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.
In last week’s article, we mentioned the need to localize franchise models to drive AfCFTA instead on copy-pasting foreign-designed models used by multinational franchise brands coming into Africa.
The reasons are simple, each of the 54 African countries has their own cultural, linguistic and socio-economic environment and it is only by taking these into account that a business will thrive there.
But there are other fundamental reasons and AfCFTA will remain a pipe dream if, at individual country level, businesses do not come up with strategies to harness their weaknesses into strengths and convert threats into opportunities.
First. On one side, most of Africa is dotted with millions of micro and small enterprises started on the basis of necessity for their founders to survive.
Many have never heard of systems or standards, many close as soon as they start and only 20 per cent survive to their third birthday.
They cannot be relied upon to grow beyond their village enclaves, yet they are the majority who should be thriving in this enlarged African market.
Second. In the middle are a few relatively successful indigenous businesses. These are among the 20% that survive their third birthdays, characteristically African family-owned enterprises that have matured as their founders grew older.
Most are run on operations manuals held only in the heads of their founders, normally with zero succession planning. Inevitably, when the founders die, the enterprises soon follow.
Even more tragically, at the height of their success, few have growth plans beyond feeding, schooling and investing for the family. Their founders are rigid and only read of AfCFTA in news, wondering what animal it is.
Third. The other side of the scale has few indigenous businesses which have survived generations (mainly Asian-owned), operate on success formulas mostly copied from multinational corporations operating in Africa.
These, together with the multinationals that they copy, constitute less than three per cent of all enterprises and serve over 90 per cent of the market in their localities.
They know about and want to take advantage of AfCFTA as they have, most likely, sat in the workshops that created this new free trade area.
But unfortunately, they are tied to the conventional brick-and-mortar distributor models. Most will wait until they can raise enough capital to increase production capacity to meet the new demand created by AfCFTA. They will go into each country, appoint the largest distributor in town and go to market through this conventional channel.
One of Africa’s crippling problems is unemployment, which has caused the mushrooming of the millions of survival-focused micro and small enterprises.
In order to truly realize the AfCFTA dream, we need to design African franchise models that, first, infuse standards into and formalize the millions of micro and small enterprises to become part of the bigger more-organized trade ecosystem. Second, such models should inspire the few indigenous African family-owned businesses to seek and achieve easy growth into Africa through involvement of citizens of the other countries.
Lastly our African franchise models should encourage the few larger successful local and multinational enterprises to entrench in each African country seamlessly by localizing ownership.
A combination of the formal business format franchising, licensing and micro-franchising models is needed to embed everyone in these categories into one African manufacturing, trading and consumption ecosystem.
This would ensure faster growth for all enterprises, more jobs creation, quicker technology and skills transfer, more widespread wealth creation and a sure increase in the private sector’s contribution to Africa’s GDP.
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.