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Exporting as a first step for expansion into the rest of Africa

Article by Griffin Advisors

There is an old saying that first-time and would-be exporters would do well to take note of: ‘Don’t start something you cannot finish.’ This underscores the commitment and resources required to sustain an export drive. The fact that large companies account for almost ninety per cent of exports in South Africa illustrates the difficulties and challenges SMEs face in trying to sell their products and services into foreign markets. To offset slow growth or diminishing sales in your local market by trading cross border, particularly at a time when the weak Rand makes South African exports more price competitive, makes perfect sense. However, the decision to start exporting needs careful consideration. The process though need not be daunting. 

Firstly, companies should carry out an internal evaluation to gauge if they are export-ready and to identify gaps or skills shortages that need to be addressed. Post that, the company may seek to acquire the skills by hiring or it may explore the possibility of completely outsourcing the export function. There are a number of logistics companies that offer an end-to-end solution that takes the burden off the company.

Many an experienced marketer will tell you that research is the cornerstone of any new venture or project, and exporting is no exception. Before flying on a whim into what you may perceive as a viable new market, the time and money would be better spent on commissioning quality research. This will allow you to identify target countries and, what is now growing in importance, cities or regions that can be regarded as stand-alone targets. Research will also answer the most basic of marketing questions: who are my customers and what do they want? Moreover, research will be required to learn of trade barriers, required export documentation, export incentives and marketing support offered by the DTI (Department of Trade and Industry), costs incurred to transport your exports, applicable duties and tariffs that will affect pricing, and restrictions that may be peculiar to a country (for example local content and packaging requirements). Also, one needs to learn of what marketing platforms are available (and at what cost) to promote and advertise a product in a new market, for example billboards, newspapers, websites, radio, and television. Timing is also an important consideration when assessing export opportunities. Companies in the clothing and textile industry and exporters of foodstuffs (most notably fresh fruit) need to be cognisant of different seasons, particularly when targeting markets in the northern hemisphere.

While many companies will seek to export on their own account, there is a strong argument for using Trading Houses who operate in an intermediary capacity. In effect this allows a manufacturer to conduct a local sale to the Trading House, who in turn will export the product. Albeit the Trading House will mark up the price of the goods to cover its costs and earn a profit, the manufacturer avoids the administrative and logistical burden that sometimes accompanies exporting. Companies exporting themselves invariably seek local representation, either through the appointment of an agent or distributor, ideally a person or entity with experience and credibility in the market.

Griffin Advisors offers SMEs a market-entry platform that covers the whole value chain thus allowing SMEs to focus on their core business whilst embarking on their export initiative. Griffin’s platform is designed to assist SMEs in identifying suitable local partners, minimizing risks, reducing costs and overcoming obstacles.

Over the years Griffin Advisors has assisted and seen SMEs succeed in exporting into the rest of Africa. A notable common feature of their success is the nature of in-country partnerships formed. Griffin therefore places emphasis on assisting its clients in identifying partners and entering into the right commercial arrangements which is critical to their success.

For companies who may have long term aspirations, for example establishing a manufacturing facility at a later stage in a foreign market, exporting is a logical first step. It will provide time to test the market, establish a product as a brand and learn of the intricacies that any new market will present. Also, it allows for a relatively quick and inexpensive exit should the product or service fail to find a market in the foreign country.

Griffin Advisors are a proud Partner of the National Small Business Chamber (NSBC).