Afreximbank Report Shows Weak Africa Franchise Sector but huge untapped opportunities
African Export-Import Bank (Afreximbank) today in Cairo launched a market study on the franchising sector in Africa, showing a relatively weak sector with huge opportunities on the continent.
The study, conducted under the Create and Connect pillars of Afreximbank’s Intra-African Trade Strategy, shows that the franchising sector is not well-developed on the continent, except in South Africa, Nigeria and several countries within the Northern Africa region of Arabic/French and Arabic/English-speaking sub-regions.
The study highlighted the prevalence of major South African and Zimbabwean franchise brands, which have expanded beyond their borders (outbound) within the Southern Africa Development Community region and beyond.
It identified common challenges to franchising on the continent to include:
- A weak ecosystem which serves as a constraint to the franchising business model. The countries examined in the report have a variety of constraints at both the macro and micro levels. Key aspects of the ecosystem in the countries were found to be weak for franchising, including lack of access to capital/financing, limited skills, and policy vacuum.
- General bias towards in-bound franchising, which tends to require the importation of some goods.
- Limited and costly access to finance.
- Unavailability of competent and financially qualified franchisees to oversee franchise operations.
It also identified opportunities for franchising which include:
- A growing and relatively untapped market for a broad range of franchise concepts across sectors.
- Using technology and leveraging diaspora communities as crucial sources of foreign direct investment.
- Emerging business arenas, such as e-commerce, renewable energy, green initiatives/recycling, convenience, and technology.
According to the study, the burgeoning creative sector in Africa is a strong avenue for franchising. This includes Nigeria’s booming film and music industry which contributed US$1.8 billion to the nation’s GDP in 2020 and continues to grow at the rate of over one percent per year. Africa is also producing talented music artists recognised internationally with Grammy and other awards.
Afreximbank’s Intra-African Trade Strategy prioritises franchising as a critical instrument to unlock untapped and emerging opportunities for entrepreneurs, especially small and medium enterprises seeking new business ventures on the African continent.