Investing in Africa tip ten: Build a robust distribution model

Distribution is one of the most important and yet overlooked factors determining success or failure in the African mobile market.

In fact, industry insiders say that establishing a good relationship with retailers and distributors is as important a factor as the very pricing of services, and network quality and coverage. Together those three elements – distribution channels; network coverage and quality; and affordable tariffs – make up the fundamentals for operating successfully in Africa as well as other emerging markets.

African mobile markets are overwhelmingly prepaid, and that means airtime vouchers, as well as new SIM cards, must be widely and easily available if an operator is to have a business that functions at all, successfully or not.

African operators must offer attractive terms, usually in the form of commissions, to their distributor partners. Those terms have to compare well with those on offer from other operators in what are in many cases increasingly competitive markets.

As retail and distribution networks are less developed in much of sub-Saharan Africa than in India, for example, African operators need to invest more heavily in strengthening those networks than their counterparts in some other emerging markets.

For this reason it has become more commonplace for many notable figures in the African mobile industry to have backgrounds with FMCG companies such as Unilever, which appreciate the importance, and challenges, of distribution in Africa.

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Source: Intelligence Centre

And as operators seek to develop value-added content and services, such as mobile-money-transfer offerings, distribution has become more, rather than less, important. One critical factor behind Safaricom’s success with M-Pesa is the extensive agent network that it has established for users of the service. Services such as M-Pesa cannot work without a wide and reliable network of agents through which customers can deposit and collect cash.

The challenge of developing a robust distribution model across such a varied set of geographies, delicate political situations and several many ethnicities and languages will be one of the greatest challenges facing a new investor. Overcoming these will need to be at the centre of its strategic thinking.