How to export to... Africa
Africa is a big opportunity for many startups, comprising a hugely diverse array of countries and markets. As the economies of many of the countries strengthen and the demand for international goods grows, it's a continent with a dizzying amount of potential for businesses looking to export. But it can be daunting knowing where to start.
Nathaniel Peat is the founder of Gennex, creating safe, clean renewable energy products such as home lighting systems and phone chargers. There's a great need for these products in several African countries, where they can reduce the use of harmful kerosene lamps and empower people to remain in education, as well as providing communities with easy ways to charge phones and devices. Here are Nathaniel's tips for startups considering exporting to Africa.
How did you get started exporting to Africa and what are the first steps to getting started?
Our friend took one of our products with her on a family holiday. When she showed her friends and family they were amazed and told her "We have to get these products here, these are products that people need." Following this we planned and ran a 21 month pilot with our products on the ground to see if their was a demand was there. Once we established that there was a need for our products we sought distributors that would be able to order from us.
The next step was to export. We had to ensure our business was incorporated and registered, that we had an office in the country we were exporting to, that we had a bank account and that we had a warehouse for storage of the products. We also had to ensure we had all our certifications for the Bureau of Standards pass.
It's vital to comply with all the different Government Revenue Authority requirements. There are licences that needed to be applied for in order to comply with specific regulations, export declarations needed to be made, and exporting directly from the UK outside of the EU we had to gain a Economic Operator Registration Identification (EORI) number. There is a lot of things to do but by using a shipping forwarder the job is made easier. Once we had these things in place we had to source good clearing agents and then begin export.
How did you establish demand for the product, or do market research?
We formed a partnership with a Government department "The Greening Kenya Initiative" and ran projects in five places within Kenya where we measured the performance of the products, the impact and the need for our products. This project ran for 21 months and the results provided us with essential market research. We could compare it to other competitor products and were able to measure our performance against theirs, and this enabled us to modify the products more directly to meet the needs of the customers. You can watch this clip on KBC news about our pilot project.
What is the most challenging aspect?
We have had major challenges and hurdles, some of which include corruption and bureaucratic red tape. It took us twice as long to do things because we refused to bow to corruption. We also had to deal with shipping delays, which were out of our control and made us completely reliant on our clearing agents. These hurdles had a direct impact on cash flow. Other challenges have included poor internet on the ground in the country - this has limited our ability to do business and slowed our communication.
Finding the right people on the ground has been another challenge. We went through three different clearing agents before we found the right one, because we were being overcharged. The disadvantage to us was that, being a UK company, they inflated their pricing. The other challenges have been around gender inequality. My business partner Dowa Doneye is a woman, and I have had to lead on some things because her way has been blocked on the ground.
An example of this was whilst we were sourcing a new warehouse. We saw online that a warehouse was available so my business partner called, but when she spoke to the agent he said the warehouse was not available. She then asked about the other warehouse on the complex and he also said that one was also not available. It seemed a bit strange, so five minutes later I called the same agent. His response was completely different and he told me that they are both available and I could arrange a time to view it. We didn't go to see it, but if I wasn't there she would have been blocked.
Is there a lot of paperwork and certification?
Yes, there is a lot of paperwork to get through in addition to the prerequisites that are required before shipping from the Revenue Authorities and Bureau of Standards. The paperwork is more extensive if you are shipping electronic pieces of equipment or dangerous goods.
Is it expensive to export to Africa?
The import taxes can be very heavy on arrival, and clearing the goods can be expensive, especially on small consignments. These costs can be so large that you have to include it into the selling price of the goods. The landed price often times can be high. A way to mitigate this is to send the goods FOB (Free on Board) or EXW (Ex Works) - this way the client will absorb most of the costs at the port. If you are stocking your warehouse the more you ship in the better, as economies of scale work out better than small consignments.
What some reasons for startups to export to Africa – why is it a good market?
Africa is a developing market, and there are many opportunities. It's rapidly growing its worth, and offers for investment are ready. Africa’s economic growth during the past decade has been amazing and opportunities to profit exist as the developing middle class is creating brand new demands for consumer goods and services. They have more spending power and it provides opportunities for UK products to be exported.
The time to do it is now - the continent is much bigger than we think and there are lots of opportunities in many of its countries. Nigeria, Ghana, Kenya, Zimbabwe, South Africa, Zambia, Rwanda, Mauritius, Eygpt, Ethopia are just a few that can be considered. I believe that several opportunities will grow in the next five years where UK companies can export to the continent. UK products create a perception of high quality and often times they are of higher quality - this can be used to your advantage in exporting.
What sorts of businesses do well in Africa?
Sectors vary country by country, so I can only really speak to the countries that I know of, namely Nigeria, Kenya and Zambia. The sectors of Agriculture, Energy, Consumer Goods, Banking, Services, ICT industries and E-commerce are all sectors that seem to be doing well and are expanding.