By Martha Lagace, Staff Writer, HBS Working Knowledge
"When I left the US 12 years ago and returned to Ghana, everyone said, ‘Don't take the risk,'" software specialist Hermann Chinery-Hesse told the HBS audience with a grin.
Now technical director of SOFT Company Limited, Chinery-Hesse said he'd gone home to Ghana with one PC and "essentially no money." He just set the PC up on his bed and started writing programs. Then he bought more PCs, hired more people and bought still more PCs.
"This is one example of starting a business in Africa," he concluded, with a palpable mix of pride and exasperation, at the Africa Business Conference's panel session "Investment Opportunities in the New Millennium: Local Entrepreneurship."
"There are still working problems," Chinery-Hesse reminded the audience. "I should have been able to get a loan: Today we run the largest software company in Ghana. Exports are what will make it work. Yet there is a fundamental lack of understanding of financial services in our countries as to how businesses operate.
"[Loan officers] will ask you if you have a house. They have no data for evaluating a software company. Our company is too small in their minds. They don't understand it."
Other snafus, he complained, include a creaky court system ("If you took someone to court in Ghana, the whole thing could last seven years"), currency fluctuations ("We have mega problems with the economy. You can't change your price every week"), and corruption ("Contracts are awarded with a mechanism other than price efficiency," he noted, diplomatically).
Chinery-Hesse also emphasized that it is vital for entrepreneurs in Africa to nurture harmonious relationships with their partners. "Partnerships have to work," he stated, because anyone who quarrels with his or her partner might as well forget about seeking redress in the court system.
Yet the challenges may also be invigorating on occasion and can take advantage of unknown, heretofore untapped talents, he added. "You have to play all kinds of games; you have to be absolutely creative," Chinery-Hesse insisted. "You have to become an espionage expert to work there.
"But, on the positive side, where else in the world can you do business, and at the end of the year say, ‘I made a hundred percent margin' and it's not a drug business?"
The Customer Connection
Properly assessing the space for improvement leads to good opportunities, according to Shikoli Makatiani. Makatiani, a panelist representing the general-service Web site Africa Online, told the group that he and his partners "gave up comfortable lives in Boston to drive through potholes in Nairobi."
"But this also means we can understand our customers really well, and understand what they expect from us," he noted.
What customers have come to expect and appreciate when they can get it, he said, is superior customer service. Africa Online customers who had grown weary of rude treatment by their phone company, for example, met with a different attitude at Africa Online. When it rains in Zimbabwe, Makatiani explained, most customers can't get their Internet connection. So they go to the local office of Africa Online to use facilities there. "They appreciate it," said Makatiani, "and are ready to wait for [their own] connections to come back."
Part of Africa Online's approach, Makatiani said, was to target parents whose children were studying in the U.S. This enabled parents and children to stay in touch via email; it also allowed the company to train users and initiate a whole market segment into the communication wonders of the Internet.
Entrepreneurs fight for credibility
Panelist Adam Saffer (MBA '88) told the audience that if they want to work in Africa they need what he called "the Four Ps": passion, persistence, patience, and professionalism.
"The fifth ‘P' is to ‘pray,'" Saffer added. "Because nothing goes as expected."
As managing director of the Johannesburg-based joint-venture Ebony Consulting International, Saffer has worked in and around southern Africa for 20 years. He explained to the audience that African entrepreneurs need to prove themselves before they will be taken seriously by major players in the region.
"Entrepreneurs are assumed to be non-professional," he said. Small and medium sized businesses have the greatest trouble getting financing because they are perceived as either "too big" or "too small." It is easier to get financing to buy an $18,000 motorcycle than it is to raise $10,000 for a metal manufacturing enterprise, he said, shaking his head.
People contemplating entrepreneurship in Africa should look into import substitution, supply chain management, franchises, information technology, agribusiness and tourism, according to Saffer. "The most exciting aspect of consulting is hooking up entrepreneurs with larger businesses: domestic, foreign, white, black. There is tremendous opportunity through linkages, not only through procurement," he told the HBS audience. Large companies are very interested in doing business with small companies.
"A lot of money flows in to train technical assistants," Saffer added, "but it rarely gets into the hands of the entrepreneur. Through linkage opportunities, you can go where the money is. Look at opportunities [that have] increasing outsourcing of non-core activities: There is a deal and a transaction, and when you present yourself in that aspect of the supply chain, you'll get an opening."
However, Saffer said, what is restricting the growth of his own company is finding people in South Africa and southern Africa capable of handling the work. "You have a tremendous brain drain," he told the audience. "You know that. The young talent is being scooped up by large corporations. A lot of entrepreneurial talent is ending up at multinationals and big banks.
"You see all these micro-entrepreneurs cutting hair on the street," he pointed out. "They are trying to feed their families and stay alive, and to equate that with entrepreneurial talent is a mistake. Africa is at a point where — if you're focused — there is opportunity for entrepreneurs and they're not around. It is a serious challenge to find the right partners and staff; it's quite different from other places.
"Small-to-small and medium-to-medium business connections work because they understand each other's problems," Saffer said. "Both want to form a relationship but they speak different languages, so we're trying to broker the deal.
"Money is not the constraint," he added. "We've never had a problem with a viable relationship getting the money."