Approximately 40% of SMEs globally don’t see the opportunity for growth that Africa offers, despite the continent’s economic growth.
A study conducted by the Economist Intelligence Unit (EIU) on behalf of logistics giant DHL Express surveyed 480 SME executives and experts from business lobbying groups to find that the remaining multinationals and state-owned companies do see the potential in dealings with African countries.
But that still leaves a large margin of small businesses worldwide that are put off from involving themselves in the African market, often because of the continent’s low average consumer spend, cultural and infrastructure challenges, as well as inefficiencies such as corruption and political risk in the region.
Charles Brewer, Managing Director of DHL Express Sub Saharan Africa says unfamiliarity to the unique regions is the most common obstacle for foreign businesses.
“The unfamiliarity of foreign markets received particular attention, with 84% of respondents describing understanding a target market’s culture or language as important or very important in determining its attractiveness,” he said. “This also explains why most SMEs often expand into markets that resemble their own.”
But the continent still has untapped potential for smaller international businesses.
“The fact that SMEs expect to generate up to 50 per cent of revenues internationally by 2019 is a massive positive and highlights the vast opportunities for Africa from an investment and job creation perspective,” he said.
DHL notes that, with its strong networks, it can help help SMEs grow into new markets.
“With the support of the right partners, a well-designed supply chain, clear understanding of their competitive strengths and the right mindset, SMEs can break through any border and make the world their market,” Brewer said.