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Starting A Business in South AFrica

 

 

 

 

~By Walter W. Muzangaza

 

With many unpredictable events taking place on the global geopolitical stage, during multinational states of unrest. Added to that, the uneasiness of the still rampaging global Covid-19 pandemic. The thought of Starting a business in South Africa or Africa might be something that just seems like an unneeded risk to add on to what already seems like a precarious state of global economic affairs. Yet somehow somewhere we understand that there is a possibility that these global shared problems might not go away for a long time and the real exercisable option available to us right now is hedging the risks and take the necessary actions to move forward. The question we really need to ask is, "Is Starting a business in South Africa worth it?". Let's explore this more.

 

Let's firstly work with what we have right now. You are probably looking at this article because you have been thinking about starting a business and you are now gathering information that helps you make that decision in an informed way. So we will get it out of the way and say, yes starting a business carries some risk that you may fail. However, if you take the right actions study the risks and benefits of certain directions, to capitalise on the right opportunities at the right time, you will be able to achieve success in reaching your business goals.

 

Starting a successful business in South Africa needs you to always be informed with the correct and relevant information about what is happening, the opportunities available, the risks associated and strategies to use etc. In this article to help us answer the question, "Is starting a business worth it for you?", we are going to draw from major changes that have been happening that have potential to create major national as well as continental businesses successful. Whether you are big or small, these are insights that are useful and can help you benefit from them if you choose to adjust your strategy to become aware of these changes.

 

Fast growing population

 

 While it is not often talked about with the amount of attention it deserves, the African Population is growing at the fastest rate in the world. With a current population of 1.2Billion in 2021. This figure is expected to increase by 50% by the year 2035. This means that the African population will have grown to surpass that of China or India. By 2050, the African population is expected to have doubled to about 2.4Billion and to double again to 4.8Billion by the end of the Century.

 

Why should these numbers matter to you when you are considering starting a business or looking for investment destinations in Africa?

 

Profitable business is only successful if there is demand for the products and services it supplies. It goes without saying that the more people there are, the more demand there will be for products and services that your business will supply. The businesses that generally become more successful are those that are well recognised and trusted by the people it serves. The major strength of economies like and China & India, and the reason why they are growing at a very fast pace is because of their large population.  By starting a business earlier, you get to gain the trust and patronage of current as well as future customers by mere recognition of your brand.

 

 

Insight - By the end of the century, almost 1 in every 3 people of the global world population is projected to be found on the continent of Africa. More people = More needs of products and services = more business potential.

 

Furthermore, as a final note on this point, starting a business in a country such as South Africa, where it has already cemented its reputation as a strong economic player on the continent with strong industrial capacity, manufacturing, technological and financial muscle will help you ride on it when trying to find easy first-mover advantage into the rest of the other countries with little to no industrial or manufacturing capacity but with massive demands for those products created in such ways.

 

Quick Adoption of Digital Technologies Trend

 

While Africa in general has not been a major player in the creation of technological capacity due to a number of socioeconomic factors. It has however actively adopted and benefitted from the technologies that were developed by its peers of other continents. This has been especially true for those services that assist in the day to day easing of doing business e.g. Fintech that allows people without bank accounts to send and receive money within and beyond borders. Apps that allow the freelancing economy to grow and quickly share work opportunities. Social media mediated commerce where small retailers, are able to find and target their relevant customers with ease.

 

Africa is becoming an incubator of soon to explode potential especially in the areas of tech that helps people improve their lives, whether this is transporting people/goods, food production monitoring, logistics tracking and management, accessing affordable education and important information etc.

 

According to Mckinsey article titled Africa's overlooked business revolution, "Amongst the main reasons for the meteoric rise of Africa is the avid adoption of all things digital and mobile. 122million active users of mobile financial services. Smartphone usage is set to double from 315million to 636million by 2022. This will match the usage of that in Europe. Does that mean that there is an opportunity to be found in serving this growing segment?" This article quoted had been published in the year (2018). This number was already surpassed and now stands at 650million active mobile users as of writing this article in July 2021.

 

What this means is that, the growth of business activity in Africa will be heavily supported by the usage of digital technologies that help reduce costs, increase better decisions by relying on AI tools and reducing overheads by automation and outsourcing noncritical functions to other businesses.

 

Changing Trade Landscape on the African Continent

As of the beginning of the year 2021, the African Free Trade Area that had been ratified by 54 of the 55 African Countries came into effect on January 1st 2021. However, because of the global pandemic that had caused most of the countries worldwide and on the continent to close borders in an effort to restrict movement and reduce the spread of the virus most countries could do little to take advantage of this new and historic continental free trade block.

 

Egypt, Nigeria Algeria, Kenya, Ghana & Rwanda are some of the economic major players on the continent that compete in the North & upper central regions of Africa and are relatively safe destinations for investing in certain industries as they are increasing their capacity for better trade. However, In the southern regions of the continent the best places to start a business or direct investments will be South Africa, Botswana and Zimbabwe. They are the major economic players in the region putting in place measures to further safeguard their future prosperity as Southern Champions of African Trade. For this article however, we are going to direct attention to South Africa as the best place to start a business.

 

The most promising industries that are showing tremendous profit potential are in the areas of Infrastructure building, agriculture, banking, consumer goods, mining, oil, gas and alternative energies, telecommunications. See more from Mckinsey article titled "Africa's path to growth sector by sector". When you juxtapose the necessity of such products and services as business opportunities and their growth potential owing to rapidly growing population, you can see exactly just how much distance you and your business can go.

 

So is it a Good Idea to start a business right now in South Africa?

 

We say yes, provided you are guided by good quality information to help you make better decisions.

 

Assuming, this article has done a good job of getting you excited about the prospect of starting a business in Africa and specifically South Africa, what are the 5 general guidelines should you keep in mind as you choose to take action go forward?

 

We are living in an information age, and as all new and upcoming successful entrepreneurs and business owners need to be, you must always have good and reliable sources of relevant information around you - especially from relevant experts. Let them advise you on what has happened, is happening and is likely to happen in the industry of your choice. This is such that your decisions may be informed and armed with insights that help maximise benefit while at the same time reducing unnecessary assumption of risk.

 

Familiarize yourself with the legal environment of your business. South African Law is very specific and highly developed especially in certain industries, it is a good strategic investment to learn about the laws that apply so that you may both benefit from them as well as to avoid breaking them.

 

Be very clear about the scope of the services or products you will offer, to whom, when, how & why. You must also define what it is you do not do. This will help you find partners that are willing to work with you as well as support the better running and growth of your business. Often times this may result into access of an entirely new demographic of customers.

 

Know your competitors, what they do, how they do it, how much it is costing them, their value proposition to customers and their capacity to impact negatively or positively on your business.

 

Always keep learning fast, adapting, overcoming and moving forward being aware. Beyond the specifics of what the African and South African business landscape requires, fast learning and adapting are the most powerful tools that any prospective entrepreneur or new business owner needs to develop.

 

In Conclusion

 

So we ask again the question, Is starting a business in South Africa worth it? We believe yes it is, provided however this decision is calculated with the aid of relevant credible data from experts. By the time many people realise this and begin taking massive action, it may already too late or the markets with the highest potential may have already become flooded.

 

There needs to be high levels of coordination of entrepreneurial activity on the continent. This is such that opportunities may be seized as they are being recognized and it needs to be a loop that feeds into each other on multiple levels without little or no wastage of resources or material."

 

Although it seems like it is happening at a very slow pace, Africa is developing at a very astronomical pace. There is a lot of room for improvement and investment in areas of human life that have not yet been explored. Investment in digital tech and natural resources, logistics, food production & security, healthcare, skills development as well the infrastructure that assist these business and encourage further progress will boost development. The business that are created early are those that will reap the biggest benefits.

 

Image By: Rui Silvestre (Unsplash Images)