Networks spread ever wider
Mobile phone content provider iTouch started operating in Nigeria last month and IT group Dimension Data has taken control of Nigerian and Kenyan technology groups in the past 12 months.
Given the potential size of the African IT market, it’s easy to understand why they are keen to start operations elsewhere on the continent.
The IT market in sub-Saharan Africa, outside SA, was worth about US$1bn in 2005, according to specialist research firm BMI-TechKnowledge, leaving plenty of room for growth.
The young but rapidly growing cellphone industry, along with increased investments by oil companies, is driving demand for IT services.
There is no doubt that SA’s mobile operators, and MTN in particular, have led the march north. The group’s Nigerian network was launched only five years ago but is already a multibillion-rand business. In the nine months to December 31, it recorded sales of R4,7bn. Vodacom has also enjoyed some successes on the continent .
But the move by IT companies to establish operations in Africa is a braver one if one considers that they have had a fairly patchy record so far.
Business Connexion (BCX), a Didata rival, announced earlier this year it would scale back its Africa operations. Though there are lucrative opportunities, long waiting periods between projects drain cash, says BCX deputy CEO Benjamin Mophatlane.
Dealing with these waiting periods is a challenge that is not lost on James McCormack, Didata’s chief operating officer for emerging markets. McCormack says Didata is prepared to take on smaller jobs of between $50 000 and $100 000 to keep cash coming in, while simultaneously looking for larger contracts of between $3m and $5m. "We hunt elephants and chase rabbits," he says of the company’s strategy.
Didata also makes use of local partners in the markets in which it operates. In Kenya, it took a 51% stake in ICL East Africa and it has taken a similar holding in a Nigerian group, ROE.
Oil deposits in Sudan and Chad will help investment in those economies. And a plan to run a submarine telecom cable along Africa’s east coast next year is expected to give a further boost to IT spending.
Next to MTN and Didata, iTouch is a relative newcomer to Africa, outside SA. Its Nigeria venture is its first cross-border business.
The company has had its fair share of difficulties, says CEO Greg Brophy. Someone registered its iTouch and 35050 brands just weeks before it started operating in Nigeria. Instead of negotiating with the person who had hijacked its brands, iTouch quickly registered new brands and changed its marketing campaign.
Brophy advises those wanting to do business in Nigeria to visit the SA high commission in Lagos or Abuja. The commission, Brophy, says, helped iTouch by providing it with information about how to set up its operation and what scams to be mindful of.
He says the high commission was a bit surprised to see him because SA businesses have a habit of first getting themselves into trouble and only then approaching the mission for help.
BMI-T says there are no short cuts to doing business on the continent. "Success in Africa is a result of a considered approach, careful planning and uncompromising execution."
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