Challenges Facing Satellite Industry
Even with the improvements within Africa for more satellite product and services, the traditional obstacles of regulation, limited competition and lack of payment for services still dampen the sale of satellite transmissions for Africa business ventures. But there are other elements hindering the growth of this market, ironically, one of which "is the satellite itself," says Kim.
"Space segment prices are still quite high compared to the equivalent connectivity found in developed markets through available terrestrial technologies such as ADSL," he says. "African salaries and revenues are also lower than their North American counterparts, but telecommunications costs are several multiples higher. This means that an African cyber cafe may use up to 80 percent of revenues to pay for its VSAT service charges."
"Administrative issues and regulations are [also] major challenges," says Anacom's Hannon. For instance, "many companies must use Letters of Credit to purchase goods. The paperwork involved in these transactions is difficult and time consuming; in addition, any error can result in non-payment. Prior inspection of equipment is also required and once again this is very time-consuming and cumbersome."
Getting products to customers can be a real problem in Africa, due to the interlocking factors of poor (and even nonexistent) roads, lawlessness and government bureaucracy. To cope with this issue - which pushes up transportation expenses substantially - Patriot Antenna has "strategically set up Master Distributors throughout the region," says Steve Pokornicki, the company's director of sales and marketing. Patriot sells a lot of 1.8-meter and 2.4-meter C-band transmit/receive earth stations in Africa. "These are companies that purchase container loads from Patriot Antenna monthly," he continues. "They 'stockpile' our product and then supply to the areas as needed. They save transportation costs this way."
The complexity of doing business in Africa is a challenge in itself, especially to naive suppliers accustomed to the comparatively simple U.S. market. To succeed in Africa, a company's must have the "ability to adapt needs in lightning speed, and be able to roll up its sleeves and fight in the trenches," says Kim. "This market is deceivingly sophisticated, competitive and unpredictable," he adds. "Many operators make the mistake of coming into this market with the wrong expectations of expedited time lines for profitability."
Kim's advice: Do not come to Africa unless you are in it for the long haul and are willing to invest heavily in this market. "There are many costs associated with doing business in Africa that are disproportionately larger than the same types of costs in Europe and North America," he says. Those unwilling to shoulder such costs should look elsewhere.
One headache is just trying to find out what the rules actually are, according to the GVF, "The difficulty of obtaining information about VSAT regulations in Africa is so acute - and the demand for such satellite solutions is so great - that it has given rise to a lucrative business, attracting international consultants who sell the information to would- be satellite service providers."
Approaching The Land Of Satellite Opportunity
The opportunities and challenges of the African satellite market require more than just 'street smarts.' They require a new way of thinking on the part of Western satellite equipment and service vendors.
The place to start is to stop seeing Africa in comparison to other regional markets. Instead, consider the continent on its own terms. To do this, vendors need to get a grasp on the African mentality--indeed, the wide range of different mentalities across this vast land--and then formulate their strategies accordingly.
This is why local partners are so important, be they domestic service providers, entrepreneurs, or government officials. Such partners can help Western suppliers develop a realistic understanding of the particular African markets they want to enter and the right ways to approach them.
As well, local partners are usually the appropriate people to make 'first contact' with African government officials and regulators, because these partners intrinsically possess the necessary cultural etiquette for doing business in Africa. Make no mistake: the memories of overbearing Western imperialism are still fresh in this region. Foreign suppliers wishing to succeed in Africa may want to keep this in mind and to respectfully temper their sales strategies accordingly.
Finally, the challenges of Africa should not cloud the fact that things are looking up on this continent, now that the nations here are starting to find their way economically. For companies willing to seriously devote themselves to this market, Africa is indeed a land of opportunity; one that could deliver substantial returns in the long run.
James Careless is senior contributing writer to Via Satellite magazine.
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