Where to Launch in Africa

(Source: Harvard Business Review)

Benard Kenani spotted his uncle as
soon as he walked into the hotel
lobby. Uncle Michael was sitting at a
corner table with two other men,
also in suits, both of who were
laughing at one of his jokes. That
was typical of Michael, a successful
executive in Nigeria, whose affable
disposition was widely admired. He
quickly stood up when he saw his
nephew.

Michael shrugged off the comment.

What matters to me most is that
youre finally going out on your own,
achimwene. Its what youve always
wanted.
Michael, like Benard, had been born
and raised in Lilongwe, the capital of
Malawi. Like many talented
Malawians, he had left the country
as a young man to seek
opportunities elsewhere, settling in
Nigeria a decade ago. He now ran a
thriving manufacturing enterprise.

Welcome to Lagos! he shouted

across the room. He proudly
introduced Benard to the others,
referring to him as one of Nigerias
up-and-coming entrepreneurs.

Benard had left Malawi, too, after

winning a scholarship to study in the
UK, where hed completed both his
university degree in economics and
an MBA. But hed been drawn back
to Africa by the burgeoning
opportunities there and a desire to
be closer to home. After six years as
a manager at a packaging company
in Kenya, he now felt that he had
enough experience to start his own
business. His uncle, along with
several other friends and family
members, had committed to
investing in it.

Right after the men left, Benard

corrected his uncle. You know I
havent decided if Nigeria is the
place to start my business yet.
(Editors Note: This fictionalized case
study will appear in a forthcoming
issue of Harvard Business Review,
along with commentary from experts
and readers. If youd like your
comment to be considered for
publication, please be sure to
include your full name, company or
university affiliation, and e-mail
address.)

Benard was in Lagos to see his uncle

and seek advice about where to
establish himself. Though Benard
1

had an ambitious vision of someday

running a venture that spanned the
continent, he knew he needed to
focus on one country at the start.

nervous. And Ive been reading a lot

recently about growing instability
and how that could threaten the
countrys prosperity.

But youre seriously considering

Nigeria, right? Michael said.

Sure, those are risks, but youre

going to find risks everywhere. You
also need to think about the upside
of basing yourself in Africas largest
economy. Where else are you
considering? Michael asked, quickly
adding, Waitdont tell me
Malawi.

Yes, of course. Benard nodded as

he opened his laptop. The market
is competitive, but my research
suggests that there are still
opportunities in some specialty
packaging markets. Ive run some
projections.

Benard gave his uncle a nervous

smile. He knew this was coming.
Benard, when did you become so
sentimental? Your vision is so much
bigger!

Michael interrupted Benard, closing

his computer. You just need to look
around! The BBC, the New York
Times, the Economist the whole
world is talking about how fast
Nigeria is growing. Were on the
cusp of joining the G20. If you want
to be on the forefront of Africas
growth right now, Nigeria is the
place to be.
I agree. There are many factors that
make it an attractive market. If
everything continues at this pace,
Im confident that I can be profitable
in the next year or two, Benard
said. But Im also worried.

With the expertise I can bring to

the business, within a year Ill be the
number one packaging
manufacturer there
Michael quickly stopped him. But
what does that matter? Number one
in Malawi?
Thats just the start. Malawi will
give me a base to launch into other
east African markets Zambia,
Mozambique, Rwanda, even
Tanzania and then move into

He saw the puzzled look on

Michaels face as he continued, The
political environment makes me

other businesses. I dont want to be

stuck in one place. I want to build
across markets to achieve scale.
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The apprehension on Michaels face

made Benard realize he should try a
different approach. Abambo,
remember when you started out
here in Nigeria, it wasnt such an
enormous economy. As the country
has grown, so has your business.
There are other smaller African
economies poised for growth, and I
can be a part of it. I already have a
potential business partner in
Lilongwe that can help get me
started.
If thats what youre concerned
about, Michael interjected, I can
line you up with three potential
partners here tomorrow. Just say the
word. He asked Benard when he
expected to make a decision.

business partner in Malawi. She had

inherited a small packaging business
from her father. Because shed been
preoccupied with several other
successful entrepreneurial ventures,
however, shed done little to
develop it. For the past year, Amara
had been looking for ways to divest
the business, ideally by finding
someone to buy a majority stake
from her. Benards father had
introduced them during his last visit
home.
I simply havent had the time to put
into the business, Amara explained
as she showed Benard around the
manufacturing facility. Indeed, many
of the machines were outdated, and
several were no longer functioning.
Luckily, were still in the enviable
position of often having more orders
than we can fill. Your father probably
mentioned that our customers are
primarily tobacco producers.

Soon, Benard said. He explained

that he had told his boss that he
would be leaving to start a new
venture and had taken the week off
to finalize his plans for it.
I will support your business no
matter what you decide, Michael
said. But you need to think about
where the money is now. Thats
where you want to be.

Tobacco accounted for more than

70% of Malawis exports, and
tobacco packaging offered some of
the most attractive margins among
the products sold by Benards
current employer in Kenya. If he just
made a few equipment purchases
and built off Amaras existing
relationships, he could get started
right away. But he also realized that

The Potential of Malawi

The following day, Benard flew to
Lilongwe. He was eager to meet
with Amara Desta, his potential

it was risky to set up a business

where almost all the demand would
come from one sector.

Were perfectly situated for later

expansion into other markets in east
Africa too, if thats of interest to
you.

You must enjoy being back home,

Amara said.

Benard agreed to be in touch with

Amara in the coming week and
excused himself to go meet his
father, Kwende, for lunch.

Yes, I would love to spend more

time here, Benard responded,
thinking about his childhood in
Lilongwe. His family, as well as many
of his friends, were still nearby.
Attractive as it is on the personal
side, I want to make this decision
objectively, based on the
economics.

Kwende was eager to hear about

Benards meeting with Amara.
Theres lots of potential there,
right? Kwende asked
enthusiastically. It seems like a
good partnership. You both bring
such assets to the table.

Malawi has more to offer than most

people think, Amara noted as she
proudly rattled off a list of the
countrys recent improvements to
him as if he were a visitor, not a
native. Though the 10 years Benard
had been away from Malawi hadnt
felt long, he understood why those
whod stayed now treated him like
an outsider.

Its true. But, abambo, I know you

want me here, and I think thats
clouding your judgment.
Listen, Im not as successful as your
uncle Michael, but Ive been looking
into this. Start in Malawi, and after
youve succeeded here move into
other countries. Focusing on one of
the bigger markets like Nigeria and
Kenya may seem safer now, but that
can always change. By diversifying
into several smaller markets, youll
still have a business if there is
political or economic upheaval in
one place.

And the demand is there, Amara

continued. The tobacco growers
would love to buy packaging in
country. Right now, the costs to
import packaging are exorbitant.
Producing domestically would
dramatically lower them, and wed
quickly capture much of the market.

Ive thought about that. In fact, the

woman I spoke to in Rwanda argued

the same thing. Benard had been

in touch with the head of the
Rwanda Development Board, a
government agency that was
providing incentives for smallbusiness owners as part of its
postgenocide rebuilding efforts.
Shed made several compelling
arguments for establishing the
business there, including a growing
economy and reduced bureaucracy.

problems this month, infrastructure

ones the next. But youre ambitious!
Dont you want to be a leader and
put back into the country what it
gave you?
Back in Nairobi
One week later in Kenya, Benard
knocked on his bosss office door.
After inviting Benard in, Peter
Agambu, the CEO of the company,
quickly got to the point. Im sorry
that youre going to be leaving us to
go out on your own. Have you
decided where youll be setting up
your business?

Shes right. While some of these

other markets might be less lucrative
today, as they continue to grow, so
too will your business.
Uncle Michael also raised the issue
about a skilled labor shortage here,
Benard said. It looks like Amara has
struggled with that. I need to be
sure I can hire people with the
appropriate skills. If I cant find my
employees locally, its going to
dramatically increase costs.

I met with my uncle in Nigeria and

a potential partner in Malawi. There
are attractive opportunities in both
markets. I also spoke with a
government agency in Rwanda, and
theyve set up a one-stop shop to
help new businesses get all their
permits. Its now one of the easiest
places to set up a business on the
whole continent. So there are many
options, but its hard to see the clear
front-runner.

Benard, everyone is going to tell

you to go to the big markets like
Nigeria, South Africa, or Kenya.
Theres still money to be made
there, no doubt, but its also
tremendously competitive. Malawi,
Rwanda, Mozambique they are
low-hanging fruit by comparison.
Sure, youre going to face some
significant challenges labor

For me it was easy, Peter replied

confidently. Kenya was a big
market, and Im originally from
Nairobi, so I knew the place well. I
just had to learn about packaging.

Peter had hired Benard right out of

business school and had been his
mentor ever since. In Peters view,
entrepreneurs needed to focus on
one country to succeed in the
African marketplace. Africa was so
culturally and politically diverse that
a business that spanned multiple
markets would need a huge
centralized infrastructure. Dreaming
of a successful pan-African business
is just that a dream, hed once
told Benard.

I bet your uncle encouraged you to

strongly consider Nigeria, Peter
said. Theres certainly a lot of
excitement about its growth and
potential. Even those of us outside
Nigeria are now talking about it.
While you might be fighting for a
smaller piece of market share, it can
still be very profitable to be a
relatively small player in a big
market.
Thats certainly true, Benard
replied. But theres no reason I
cant build a profitable business by
launching in a smaller market. Of
course, the trouble is, if I start off
there, Ill need to expand into other
countries to gain scale, and Ill be
creating exactly the type of business
you always cautioned against,
because itll be difficult to manage.

Benard recognized the challenges.

There were unquestionably
significant hurdles associated with
expanding into multiple markets.
Countries in Africa might be
geographically close, but differences
in language, culture, and political
systems often made them seem
much farther apart. Even getting
from one place to another was
difficult. Countries that were
practically neighbors might involve
several plane connections, and
travel could consume an entire day.

My strategy was my strategy,

Benard. Whats yours?
Questions:
! Should Benard begin his new
packaging business in Nigeria
or Malawi? Or, consider
another African country? Why
(and Why Not)?
! Should Benard be considering a
partnership structure for entry
(why or why not)? If yes, what
type of partnership structure
would you suggest?

Still, Benard believed Africa was

changing and that many smaller
markets that had historically been
overlooked by ambitious
entrepreneurs like himself were now
among the most attractive.