Market economics is the largest challenge in sub-Saharan Africa where South Africa still dominates, but opportunities will improve as economies continue to prosper.
https://www.avinteractive.com/features/market-sectors/exploring-business-beyond-south-africa-06-09-2017/
Middle Eastern and African professional AV spend will increase by 50 per cent between 2016 and 2022 with revenues topping $13 billion, comprising six per cent of global AV spend. That’s the smallest of the regions analysed in InfoComm’s global report but the relatively high eight percent CAGR obscures a significant sub-regional dichotomy.
Whereas Middle Eastern and North African (MENA) revenues will show a 10 per cent CAGR, and generate $12 billion by 2022, AV value in sub-Saharan Africa (SSA) will contract by six per cent year-on-year, and fall to a mere $900 million.
This is attributed chiefly to the conflict and instability inherent in some countries, notably Sudan, Nigeria and Somalia but also to the reasoned belief that AV in large parts of the continent remains unsophisticated and very much a low-cost market.
There is perhaps little value in treating such a vast region as one market. Around 46 of Africa’s 54 countries are understood by the UN as being sub-Saharan, with different cultures, often with different languages, different import laws and currency issues.
“The wider market in Africa is always uncertain as influenced by politics, red tape, (lack of) trust and dollar exchange rates, and so develops often at a slower pace than the market requires,” says Jon Alway, international sales manager, B-Tech AV Mounts.
There are signs of improvement, particularly in Western Africa for construction projects where the region is able to exploit natural resources to develop quicker and encourage trade from Europe, Asia and the US.
“Buoyed by imports from the Middle East as well as China the market will continue to develop and potential is definitely there,” says Alway. “It’s still a very immature market currently compared to western European and US markets – incredibly price driven. Cheap local firms have greater success here than in other regions. Plus, there are high import taxes for some products.”
In the western Africa region, fuelled by crude oil exports, Nigeria surpassed South Africa in 2014 as the continent’s largest economy. It also comprises 25 per cent of the total African market and is likely to overtake South Africa in 2018, suggests Alway, although over 65 per cent of the 170 million population live on less than $1.25 per day.
Jo’burg powerhouse
The powerhouse of the SSA is South Africa where the sales channel is very well developed. Professional video in Cape Town, in particular, is doing “exceptionally well” reports Canon due to a very well entrenched market for film and TV production on a local and global scale.
“Projector products sell much better in Johannesburg than anywhere else due to the vast quantity of schools, conference centres and similar types of establishment,” says Roger Machin, product manager Pro Imaging Group.
“Digital signage is expanding rapidly although many of the projects are quite standard 16:9 and not overly adventurous,” says Malcolm Finlay, ceo, Penmac Audio Visual Solutions, Dataton’s distributor in sub-Saharan Africa. “The more interesting applications are often found in South Africa which tends to act as a powerhouse, or leader, in implementing new technology.”
Johannesburg is South Africa’s, therefore the continent’s, financial hub. “The bulk of opportunities, budgets and modernisation are here,” says Gary Davies, regional sales manager, Exterity. “The skillsets and understanding of AV is very strong. At the moment, I’d say there’s greater development in this part of South Africa than anywhere in Europe.”
Exterity’s key focus in the city is banking. Investec, a major Exterity client, has its global HQ there. “Banks are looking to drive into the IP world and have a strong appetite for investment in IT,” he says. “There’s a big push toward distributing realtime video for streaming corporate announcements around regional offices here in Africa and branches in the US, Asia and Europe.”
It should be noted that the RSA is currently in a technical recession with three official ratings agency downgrades. Growth countries outside this include Botswana, a politically stable country with reasonably strong exchange; and Ethiopia where Powersoft distributor Surgesound reports numerous requests for high end AV equipment.
“Mozambique shows positive growth, the Seychelles is potentially a great opportunity within tourism and Mauritius has very favourable tax incentives for business and a flourishing economy,” says Surgesound managing director, Andrew Rowan. “Nigeria is a massive economy, with potential for huge growth, however a knowledge of how business works within the country is essential.”
Exterity is looking to move into other verticals with hospitality next on the list. Many locations in the region are either very popular conference venues or tourist destinations, reflected in the AV solutions deployed.
“Mauritius combines the two sectors, as it is both a tourist magnet and hosts a high volume of larger conferences,” informs Finlay. “Namibia is also a strong conference destination with a lot of solid, quality AV work. In Jo’burg and Cape Town, live events predominate right now, although Cape Town has a growing tourist industry which should benefit the AV installation sector. Port Elizabeth and Durban are up-and-coming as live event locations. What’s also interesting to see is how other countries, such as Mozambique and Zimbabwe are now more actively pushing tourism. This should boost the AV installation and experience markets there.”
Dylan Finlay, Penmac’s technical director points out that Botswana also hosts lots of live events, such as the recent World Netball Youth Cup in Gabarone. Machin reports pro video growing in Zimbabwe and Zambia, but not in Mozambique or Namibia. “Projector products are not moving in these markets at all due to massive amounts of no-name brands at ridiculously low prices dominating all the markets we try to enter,” he says.
Education is perhaps the main challenge with knowledge levels of many local AV installation companies low. “Needs and costs and brand advantages are not known,” advises Machin. “Everything pretty much boils down to lowest cost per product with maximum advertised spec.”
He reports that when trying to sell projectors into most SSA markets, most establishments will have an IT person responsible for AV needs. “Unfortunately, these people do not have a good understanding with regard to lumens, contrast ratio, throw distance, among other features. They are normally tasked with getting a maximum number of projector products for the lowest cost – especially in schools. They will often take advice from retail store staff or from IT installation companies that perform cable installations and ceiling mounts as an add-on service to setting up network servers and cabling. This often ends up with school halls having SVGA level models with lower than 3,000 lumens to show to rooms full of hundreds of people.”
By European or US standards, the wider SSA channel would be considered to be “highly undeveloped,” says Rowan. “Marketing is essentially word of mouth, website, social media marketing.”
Alway says the biggest challenge is finding reliable system integrators and an AV channel in the market: “They are not able to achieve high margins as they did in the past. Customers are also not able to identify or do not take accountability by ensuring that the products they have spec’d are being installed. Low quality replacement products are put in place and below standard installations are taking place.”
There is no AV governing body in most countries to regulate this, although SACIA (the Southern African Communications Industries Association, based in South Africa) is trying to bring this together.
Digital Out Of Home is the strongest vertical for Daktronics due to investment from major players in the out-of-home market driving growth. “We’ve not experienced demand for LED displays in retail or other market verticals to the same extent we have elsewhere,” says Ben Aesoph, regional sales manager.
Nigeria has invested in much larger displays and systems than other countries in this region, according to Aesoph. “The investment they’ve been willing to commit is the most distinctive characteristic of this area. Most other countries are investing in smaller more standardised solutions.”
Indeed, the challenge for Daktronics is less about market education and understanding and more tied to economics and whether the market can provide positive returns on the investment. “Some countries have very high expectations and are very sophisticated while others have more tempered expectations, mostly tied to internal economic and political conditions,” says Aesoph.
Exterity identifies the continent’s eastern seaboard as one to watch. “We are honing in on Tanzania, Uganda, Rwanda and Kenya,” says Davies. “The skills base in Nairobi in some cases may be better than SA.”
It is Rwanda surprisingly which is showing most ambition. Thriving on a stable government after decades of civil war, the country wants to become the Dubai of Africa and is pouring in investment to entice international companies. This includes a $13.5 billion (£8.4 billion) railway project linking the Kenyan port of Mombasa to Kigali, the Rwandan capital.
“Whether it gets to that level remains to be seen but we see a lot of our AV partners getting involved in projects on the eastern side of Africa,” says Davies.
Local support is often essential in SSA. “The region we serve is vast so it makes a huge difference in time and effort to clients or companies if they can reach out to someone in South Africa, rather than dealing with suppliers in Europe or the US,” says Malcolm Finlay.
“We also maintain visibility and keep in touch with customers by exhibiting at industry events such as Mediatech in Johannesburg.”
Obviously, there are some common factors: customers, like everywhere else, are internet-savvy and know what is happening in the industry. Quite often solutions will also develop and mature in South Africa and then spill over into other countries.
“It’s important to understand the particular technical characteristics within the region,” says Dylan Finlay. “In some countries, supplying a system for an event is just a matter of sending an operator and a machine. At other locations, the same event requires a full turnkey solution because the technical infrastructure is not in place. We find that our role as distributor often has a broader definition, even including educating on adjacent technology.
It may be obvious, but unlike Europe, SSA is not densely populated with suppliers.
“You can’t always be sure you’ll be able to obtain spares or new gear when you need it,” he says. “When you take technology into this region, you need to make sure you are equipped with spares for backup yourself.”
“The biggest opportunities are for skilled users who are able to transfer their knowledge,” adds Malcolm Finlay. “There is a huge potential for educators and tech-savvy users, which is one reason we invest in training for users.”
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