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Opening the door to Africa:
Lessons for chemical companies

Africa can bring growth to the chemical industry but understanding local markets is essential.

It’s not surprising that global chemical companies are looking to Africa to grow their business. With forecasted gross domestic product (GDP) growth rates of almost double those seen in developed countries1, and with significant activity in agriculture and mining sectors, sub-Saharan Africa presents an increasingly attractive target market. Here are recommendations for opening the door to Africa:

  1. Demonstrate commitment. The industrial client base, regulators and government of the host country will look to any new supplier to provide stability and commitment to the local market. These steps are critical before they will commit to significant contract volumes or issue operating licenses. Partnering with local producers or distributors, investing in local production capacity and building a track record of reliable supply are all ways to show practical commitment to a new geography.

  2. Understand your customers and how to reach them. In many African countries, the competitive intensity is hard to assess from the outside. Segmenting the customer base appropriately and developing specific offerings for each segment is critical. Local customs and complicated networks of intermediaries can make it difficult to practically reach the intended end customer. Partnering with local distributors and related suppliers may be key to building brand awareness.

  3. Be reliable. Many countries in developing markets are remote and logistically complicated. Delivery lead times may be long, and many customers favor consistent outcomes over the lowest product cost. Understanding delivery lead times, inventory levels and local quality expectations will build trust; these traits will also allow suppliers to move from mere product vendors to solution providers and business partners.

  4. Really understand your costs. Whether you manufacture in country or import manufactured product into the target market, it will almost always take longer and be more expensive than planned. Local productivity, access to skills and equipment, local fiscal regimes and the sheer logistical challenges can quickly escalate costs beyond original business case estimates. Start small and plan for scalability to test both production costs and pricing before committing to any new market at scale.

  5. Don’t put all your eggs in one basket. Many market entry plans rely on capturing a share of the large key accounts within each sector. While this is desirable and necessary, it is often easier to start as a second- or third-order supplier to these large players. Supplying subcritical volumes is a much easier sell, allows market diversification and provides direct access to client operations to learn and develop a value proposition.

  6. Stand out from the crowd. Once the effort to develop, market and segment relevant services starts to yield results, share your successes with partners, clients and regulators. Working hard to be relevant to the new market is of no use if the leaders, procurement teams, distribution networks and license authorities are not aware of your capabilities. Showcasing success stories drives more business and builds differentiation and credibility where it really counts.

Entering the African market continues to hold the promise of substantial growth for chemical companies. However, being successful requires commitment, a unique understanding of the local intricacies and an agile implementation approach.