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'Businesses need to rework Africa expansion strategies'

'Businesses need to rework Africa expansion strategies'

A study conducted by PricewaterhouseCoopers (PwC) on M&A activity in Africa shows that deals with no capability alignment (32% of the total number) significantly underperform compared to those that have clear capability alignment. Business expansions into Africa have been particularly disadvantaged with a total of 66% resulting in negative shareholder returns.

These recent blunders across Africa demonstrate a need to close the gap between strategy and execution on the continent according to PwC.

Jorge Camarate, partner and business strategy specialist at PwC says the majority of executives interviewed for its annual CEO survey said they do not have a winning strategy.

"In the context of Africa expansion for companies there is a lot of discussion about which countries to go for, which sectors etc. and you don't often hear discussion about 'what are we good' at and 'can we actually do this', 'do we have the right capabilities' and I think that is unhelpful. We suggest that one should start by understanding what you are good at and then you look for opportunities where you can use those capabilities."

Camarate says businesses should not necessarily focus on growth as is typical of executive outlook, but should rather pay attention to the business's identity and capabilities.

He also recommends what he termed 'acts of unconventional leadership' which include translating business strategy into the everyday, putting the company culture to work instead of trying to overhaul it, committing to an identity and cutting costs to grow stronger.

Managing growing complexity

The challenge of running a company in different parts of the continent, as evidenced by the torrid time firms like MTN, Sun International and Tiger Brands have endured in Nigeria, show that companies need to simplify their strategies as much as possible, according to Camarate.

"The reason strategies of diversification underperform is because of complexity ... because you are are trying to do something different to what you were doing before and that adds more complexity to the organisation. You now have a set of operations, a set of markets etc. and now you need to have new solutions and that complexity can become unmanageable after a while. I think successful companies expand in a way that is consistent with what they have done before and in a way to avoid unnecessary complexity... for example Shoprite have started building shopping centres but the core of their business is still very much retail."

Camarate also called for strategies to be tailored for each country in order for them to be executed effectively. "A lot of foreign companies tend to approach Africa as a monolith or as a kind of last frontier, and the countries are actually quite different and this needs to be considered as companies expand. You can see South Africa, Namibia, Botswana and Swaziland as one block and you can see Kenya and Tanzania as another, and Nigeria will have its own reality, but you need to evaluate each country and and see how you can be specific to their needs."

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