Localise franchise models for Africa

Friday September 6 2019



Wambugu Wa Gichohi

Wambugu Wa Gichohi 

Africa recently moved closer to economic integration with the launch of the operational phase of Africa Continental Free Trade Agreement (AfCFTA) on 7th July 2019 at Niamey, Niger. When fully operational,AfCFTA will create a single market for goods and services by removing existing trade barriers across Africa. Set to be the world’s largest free trade zone in terms of population, it will create a single market of 1.2 billion people and establish a combined GDP of USD2.5 Trillion. The UN Economic Commission for Africa projects it to have the potential to raise intra-African trade by 15% to 25%, or $50 billion to $70 billion, by 2040.

Even with this rosy picture painted by these targeted figures, finer details of achieving them need a tooth-comb approach. It is foolhardy for any business seeking a share to think of Africa as one homogeneous market of 1.2 billion people eagerly awaiting your goods/services. Some South African companies-otherwise very successful at home-have failed miserably in most of Africa, with success registered only in marketsneighboring home.

The reason is, they mistakenly think what works in South Africa will automatically work elsewhere, yet at home they will tell you they have “never been to Africa”. Even more interestingly, they never learn from their predecessors, with a current example being a popular South African pay TV channel provider currently on the brink in most of Africasince they won’t switch to a pay-on-demand model when most of Africa long-moved to internet-based free content streaming.

Given the diversity that defines Africa, each of the 54 countries has their own cultural, linguistic and socio-economic environment which businesses thinking Africa will have to contend with. That is where the tooth comb comes in.

Conventional Fast-Moving Consumer Goods (FMCGs) distribution proponents argue it is easier to station a production unit in one corner of Africa, produce for the market and distribute using traditional FMCG models used by multinationals over the years. In the disruption world we live in, that is defending success formulas of yester-years without considering current market dynamics.

The reality is, businesses thinking of growing under AfCFTA must consider the diversity that defines Africa, lestbe ready for failure.

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The easiest way to do so is by adopting franchising to drive AfCFTA, since ithas been proven to succeed through localizing ownership. What is important, however, is that the franchising model as generally applied in the countries where it has succeeded, must change/adapt to fit-in with the individual country’s economic reality, activities, tradition and culture.

Kirk Magleby in his book “Ending Global Poverty- The Micro-Franchise Solution” shows that there are at least 19 different business relationships that are variations of franchising.

He states that “most of the successful enterprises on earth could conceivably utilize one or more of the standards-driven, well-documented franchise relationships to extend their influence into the far reaches of the developing world. For franchisor and franchisee alike, a well-designed and artfully administered franchise concept can be a consummate win-win”.

It is through adopting one or several of these that African businesses will seize opportunities under AfCFTA and eventually integrate Africa. Even as we attract Foreign Direct Investments-(FDIs), Africa can’t simply wait for international brands to eventually establish in certain selected countries-as they currently do-based on uniteconomics of their foreign-designedfranchise models. To integrate Africa socio-economically, indigenous business concepts in Africa must take the initiative to localize franchising and this is possible as has been proven by the few that have tried.Given the micro nature of most African enterprises, Micro-franchising holds the magic key.

The writer is the Project Promoter and Lead Franchise Consultant at Africa Franchising Accelerator Project aimed at achieving faster African socio-economic integration under AfCFTA. We work with country apex private sector bodies to increase the uptake of franchising by helping indigenous African brands to franchise.

We turn around struggling indigenous franchise brands to franchise cross-border. We settle international franchise brands into Africa to build a well-balanced franchise sector. We create a franchise-friendly business environment with African governments for quicker African economic integration.

wambugu.wagichohi@worldaheadafrica.com, franchising@tpsftz.org

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