationalized healthcare system- like many sectors, it is heavily dependent on AID which is needed for life threatening conditions but distorting from a business point of view. At the most basic end you will always have big problems such as HIV and malaria that are the domain of NGOs and foundations poring billions into projects and that take up a huge share of media mindshare- some wasteful, some fruitful. What about the next level up, and what about real tangible services? The increasing middle class and urbanization presents many opportunities to provide the first layer- in Tanzania, it started with many expats originally served by foreign Government or multinational subsidized clinics-this includes airlines, international schools and mining companies whose employees and their children needed healthcare services, but there are real opportunities to expand into new private hospitals and clinics. Many higher income Tanzanians continue to go on “healthcare tourism” trips to South Africa and increasingly India with remarkable results- there is an opportunity to bring some of these very services to the emerging middle class that the wealthy people fly abroad for.
In the next post I will cover Education, Cleantech and Real estate opportunities and conclude on key pillars for success.