Do American Businesses In Africa Outpace Local Peers?

By Frank Mutulu AFKI Original Published: March 21, 2014, 11:21 am
coffee housePhoto: tripadvisor.com

When John Wagner and Kevin Ashley opened a coffee shop 14 years ago in the upscale Nairobi borough of Adams Arcade, they set in motion a chain of events that changed the local coffee shop industry.

The American duo has since expanded their first Java Coffee House into a chain of 21 shops in Kenya, bagging a few international awards along the way and attracting big-money investors.

PendaHealth runs a chain of maternal clinics in Kenya started by an American Nick Sowden that has also won international accolades and is seen as a cherry startup.

Do American firms have a secret formula for doing business in Africa that locals do not?

Pundits say that the key to American business success in Africa has been bringing some sense of order in a wild sea of inconsistency.

American private equity firm Emerging Capital Partners bought the Java Coffee House chain  in 2013 for an undisclosed amount. For a company that rakes in more than $12 million in revenue according to local press, the price may have been princely.

Peers deemed the Emerging Capital Partners transaction as the Deal of the Year at a ceremony held in Tokyo in October 2012.

Java Coffee House’s success inspired local firms to open competing coffee houses. Many have fallen by the wayside; others are faring well. Wagner and Ashley’s venture is still holding steady 14 years later.

So do American entrepreneurs have the market on creating something that works and then reproducing it faithfully, over and over again?

Evelyn Situma, a Kenyan-based lifestyle writer, says that the flow of customers to Java Coffee House has stayed strong because of consistency: customers know that the latte or mocha they like will taste the same tomorrow.

She says that the same cannot be said of the chain’s competitors.

Java Coffee House does not have a monopoly over quality, she said. “It is about consistency. The food set-up is the same at every Java that you go (to),” she told AFKInsider.

PendaHealth’s Sowden says that the first thing he did when he was setting up his business in 2011 was to train staff on customer service. Most of PendaHealth’s customers are young women, and the right tone at the first encounter can mean the difference between a repeat customer or a lost one, he said.

Young women who have come for checkups want to be treated in a manner that is neither judgmental nor embarrassing. This, he says, has been one of his clinics’ main draws.

Andrew Franklin, a former U.S. Marine and offshore investment salesman, says that in the  30 years since he arrived in Kenya, he has seen a gradual decline in service in most sectors. The restaurant industry is no exception.

“The portions have become smaller while the prices have generally tended to increase,” the New York native told AFKInsider.

During the ’80s, most sub-Saharan countries experienced high population growth rates but central planners did not structure policies that took the rapid growth into account.

World Bank prescriptions to fix the ailing economies resulted in most countries cutting back on social spending in critical areas such as health and education.

The result has been a distorted labor market that keeps receiving graduates who have a philosophical understanding of subjects but lack a technical grasp.

The is true in the construction and agriculture industries.

KFC, which has opened three outlets in Eastern Africa, has to import French fries from Egypt because its outlets south of the Equator can’t find local companies that can deliver standardized and precooked fries.

But the multinational corporations and their customers aren’t complaining, if the snaking queues at African KFCs and Subways are any indication of earnings.

Customers lined up for up to three hours when KFC opened its first Nairobi branch in in 2012.

 

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