Current affairs

28 June 2019

Keys to successful business in East Africa

Hello everyone,

today we’d like to share with you a very insightful and extensive interview Sebastian gave to InvestAfrica.pl

What you’ll learn from it is why it’s a good idea to invest in Africa and how to best go about it.

Read on!

Building sales structures as a key to business success in Africa – an interview

InvestAfrica’s extensive network of contacts allows us to meet interesting and inspiring people responsible for developing Polish-African economic relations. We met Sebastian Sulma, the founder of Sulma & Sulma, at the European Economic Congress in Katowice, to talk about East Africa, figure out how to make the best use of business opportunities in the continent and inspire Polish entrepreneurs, you, our dear readers in particular, to take them.

InvestAfrica.pl: Please tell our readers more about what is it that Sulma & Sulma does. Especially in the African context.

Sebastian Sulma: We deal in efficient introduction of products to the market and dynamic sales growth. Our goal is to make the product pop, not just be available. What’s important to us is dynamic growth in terms of product sales, so that further investments in it are justified and beneficial. We operate within the European Union, the United States, and East Africa. Despite receiving business inquiries from other parts of the globe as well, South Korea, for example, so far we’ve been focusing solely on these three markets. 

What’s your model for introducing a product to the market? 

It’s a project-based model. We start by consulting our client in order to figure out where we stand. How big is the budget? How much time do we have? Is it possible, and if so, how can we synchronize the introduction of a particular product with the market? Next, we turn this information into a quarter-long project, which is comprised of a quarterly fee and a bonus we get if we meet the KPIs set with the client. Our task is to stay within the budget, which is something we’ve been managing to do so far. 

Recently, we were trying to determine how many industries we’ve worked in and the number we reached was 18. To us, the very niche is not a problem, because we’re confident in our ability to learn fast and have a great relation with the client, who after all has the most expertise in terms of the product. What’s key to us is swift and efficient development of a sales process, to make the life of the person eventually responsible for the product as easy as possible. 

In terms of Africa, we’ve worked with companies operating in the clothing, cosmetics, electric power generators, and property protection systems industries. We’re currently seeing a ton of niches and products you can do business on in Africa, which in my opinion is related to the Africans’ drive for wanting to become independent from the Chinese and Indians. 

So, does Europe, and Poland in particular, offer any alternatives? 

I can’t speak for the entire Europe, but Poland very much does. In my experience, Poland brings up positive associations in Africa, because it’s not Western Europe. We’ve been murdered, decimated and enslaved as well. Now we’re trying to rise back up. Thus, from the African standpoint, we’re not the typical Western white man.

What’s also important, universities help a lot. It’s often the case that someone’s cousin, and Africans usually have a lot of them, is a politician or some minister, who graduated from a Polish college or university. This immediately opens doors and creates common ground for talks. Sure, the fact our products are high-quality, competitively priced and flexible helps. Similarly to Africans, Poles are ready to learn, which is very useful in that market. Some of the problems there we may now see as trivial are the same ones we faced about 20 years ago. So, if you have good memory, you can transfer the knowledge and make a decent buck while at it. 

These are the main reasons we decided to expand into Africa. From the early stages, back in 2014, we’ve been focused on East Africa, because we’re bound by the same religion, knowledge of English, and similar historical experiences. We constantly keep hearing from clients based in other markets, say, Nigeria, and at this point, we do get engaged in some projects, however, we remain pretty selective as far as what we say ‘yes’ to goes.. 

So, is it safe to say you’re choosy?

Yes indeed! Back when we founded the company, we were dismissing nine out of ten inquiries. Now, we dismiss about seven or eight of them. And it’s not like we’re fussy. We simply ask questions which are demanding for the other party involved and together we reach a conclusion that it’s not worth anyone’s time to get into this. 

You mentioned Asia as the place you’ve received business inquiries from. Why did you decide to go with Africa, and not Asia? 

I’ll be honest, we have a number of Asian clients we’ve been working with. We chose Africa because a couple of years ago there was a major boom for China and Asia in general, while no one was talking about Africa. This has lead us to enter a significantly less crowded market. Back then, and actually still, Africa wasn’t our main source of income. We consider Africa to be a future-oriented project. We know that market is going to grow, so that’s where we want to be. We believe in a strategic advantage of the first one in and that’s why we’ve been investing in East Africa. 

I’m happy to say our work already bears fruit. There was a time we were glad to have two simultaneous projects. Now we have three, four, five projects at the same time, so we clearly see our business is growing. We also notice the pace of our projects to be increasing. The first project was like pregnancy – it lasted nine months. The most recent one was launched in December and saw effects in February. 

What are the reasons for acceleration and your business’ growth in Africa? 

Experience, for sure, and market expertise, including all the mistakes we’ve made, help us become better. When we first started, we had no people on the ground. Now we hire employees. Moreover, the African job market is evolving. Young people are entering it. Their open minds combined with the family’s financial support make doing business with them way easier than with their parents.

What’s crucial for your projects to be successful? 

First and foremost, experience and familiarity with the market. Since we get involved with many different industries, we have an in-depth understanding of all these markets. This allows us to connect the dots that escape others. At the end of the day, we’re result-oriented, which is something I call “closing with a knee”. If things get delayed, we’re able to come in and make sure the deal is closed on time. 

What we often see, especially with innovative projects, is the lack of conviction. One party provides the stock to the other and that’s it. However, actually successful businesses say: “I realize you don’t know how our product will benefit you, but if you’ll do A, B will happen, then C, and that’s how you make money on this”. This is how you build trust, which quickly leads to more business, because you’re simply in demand.

In short, the most important thing is to not leave the client on his own with the stock in the market. We once made this mistake too. It would’ve sufficed to get on a plane, “close with a knee”, and the client would’ve made it. Back then we made an incorrect assumption that if someone invests in goods, he believes in them. The reality is though that this faith often has to be boosted by building a sales structure and showing to the client how to make money. Once he sees this, I guarantee his engagement will be long-term.

That’s why I don’t agree with how export support programs work, which focus on a one-time sale. Multiple sales should be the goal of these programs, because anyone can sell stuff once. 

Let’s get a better understanding of your operations in East Africa. Where exactly are you present? 

Our East African endeavor started in Rwanda, which we see as the Switzerland of Africa. Then, we moved to Kenya. Recently, we’ve also started doing business in Uganda. We’re also operating in Tanzania, but we consider it to be more of a path to Rwanda. Our experience shows Uganda to be a market for Kenya because of a major import concern. Local entrepreneurs invest their own cash, so if they purchase stock which won’t sell, they’re in the loss column. Import-export agencies, which insure entrepreneurs aren’t common in these countries. That’s where the concern for loss comes from.  

Do these four countries have anything in common? If so, what’s that? 

The drive for development, the want to catch up with Europe, that’s for sure. Interestingly, I haven’t seen any Rwandans, Kenyans, or Ugandans wanting to catch up with the US. From what I’ve heard and saw, Europe is their benchmark. The Chinese and Indians aren’t very much in favor there. I’d like you to think of these countries as of Poland 20 years ago. The ambition to catch up with the rest of the world, and thus the willingness to be considered a normal, and not a second or third world country. 

What are the biggest differences between these countries?

For instance, if we compare Kenyans and Rwandans, the former seem to be more suppressed. They don’t believe in themselves as much as Rwandans and are more fearful. They’re rather reserved, don’t immediately believe you and are careful in human relations. By African standards, Kenyans don’t smile as much. Rwandans are the complete opposite. They’re more open, are very approachable, and there’s no invisible barrier for them. You can even notice this in regular conversations. In Kenya, you’ll often hear that “it’s better out there, in Rwanda”. It’s easier to sell something to Rwanda than Kenya and get an advance for it. In Rwanda, it’s possible even without the buyer seeing the stock in advance. 

Let’s keep the comparison theme going. How does Africa stack up against Poland? 

The way I see it, Rwanda and Poland are very similar. Looking at the history of both these countries, catholicism, the admiration of the Saint John Paul II, but also considering the internal market and the dynamics of its growth. Poland is also seen as the better country in Eastern Europe. People’s attitude, openness, willingness to help – all this makes us very similar to each other.

In terms of the key difference, it’s surely the experience they don’t have. We remember how things were in the 90’s, how we grew, and we can utilize this knowledge. They’re only starting to grow and are doing it without much guidance. There’s also a difference in terms of the country size. Rwanda’s significantly smaller than Poland. For instance, in Kenya, a large wholeseller buys a 40-feet container of goods every month. His Rwandan counterpart will buy a 20-feet container every quarter. That’s a totally different scale.

You mentioned experience, which ushers in the topic of how to do business in Africa. I suppose we agree it’s worth it, right? 

It sure is!

You just have to consider this as a future-oriented project, because there’s still a lot to learn, implement, and adjust to the local market. Poland has no popular brands there, such as Coca-Cola or Apple, won’t accept us just because. That’s why you have to reach them, target the right people, know who and how to talk to. The goods we offer are of the same high quality as the ones by competitors from other countries. I’ve noticed that European manufacturers, including Poles, have a tendency to overcomplicate things. Africans need straightforward solutions, while we keep offering them not needed frills. SImple and efficient thinking is advised. Obviously, you can’t assume you’ll close the deal in a single meeting. You have to remember that this is a process.

You absolutely have to keep in mind one thing. Africans have phones, access to the Internet, the Alibaba and other similar sites which constantly lower the prices. That said, you won’t conquer that market with mere dumping. The value we can provide them with is the growth and development, which create a basis for them to learn and lean on. This is particularly noticeable in Kenya.

In your opinion, what are the biggest mistakes made by Polish companies when entering the African market? What not to do?

Don’t treat Africans like second-class people. As long as you keep that at the back of your head, everything will be fine.

Is there anything Polish companies are missing when doing business in Africa? 

I’d say budget for expansion. There aren’t many companies that devote actual financial means to business development in Africa. Let me point out that it doesn’t have to be a huge budget. Remember that when a company from Western Europe enters Poland, it has a four-fold advantage. 1,000 EUR invested in the West is 4,000 PLN in Poland. The rate is similar for us in Africa. So again, the budget doesn’t have to be major. Still, there are companies spending hundreds of thousands of dollars on business trips to Africa that bring no return. 

We suggest that it’s better to devote a smaller sum in a quarterly perspective and think of it as a process, than think of singular visits or meetings. 100,000 USD invested in a quarter may yield a five- or ten-time return if you think long-term. You have to be process-oriented and steadily perfect things instead of going on holidays. 

In our perspective, as far as relations with Rwandan government goes, we can call a particular minister from Poland, talk to him, and if he sees value in what we’re trying to do, he’ll help us. In Kenya, it’s tougher to reach out to a minister, but it’s not impossible. Still, the very help you may receive will never grant you success. If your business won’t involve proper processes then any help a minister will give you will be just that – assistance, and the business won’t pop in the end. 

Alright, let’s say a Polish entrepreneur is thinking about doing business in Africa. What should he consider before talking to you and how can you help him?  

The person thinking about doing business in Africa needs to know why he sells in Poland in the first place. In our experience, the biggest mistake made by Polish companies is wanting to expand abroad because they’re not doing well in the local market. This is the first thing we fix, should the need be. Second, our client needs to know why Africa. At least some fundamental knowledge of the continent is required. You may want to reach out to Polish Investment & Trade Agency for more information. Third, our client has to realize that a specific budget and time frame are key for achieving success. As previously mentioned, this is a process and no less than a quarter is required to see initial results. I’d also say you should be oriented for long-term cooperation. Selling something once is easy, while continuous sales are the actual achievement. We work with companies that aim at being in the second group.

You’ve operated in multiple industries. Where do you see the biggest potential for ROI in Africa, or Rwanda / Kenya in particular? 

I’d start with the most obvious industries. In Kenya, 70% of the workforce is in agriculture. No matter who you meet in the street, they have a family in farming. Moreover, all daily-use products are a great business opportunity. From cosmetics to public transportation and communication. But it has to be adjusted to the local market. Kenya’s investments aren’t a mystery. Currently, they’re big on aviation infrastructure, so you can assume that the whole passenger service industry is a great niche for investment.

To wrap things up, the floor is yours! Share your final thoughts with our readers. 

Just as once Polish companies were storming China with powdered milk, making a huge buck, there’s some limited time in Africa, when you can make even more money, based on long-term, process-based sales. Especially, since both East and West Africa with their well-developed infrastructures will be a kind of stops for further expansion into the continent. If you’ll grow a business in, say, east Africa, you’ll be in a great position to move further. I strongly encourage you to invest in smart sales in Africa.

Sebastian, thank you very much for sharing your knowledge and experience! 

 

Invest wisely!
Sulma & Sulma
#KeepGivingBack

 

The interview was originally published in Polish at InvestAfrica.pl



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