For Karim Tazi,owner of Richbond, a Moroccan manufacturing group, setting up a mattress factory in Ivory Coast proved “a hurdle race every day”. Yet it was worth the effort, he says, because “demand was almost instantaneous”. There is good scope for growth and profits are “not huge but reasonable”.
Mr Tazi leased the land for the factory in 2014 but soon ran into bureaucratic delays, which meant it took two years to build the plant. “Bureaucracy and corruption were the biggest problems,” he says. “Laws and regulations are not adapted to the reality of business.”
The group, which has an annual turnover of $170m, suffered weakening growth in the wake of the global financial crisis in 2008. Europe is Morocco’s main economic partner and the impact of the slowdown on the continent was keenly felt in the north African kingdom. Richbond decided to diversify into real estate and hotels in Morocco while expanding its core industrial business outside the kingdom, hence the investment in Abidjan in Ivory Coast.
After four years in the west African country, Mr Tazi says he has learnt that “you have to be a big, well-organised company, ready not only to invest a lot but also to lose a lot before breaking even”. It means, he adds, that investors must have deep pockets and not rely on loans, because interest payments will become a burden during the time spent grappling with bureaucracy and training staff.
Another lesson is that there is no single best approach that applies across the continent — there are different countries and regions with their own specific conditions, he says. The conditions of roads are one of the main problems for cheap products such as mattresses, which can cost more to transport than to manufacture.
Mr Tazi remains optimistic about his company’s prospects in Ivory Coast. Though he did not wish to repeat the experience of a greenfield investment — so for his next venture he headed to Kenya where, for $8m, he bought a majority stake in the Kenyan arm of UK bed and mattress maker Silentnight, an investment he describes as a “sleeping beauty”.
“Our main target is to make 20 per cent of our turnover in Africa in five or six years,” he says. “We are still in the learning phase, but my market will be Dakar, Abidjan, Accra, Nairobi and Dar es Salam. In the future, I would also like to add Addis Ababa and Algiers.”
Hightech Payment Systems
Hightech Payment Systems, an electronics payments company, was present in African markets even before the global crisis drove many Moroccan companies to look for growth in countries south of the Sahara.
Founded in 1995, the company, which is listed on the Casablanca stock exchange, had big ambitions to establish a global presence. Thirty-nine of the 90 countries in which HPS operates are in Africa, which accounts for 34 per cent of the company’s revenues, says Mohamed Horani, founder and chief executive.
In South Africa, HPS’s customers include the country’s two biggest banks, giving it access to half the electronics payment market. The company also provides the software that connects banks in the west African Economic and Monetary Union’s eight member countries, which have one central bank and use the same currency.
Clients are mostly banks but also include telecoms companies, retailers, oil companies and governments, says Mr Horani. Powercard, the company’s software, connects banking networks in real time to authorise transactions and to carry out clearing and settlement functions at the end of the day.
“We understood from the beginning that Africa was an important market for us because Morocco is an African country and shares many of the same issues,” says Mr Horani.
The company’s business model is to charge fees to license use of its software, but to remain the owner of the intellectual property. HPS also charges for maintaining and upgrading the software. “It means 60 per cent of our revenue is recurrent, which is a good thing,” says Mr Horani. Turnover in 2017 was Dh560m ($60m) and the company has grown at a rate of 20 per cent annually in the past five years, he adds.
HPS has branched out into mobile payments and already supports this service in Morocco and Ghana. They can also tailor software to support microcredit transactions.
HPS aims to expand globally, especially in Asia, the biggest market for electronic payments companies. “This may keep Africa’s share of revenues constant, but the number of transactions will grow,” he says.
