In recent years, the Vietnamese Government and enterprises have done quite a lot to expand the African market rated as having high potential. Such first steps have brought certain success, yet in reality, the export turnover of Vietnamese goods to Africa is still too small compared with the demand of this market.
Why is the African market, which has been exploited by enterprises over the years, still at the stage of “having potential”? Many contend that Africa is a new market, thus information regarding this market is still limited. The financial capability is weak and risks in payment as well as logistics costs are high.
However, Do Quang Lien, Vietnamese commercial counselor in South Africa, said: “We cannot hold on to the above reasons to continue exploiting the African market we have done in the past.”
Lien said that all the aforementioned concerns of enterprises have been addressed. As with more distant markets such as Europe and America, domestic enterprises have all had success. Similarly, difficulties in transporting have been dealt with, when international shipping companies opened transporting routes for this market. The lack-of-information reason is also no longer valid, since each year, the Government organizes trade promotion trips to the African market; seminars about this market are also held by the two parties. “If enterprises are really concerned about the African market, it will not be hard to search for information on the Internet,” Lien said.
For that reason, the commercial counselor said: Vietnamese enterprises have not made the most of the African market due to a lack of bond with this market. Enterprises are still hesitating, investing sporadically in areas deemed as having high potentials over the years.
Specifically, regarding aquaculture products, Dang Ngoc Quang, Vietnamese commercial counselor in Africa, said Egypt superseded the United Arab Emirates (UAE) as the biggest importer of Vietnamese products in the Middle East and Africa. Yet when Egypt requests Vietnam’s assistance in aquaculture technology, the domestic fisheries industry fails to meet it.
According to Quang, Egypt has a big demand for aqua-products such as tuna, lobster and octopus but domestic enterprises cannot meet due to lack of supplies. Many domestic aquaculture enterprises are not interested in the Egyptian market due to their attention to other traditional markets. Egypt’s aqua-product demand reaches millions of tons annually, but Vietnam can only export 30,000 tons every year.
Vietnam’s competitiveness versus other countries in the African market is still limited. Enterprises only stop at planning and do not have specific or long-term solutions. Experience from the recent economic crisis shows that Vietnam is too dependent on big export markets such as the EU, the U.S. and Japan. When the market is still at the primeval stage, there are many opportunities to exploit and conquer. However, some years later when foreign companies start to flock to Africa, domestic enterprises will find themselves a latecomer as “the early bird catches the worm.” This can be easily seen in government management, when Vietnam only has five trade bodies for 54 African countries. For big markets in Central, West and East Africa, Vietnam only has one trade office in Nigeria.
More focus needed
In order to enter the African market effectively, enterprises need to stay focused and have specific plans. Acecook Company participated in introducing and marketing products to consumers and distributors in South Africa at Saitex and Big Seven trade fairs held in July 2010. Similarly, HCM City-based Lotus Rice Company promoted their image and goods by sponsoring a conference on rice in Cape Town, South Africa, also held in July. Lotus Rice has a specific and clear strategy for the African market. The company hires foreign experts for market development in South Africa.
Nguyen Cong Hien, deputy director of the Department of African, West and South Asian Markets, said areas with low turnover should be given priorities in terms of budget for trade promotion and goods presentation. In markets where Vietnamese goods have had a good penetration and won consumer confidence, the Government has fulfilled its role of supporting enterprises. However, it should increase efforts to help businesses penetrate new markets such as Africa.
Hien also said that enterprises need to choose suitable business methods for the African market, in order to take full advantage of opportunities and limit possible risks. For enterprises who have just joined the game, it is advised to choose exporting through intermediaries. Enterprises should utilize intermediaries in Europe to export to Africa, as these companies have years of experience in the African market, strong finance capability and close relationships with banks in Europe and the U.S. Thus, Vietnamese enterprises will be able to curb payment risks.
Enterprises also need to utilize trade bodies or Vietnamese diplomatic agencies in Africa to export goods directly. Countries such as South Africa, Egypt and Angola, which already have a relatively developed banking system and a strong finance structure, are a good chance for direct export. Enterprises also need to maintain good relationships with direct partners for expansion to neighboring nations. Opening showrooms and promoting products in the African market are also necessary. Enterprises may ask trade bodies to be the intermediary for choosing business partners at a concerned country.
Currently, Europe offers 33 African nations the Generalized System of Preferences (GSP) status for goods. Therefore, it is worth investing into exported goods production by Africa. By doing so, enterprises will enjoy trade incentives that the U.S. and the EU give to African nations.
Vietnamese businesses need to change the way they see the African market and realize its full potential before they are beaten to it by competitors from other countries, experts say.