What diaspora entrepreneurs need to know to succeed in Africa

For diaspora entrepreneurs, it is a little tricky transposing business ideas into profitably business enterprises in Arica and here is what you need to know to succeed, inspired by africajumpstart.com

In a Podcast of how a Nigerian woman, Ijeoma who grew up in the United States of America failed pathetically with her business enterprise loads of lessons could be distilled. The Podcast was published on a platform owned by a Nigerian-American entrepreneur, Ifeoma Okparaeke, a member of Africa Business Academy, who recently returned to Nigeria.

The story was one of financial loss, huge emotional struggle, and utter disappointment by someone who wanted to build something in Africa. This was sad but not shocking. Most of the struggles of Ijeoma and others in a similar position are avoidable.

Ijeoma’s story play up typical Diaspora mistakes and she did eventually recognise some of them on her own, acknowledging that it was not really Nigeria’s fault, but mostly her own. But sadly this was in retrospect and only after she had lost everything; including her precious energy and motivation, stating she had no desire to go back to Nigeria and that she would stay in the US.

Here is a snippet of her story.

Ijeoma left the U.S. in 2013. She followed a tip by her older sister in Nigeria that money was to be made selling Western clothing.

She spent all her savings to buy stock, ship it to Nigeria, lease a property for one or two years, work on the interior, organise a great opening party, and then started her boutique in Enugu, Nigeria.

Two days later she received a notice out of the blue…two months later the building was demolished by bulldozers. Reason: There was a plan to widen the road.

Ijeoma lost her life savings and her dream. And during this time of desperation she felt she was also let down by her connections and acquaintances in Nigeria, forcing here to return to the USA.

While Ijeoma recognised a few of her mistakes in retrospect it is important to know about some of the typical mistakes she made, so you are aware of them and avoid them.

Africajumpstart.com is organising an Africa Business BootCamp 2017 training in the US and United Kingdom which will teach you the exact step-by-step success strategies to use instead.

Here are some typical mistakes and how to avoid them.

Making emotional business decisions

Ijeoma chose Nigeria, simply because it was home. But she did not really inform herself about the business climate and risks in her target market. As a result she overestimated opportunity and underestimated risk.

Further, she followed the advice given by her sister who lived in Nigeria and trusted that her sister would know since she was on the ground. But her sister was a professor! She had no business knowledge or experience and she was not an experienced player in the industry they chose. She was simply another African woman with a dream. In the Diaspora we are very prone to making such ‘emotional’ decisions when we engage in business in Africa and sadly, it is a re-ocurring pattern and a recipe for failure.

Realise Africa is a high risk market

Yes, opportunity in Nigeria is absolutely huge. But fact is also that Nigeria is a high risk market. It falls under the category of high risk/high opportunity market and that increases your failure rate significantly as a new comer from abroad.

There are many ways to mitigate those risks in Nigeria but another option and strategy could also have been to get started in one of Africa’s low risk/ high opportunity markets, because they exist! You can always expand into a higher risk market later if you wish, once your cash flow is secured and you have a much better understanding of your business.

Your industry of choice might not be on a clear upward trend

There are industries in each African market that are on a clear upward trajectory. So much so that you could basically jump on them and ride the trend. ‘The import of clothing’ is certainly not among that. While it can be lucrative, fact is that African governments are very busy cutting down on imports making them more difficult and expensive.

In fact, East African Community member states have just recently (in 2016) announced a ban on all imported second hand clothing, which Rwanda has already enforced. This meant that many importers were suddenly out of business. African manufacturing or exports (for example, just to name a couple) not imports are on a clear upward trend offering you generally a much more sustainable business model for Africa.

Tapping right into a high industry aspect within a high risk market

Ijeoma needed a constant address of a property for her boutique to be successful. The property industry however is a higher risk industry and you will always be very much depending on licences, contracts, permits, planning decisions from third parties including government. This can cause an acute risk potential in high risk markets such as Nigeria where red tape, corruption, and lack of transparency and accountability is given. It does not necessarily mean to give up on your plan, but to approach it with diligence.

Look at this venture: Chris Folayan, the CEO of the now hugely successful Mall for Africa who is also a Nigerian – American and who also wanted to tap into the demand for Western clothing in Nigeria has his main store online and his main warehouse in the US and is now shipping the items into Nigeria via mail order. This means the risk factors above are not really affecting him that much, yet he uses warehousing, he is more flexible and can easily divert his business model to another African market.

Research your target group to understand their pain points

Ijeoma just assumed that what she offered is what the market wanted, and how she offered it (boutique) is the way how the market wanted it. She dived in without understanding how her business model would meet the requirements of her local market and her ideal customer.

Africa is full of problems, needs, and demands, and yes, this is precisely why it presents a huge pool of opportunity.

But: those new African entrepreneurs who became hugely successful building million Dollar businesses within a few years did not make assumptions: They either personally experienced or closely witnessed a true challenge and then they provided a solution to that particular challenge or they provided a solution that was better than the one already out there.

And: They tested their idea and concept on a small-scale before putting all eggs into one basket.

STEPHEN ONYEKWELU