how the Market™ responds

December 13, 2007

Because Africa is not exactly the biggest consumer market in the world, companies don’t tend to have an assigned distributor or a branch/office in each country. Some companies simply have one distributor for the whole continent, sometimes located on the continent (very often in South Africa), sometimes not (the Middle East and Europe often are responsible for Africa) . But that happens less often than you’d think.

Business management software supplier Sage’s distribution network has the export department of the Paris office covering francophone african countries while a branch in South Africa covers the rest of the continent and I assume some of North Africa goes to the Middle East Branch (I wonder where Morocco, Tunisia and Algeria fall). Apart from the lingustic aspect, there is another reason why it makes sense. In Africa, business law, corporate pratices, accounting standards tend to be closer to those of the former colonizers. So in this case, Gabon has more in common with France than with South Africa. I wonder what effect OHADA would have on that network.
Microsoft goes for geographical regions with Egypt having its own Cairo office, a Johannesburg office for South Africa and its enclaves, an East Africa office located in Nairobi, Kenya, a Southern Africa office in Windhoek, Namibia, a North Africa office in Casablanca , an Indian Ocean office in Mauritius (that supports Djibouti, French Caledonia and French Polynesia in addition to all the Indian Ocean islands that usually belong to Africa) and here’s the twist , a Lagos office for only Nigeria and Ghana and an Abidjan office for the rest of Western and Central Africa. So in this case, the biggest national markets get their own local structure and the rest in bundled in a way that make sense.

Dell’s network is a lot more complicated with local retailers, a Johannesburg office for support on a product, a Paris office on another one and countries “belonging” to various zones depending on the service/product (if you follow the link just go ahead and click on a few countries).
Elevator company Otis has 4 offices in Africa, one in Egypt, one in South Africa, one in Ivory Coast and one in Cameroon. I’m trying very hard to understand the last one.
Caterpillar on the other hand seems to have an official distributor in almost each of the african countries (dealer locator). Construction machines do sell everywhere and with the cheapest product costing more than $100,000, one better have good consumer service.
And then you have Toyota has a presence almost everywhere either relying on the even older network that is former french colonial concession company CFAO or their own local offices.

But my point wasn’t to explore the distribution network of every single company that has an activity in Africa. That whole introduction is really about one odd thing:

M-Audio, an Avid subsidary that specializes in music hardware has a distributor in South Africa and one in Angola.
Propellerhead, a swedish company that makes the aclaimed music software Reason has a distibutor located in Mauritius that covers the whole continent except South Africa and Angola who have their own distributors (and they’re the same as M-Audio’s).
Now, South Africa is the biggest consumer market on the continent and as noted above, every companies have a distributor or an office there. Even notoriously cautious Apple has a South Africa website.
But why Angola ? The country is not particularly big like Nigeria and Egypt, or rich like South Africa, it’s not particularly well-connected to its neighbours like Ivory Coast or isn’t really part of a semi-unified regional market like Kenya or Uganda are.

Well this is why:

or

or

That was Kuduro, a music genre that originated in Angola and that mixes rap (sometimes), local rythms and electronic instrumentation and production. You can read (and view) more about its origins, its impact and the influence Jean-Claude Van Damme had on it on GlobalVoices (although I think they somehow overestimate the “message” part).

Now are we really surprised keyboards and music softwares sell enough in Angola for distributors and producers to find that market important enough to separate it from the rest of the continent ? That’s how you find opportunities, brothers and sisters (or that’s the beginning of a possible business cluster, economists).

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4 Responses to “how the Market™ responds”

  1. kwasi Says:

    I wonder if that means its possible to create another cluster in Nigeria selling digital video equipment and editing software. Or if one already exists…….

  2. aflakete Says:

    Hmmm.. First of all, do notice that I said “beginning of a possible cluster”. One needs a bunch of other conditions for it to happen (a reactive market, an advantage to produce/service locally, some competent institutions..etc.. After all 40 years of continental dominance didn’t make studios and record pressing plants and instrument shops and sound engineering schools and booking firms and record label grow in Kinshasa.

    As far as Nigeria, I think there are different constrains that prevent that from happening.
    – the country is big. Actually the industry is big because the country is big and it’s geographically spread (yes, even if all the famous actors live in the same Lagos neighbourhood).
    – music and movie equipment are not in the same parkball. It’s one thing for someone to spend $400 on a software, $300 on a keyboard and $300 on a microphone and make money out of it, it’s another to buy Final Cut Pro, a camera, lights, sound equipment and the whole 9 and then having to find a script, a crew actors and try to make money. Similarly, renting a studio is a bit safer than renting out equipment.
    – the Nigerian fim industry structure is special. Musicians buy gear and build studios because that’s what they really want to do. Now try to convince an Ibo businessman to fix his capital in hard equipment that would give him a profit only in the long-term and that’s if it’s not stolen or destroyed. Plus the Marketers aren’t really trying to release better product so they would upgrade only if they really really really have to.
    – Nollywood’s bigger problem is asymmetric information. Only the marketers know how much money they make and their knowledge is limited to their own operations. Actors may have an idea based by own much they’re in demand but the rest have no clue. I’ve met directors who said their reputation was based on how fast and cheap they can deliver a movie, any movie. So where’s the incentive to get better equipment ? (oh, i forgot to say that there are companies and individuals making money renting/selling equipment but it’s really artisanal. cheap fourth hand equipment and informal business practices.)


  3. I was very excited to read your thoughts on the nollywood market. There are many people trying to upgrade its quality and meeting serious resistance and lack of investment. Anyway, can’t believe this is my first time here…

  4. Uchenna Says:

    love what you’re doing here, man… you’re really breaking shit down!

    wish you would update more frequently, though…


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