Updated: Jan 18, 2020
In a 2017 interview, the market entry strategist at Africa Jumpstart, an organization which assists diaspora entrepreneurs to invest in Africa, Dr. Harnet Bokrezion from Eritrea, pointed out that attracting Africa’s diaspora to invest back home will greatly support Africa’s growth and development goals. With many young people from Africa leaving the continent to search for greener pastures abroad, Africa diaspora entrepreneurs can fill the unemployment abyss in Africa.
The road to investment is, however, not an easy one. While many entrepreneurs are willing to invest in Africa, the challenge is the information gap facing the African market. Many diaspora entrepreneurs lack the correct information about many markets, with the mainstream media sometimes unable to reflect the real situation on the ground. The absence or limited availability of reliable information stifles investment and causes businesses to collapse or operate without making profits. While most entrepreneurs residing in the diaspora are passionate about their idea, many do not ground their products or service in: “what real market need am I solving?”
There is need to design customized products, specifically suited for the African market and this can only be achieved through proper market research. There are however, many challenges that African entrepreneurs face while conducting market research in Africa. This article will look into those challenges and how the African entrepreneur can achieve their market research goals nonetheless.
From the 2018 survey of African businessmen by McKinsey and Company, it is clear that Africa is a hub of opportunities waiting to be exploited. However, African entrepreneurs in the diaspora are likely to make costly investment mistakes, hence the need for proper market research into their business ideas. To conduct a successful market research in Africa, the African Diaspora Entrepreneur needs to first understand the challenges they will face. Africa, which consists mostly of developing countries, faces challenges such as high levels of illiteracy, poor infrastructure, language and cultural barriers, as well as government barriers. With the continued increase in penetration of mobile networks and market research agencies, as well as use of more cautious business tactics, African entrepreneurs could find it easier to obtain the information they need to create successful investments.
What is market research?
Market research helps you avoid a trial and error kind of venture and initiate a proven business idea. Proper market research will give a clear picture of the viability of your business idea through customer surveys, competitor analysis, market trends, and general market overview. Market research can be a combination of primary and secondary information. Primary information is the information gathered directly from stakeholders through modes such as interviews and questionnaires, while secondary information is gathered from published sources such as books, the internet, media publications, and the like.
The challenges of conducting research in Africa
The following are the challenges that African entrepreneurs face in mostly obtaining primary information in Africa.
High rural-based population and illiteracy
According to an article by CNBC Africa last year, most of Africa’s economy is nested in rural areas. According to the report, a majority of young people aged 15-24 will be found in rural areas by the year 2030. Africa therefore remains primarily rural due in part to the higher rate of births in the rural areas and the lack of employment opportunities in the city.
Countries with the highest rural population of over 80% include Burundi, Papua New Guinea, Uganda, Malawi, Ethiopia, South Sudan, and Niger. With the likelihood of a high percentage of potential customers and stakeholders residing in rural areas, poor transportation, illiteracy and low internet penetration increase the cost of market research. For instance, illiteracy increase research costs as people have to be addressed in languages they can understand.
Low Internet penetration
Internet World Stats reported an African population of over 1.32 trillion in Africa in the year 2019. Of this population, only around 464 million, a percentage of 35.2 were internet users. Facebook subscribers were around 15.5% 2 years earlier. This is a relatively low penetration rate, which makes it challenging for businesses to reach people and conduct comprehensive research.
The cost of data is generally expensive in Africa. Internet penetration is however better and cheaper in countries with more than one network provider such as Rwanda, Sudan, DRC, Morocco, Kenya, and Egypt. In Egypt for example, a GB of data will cost less than $2 while the same will cost $15 in Zimbabwe. Top countries with the highest internet penetration include Nigeria, Kenya, Egypt, and South Africa.
In Africa, there is an estimate of between 1500-2000 African languages. Many African countries consist of more than one tribe or community. Since most of the people are illiterate, communication becomes challenging. People tend to be more responsive to researchers from their tribes. Field researchers therefore have to represent the different existing tribes.
Many countries will require you to have a government permit to conduct any study. Countries which require a government permit to conduct studies include Sudan, Djibouti, Eritrea, Zimbabwe, and Kenya. Some reasons for research regulation are to ensure quality research, and to safeguard data and information. The permit can take as long as 3 weeks to be ready and you might also encounter corruption, with government officials seeking to exploit researchers.
Although there are variations across countries, Africa’s economy is mostly informal. The informal economy is one which is not monitored or taxed by the government. In other words, there are limited opportunities to aggregate markets information. Consequently, top-down analyses that are sometimes essential to making business decisions are unavailable or very costly to collect: market size, growth rates, trends, etc.
How mobile penetration is making things easier
According to the Global System for Mobile Communication (GSMA), mobile connectivity is increasing, having doubled in the year 2016, with 90% of people being covered by 2G networks by the end of the year 2017. According to GSMA, mobile subscription is expected to grow, with 87% of people in Sub-Saharan Africa expected to be connected to mobile networks by 2025. The smartphone penetration in South Sahara has also risen from 15% to 33% in 2014 and 2018 respectively.
With increased penetration of the mobile phone, researchers are able to reach more people through the internet. Respondents are readily available and distance is no longer a barrier to getting the information you need. Also, thanks to geo-coding, there is no longer need to ask questions about location, meaning you can concentrate on core strategic questions.
With the increased use of smartphones, social networks have become one of the easiest avenues to source for information. Many Africans are getting vocal on avenues such as Twitter and Facebook. South Africa is the top African country which is big on Twitter, followed by countries such as Kenya with KOT (Kenyans on Twitter), Nigeria, and Egypt. Social networks are a great way to gather information on people’s views, habits, challenges, and interests.
Companies offering market research services and easing the research process
Companies offering market research services are especially benefiting from the increased mobile phone penetration. A company such as GeoPoll assists in conducting up-to-date research through mobile networks even within the informal sector within a limited timeframe. GeoPoll administers paid surveys through text, voice, SMS, in-person, and mobile applications.
KASI Insight uses crowdsourcing to get information from any country within a fortnight. KASI Insight uses a combination of the biometric system and survey research to collect information. Their biometric system is especially useful to solve challenges such as respondent bias or unwillingness to give information. Other trusted companies which offer market research services include Dalberg Research which covers about 20 African countries, Numbers Africa, SIS International, among others.
What to consider when gathering information in Africa
Face to face interviews are more effective where there is low internet penetration and logistical issues. Consider using SMS to conduct research to reach all kinds of mobile phone owners, especially those who do not own smartphones. You also need to have a diversified research team to cater for different ethnic groups, so as to close the ethnic bias gap. You need to plan to ask only very strategic questions that have a real business impact, so as to save on time and money. Market research companies are the best bet when you need to gather relevant, up-to-date, and authentic information quickly, efficiently, and effectively.
If you do have competition, research on their business through visiting their website, talking to their customers, and buying their products, among other methods.
Apart from primary research which involves directly digging information from individuals, secondary sources of information can prove invaluable. These include obtaining information from web searches and state agencies, most preferably NGOs. Another way is to search for periodicals, newsletters, and other online publications. Industry associations are also a good way to obtain information. There are also plenty of libraries all over Africa that African entrepreneurs can visit and learn more about the African market and dig for relevant information.
You can also hire a business which specializes in offering online secondary research services. Afro Assist is an example of such a company providing online research at an affordable price.
Africa is growing in terms of literacy, mobile penetration. Although Africa is increasingly being noticed on the global stage, it still remains a hard to reach market compared with other developed countries. Increased mobile penetration and the existence of market research services will help African entrepreneurs validate their ideas in Africa, as they could be the source of growth that Africa needs to rise up the economic ladder.
Further, entrepreneurs can choose to partner with existing businesses in Africa as a way to assure success. Partnerships are safe because they provide key linkages and already established ways of doing things. Finally, African entrepreneurs could choose to start small and use the experience to learn what works and what does not before they launch their ideas fully. Carrying out a SWOT (strengths, weaknesses, opportunities, and threats) analysis of your business idea is a good way to determine whether it will work or not. Additionally, consider the value of secondary research in validating your idea.