Any sustainable business always keeps a close eye on growth opportunities to ensure they gain maximum benefit from upward cycles. For more than four years now, Comztek, one of South Africa's leading ICT distributors, has been developing its African footprint and now has sales offices in four African countries, and has conducted business in 37 African countries over the last 12 months.
We certainly subscribe to the belief that Africa is the future and that there is a substantial opportunity for companies to build critical mass on this continent. This is especially true if, like Comztek, you have global brands and being a player within the continent as a whole becomes a strategic positioning model for your business.
In terms of investment decisions, however, business managers have to take a clear view of their business area and identify opportunities from there. For example, as an IT systems integrator, some of your greatest opportunities would be based on UN or World Bank projects where you can control the flow of cash.
But how do we access the potential within these countries? Comztek's model has always been to identify a country that has a strategic benefit to both ourselves and our partners, as we did with Zambia, Namibia, Kenya and Mauritius. We will then set up an office in that country and ensure that we staff it with locals - the reason for this is that, while we know what the culture and business processes in South Africa entail, we cannot profess to be experts within these other countries without the input of a local team.
I would, however, caution that investment in Africa does not mean taking unnecessary risks. While the “low-hanging fruit” opportunities are becoming more scarce, and Africa, especially East Africa, is becoming more mature thanks to developments like the Seacom cable, there are opportunities that have a good balance between risk and return.
However, as with any opportunity there are risks, and these are some of the risks that Comztek has come across:
* Counterfeit or grey products: while Africa is seen as a technology dumping ground, we have also found that this challenge lessens as a country becomes more developed and realises the value of original products and the support that comes with it.
* Margin pressures: partnering with global vendors does place additional pressure on margins and is something you have to live with in an underdeveloped environment.
* Infrastructure: generally Comztek does not invest in a country that does not have a relatively good backbone infrastructure, as this seriously hampers business.
* Available financing: only a few local vendors have the ability to fund or absorb larger transactions. Our advice on this challenge would be to be conservative.
* Knowledge, skills and experience: generally you have to invest from the outset to improve on this issue. However, if the country has the right criteria and the partner vendor is able to assist, it becomes significantly easier to improve skills levels.
For Comztek, our vision is not only to grow our Africa offices to the size of our South African operations, but to also protect our South African business. So, in a nutshell, the growth opportunities exist, remain level-headed and don't take unnecessary risks, remain cognisant of the pitfalls.
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