Winning in the digital economy: Exploring resilient business models and the AfCFTA opportunity

Ernest Armah Oct 11, 2020 at 03:00pm

October 11, 2020 at 03:00 pm | Money Moves, Opinions & Features

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Ernest Armah

October 11, 2020 at 03:00 pm | Money Moves, Opinions & Features

Photo: Ernest Armah/enpact

Africa, economically united, means more than a combined gross domestic product of over US$600 billion. The real benefits are in the amalgam of competitive advantages, the opening of new markets, and generally the boost to Africa’s entrepreneurial ecosystem. Indeed, the prospects already seem to be here; they are only waiting to be activated. 

In my research, I saw that in 12 years (2005-2017), mobile phone subscriptions in Africa grew exponentially from 87 million to 760 million. Africa remains the region with the fastest growing mobile phone transactions globally. This year, the value of Africa’s mobile money industry is valued to be over US$14 billion.

However, toxic economic conditions can bar Africans from raking in these benefits. It is still tough to do business in Africa and most indigenous businesses do not live up to their fourth year. Homegrown barriers continue to put African digital enterprises and entrepreneurs at a disadvantage and weaken their competitiveness in global markets. 

It is reassuring to see the many regional solutions that have come to the rescue, notably, the African Union’s Digital Transformation Strategy for Africa which seeks to improve the narrative and ensure, among others, continental ownership (internet-related intellectual property) in the digital space by 2030.

Then, there is the Africa Continental Free Trade Area (AfCFTA) agreement whose object is to integrate the fragmented economies of Africa, stimulate intra-regional trade and nurture new markets. But what is the relevance of these broad, regional policy blueprints for African digital enterprises and entrepreneurs? What specific provisions are there for the empowerment of startups and small businesses in AfCFTA especially? Wouldn’t these initiatives be cleaved by protectionist regimes in some African countries? 

Besides, the African tech startups including Founders of digital enterprises whom I interacted with, are not clear on how AfCFTA will activate the African Union’s Digital Transformation Strategy for Africa. Their other tasks are the specific entry points for them and what they must do to prepare themselves to own their software codes in the foreseeable future.  

On September 30, 2020, I had a conversation with Maame Darkowa Awinador and Daniel Dzamesi about these issues at enpact’s second roundtable event. Maame Awinador is an AfCFTA advocate with expertise in International Economics and Trade. She works with BlackBridge Consulting Group.

Daniel has been involved in the software/technology space in various roles and in various geographies for over a decade. He currently works as a Senior Product Owner at JUMO, a full technology stack for building and running financial services infrastructure. Their simple yet insightful presentations were very helpful. 

Maame Darkowa explained that the AfCFTA agreement is to achieve five things. First, to create a single continental market for goods and services, with free movement of business persons and investments.

Second, to pave the way for catalyzing the establishment of the Continental Customs Union and the African Customs Union. Third, to expand intra-African trade through better harmonization and coordination of trade liberalization facilitation regimes and instruments across Regional Economic Communities and across Africa in general.

Fourth, to resolve the challenges of multiple and overlapping memberships and expedite the regional and continental integration processes. Fifth, to enhance competitiveness at the industry and enterprise level through exploiting opportunities for scale production, continental market access and better reallocation of resources. 

She further explained AfCFTA’s current target market totals 1.27 billion people which is projected to rise to 1.7 billion by 2030. In terms of investment and consumer spending, it is expected to attract an estimated US$4 trillion.

She went on to distill the benefits from these broad economic prospects to SMEs and startups highlighting the direct benefits of economies of scale and access to cheaper raw materials and intermediate inputs. Moreover, she emphasized the potential for integration with global value chains and the facilitation of both intra-African and external debt capital flows to African countries. 

Thereafter, the focus of the conversation shifted to specific, practical things African entrepreneurs can do to prepare themselves for the AfCFTA opportunity including the adoption of resilient business models.

Daniel, using JUMO as a case study to illustrate his points, shared the importance of clear value proposition and communication of the same, as essential first steps. He observed that some African entrepreneurs and enterprises tend to shift into what appears to be business opportunities without carefully thinking through the value they want to provide.

There is some truth to that. An example, when the COVID-19 pandemic became severe, it triggered a rise in the purchase of face shields. Thus, prices of face shields went up extremely and for that reason, many people went into the sale of face shields. But this was short-lived as the price of face shield dropped drastically. Now those who went into that business with short-term profiteering motives are not making the profit they anticipated. 

Being mindful of different contexts and embracing the nuances in the market was Daniel’s next point. What works in one market, that is one African country, might not work in another market. For instance, Ghanaians have an appetite for loans, but this cannot be said for other African countries.

He also talked about the importance of tweaking products and services to fit the market and meet real customer needs. He further alluded to the point of knowing when to use technology, what technology to use and how to use it in the delivery of maximum value to customers. 

He also pointed to specific things African startups and entrepreneurs can do to prepare themselves for uncertainties in business. In his explanation, agility is a central element in any resilient business model. Owing to market volatility and consumer complexity, agility is a must-have, since it enables businesses to take ideas and test rapidly to establish what works and what does not work.

In his final submission, he spoke about risk awareness; explaining that risk awareness improves preparation for possible eventualities so that your startup is prepared to some extent to withstand shocks. 

These notes were compiled at enpact’s second roundtable event held on
Wednesday, September 30, 2020, at enpact Ghana’s office in Labone.

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