Africa offers small Turkish companies a chance to become ‘tigers’

Africa offers small  Turkish companies a chance to become ‘tigers’

Businesspeople from various countries convened for a TUSKON meeting to discuss economic cooperation. (PHOTO SUNDAY’S ZAMAN)

August 12, 2012, Sunday/ 14:31:00

Small businesses in Turkey now have the opportunity to join new partnerships and launch larger operations abroad owing to the growing trade bridges and commercial initiatives offered by governments in recent years.

Small-size enterprises create influential industrial facilities abroad through the formation of broad trade coalitions. In the face of bitter competition, these companies act united in the form of a strong partnership. By this model, the companies also become familiar with the culture of partnership. Many entrepreneurs that are members of the Turkish Confederation of Businessmen and Industrialists (TUSKON) have become international investors through the utilization of foreign trade bridges. Of course, it is not easy to make investments abroad, create larger conglomerates and to secure greater market share.

One of the partners needs to take care of the business activities abroad, talented workers need to be transferred from Turkey to the foreign country and they must at least speak English fluently. And of course, the partners should be open to this.

You may hear stories of success from businessmen who have joined partnerships abroad. Erdoğan Akbaş, Ayhan Yıldırım, Recep Ekşi, Adem Muslu, Recep Akbaş and Mehmet Baştürk who were owners of small business enterprises in İstanbul are now among the biggest furniture producers in Africa. Sanat Mobilya, which was created by the six partners, is one of the three biggest furniture companies in Nigeria and the leader of the sector in Malawi.

Yıldırım used to run a small business in Güngören. He made his first attempt at becoming an industrialist in Azerbaijan. He wanted to create a big factory; but his attempt failed due to financial constraints, which forced him to return to İstanbul and restart his former business. Despite his initial failure, he was still eager to expand abroad. Yıldırım who was also a member of the Business Life Solidarity Association (İŞHAD) heard some promising stories of success from his friends doing business in Africa, which was increasingly becoming an emerging market for Turkish businessmen.

Akbaş was already doing business on the continent. Yıldırım who spoke to Akbaş about his interest was convinced by what he said and decided to travel to Africa to search for prospective investments. It was obviously not easy to start a business in a foreign country from scratch, he needed a strong capital partnership and experience. Akbaş already had small investments in Malawi before 2007, and as a businessman he made frequent visits to Africa and had a good sense of what the continent actually needed. He realized that there were business opportunities for furniture trade and production. The African market appeared to be a good alternative for businesses that performed poorly in Turkey. In consideration of this, Akbaş encouraged businessmen to make investments in Africa, which led to the six-way partnership.

In consideration of the potential problems that could emerge out of a partnership, the partners decided to cement a business agreement detailing the responsibilities of each partner. The protocol also included potential problems they might encounter in the future. It took six months to draft the protocol, but it was worth it based on what the partners say.

Nigeria was the first stop for these six partners. Nigeria is a growing market that appeals to the investors thanks to its huge oil production industry. The furniture company they created, Sanat Mobilya, acquired a legitimate certificate from the government to participate in public and private sector tender bids. The company was given an award for providing the best customer service amongst furniture companies in all of Nigeria in 2010. They employ 80 people in the factory; most of the workers are Nigerian. The company also serves as a teaching institution for the local people; many workers acquired furniture-making skills at the factory. This attracted the appreciation and attention of the customers. People are surprised when hearing that the furniture they have purchased was made by Nigerians.

Sanat Mobilya imports some materials from Turkey despite the fact that it would be less expensive to import them from China or South Africa, but the partners say they are doing so in an effort to contribute to the Turkish economy. In addition, it also gives the company a chance to introduce Turkish products to local customers. Akbaş says that their business activities have been further facilitated by the emergence of TUSKON; Akbaş also notes that Turkish schools, which have been established around the world, including in Africa, by Turkish associations complete the picture. In addition to translation and guidance services for companies, the Turkish schools also take part in social projects including fast-breaking dinners during the holy month of Ramadan in cooperation with the companies.

Another group that attracts attention due to its huge investment in Africa is a furniture factory created in 2009 by 11 entrepreneurs from the Izmir Association of Young Businessmen (İGİAD) in the Democratic Republic of Congo (DRC). İGİAD Chair Mehmet Timuroğlu who is also the honorary consul of the DRC in İzmir, said it is important for Turkish businesspeople to make investments in the country. “The president in this country instructed the bureaucrats to strengthen ties with Brazil, China and Turkey. They pay attention to Turkey. The Turkish image in the country is strong,” he said.

There are two major reasons why Turkish entrepreneurs make investments in the furniture sector in Nigeria, Malawi, Mozambique and DRC. Forest products are the major raw materials for making furniture; and African countries are rich in these materials. The DRC has the second largest rain-forest area in the world, but doesn’t have the experience or infrastructure to process these materials. This is also the case with other countries as well. This means that there is a void in the African countries in the furniture sector and Turkish businessmen who realize this have invested in the field.

Mehmet Timuroğlu suggested that offered businessmen in Anatolia to create a larger company with multiple partners to open up businesses. Stressing that not only in furniture but also in many other areas, Africa needs investments, Timuroğlu said: “There are great opportunities in Africa and I think this will remain the case for a few more years. Those who use these opportunities will dominate the future.”

It is not of course easy to ensure survival of such initiatives with many partners due to diverse views and positions. In an attempt to overcome this problem, they drafted a company bylaw. The bylaw specifies the roles the partners would assume in the partnership. Further measures were taken to ensure that none of the partners would acquire a majority share in the company. Timuroğlu believes that large companies created by small businesses will be dominant and influential in the future.

A similar partnership was created in Mozambique by seven partners who were members of the Kocaeli Association of Active Businessmen and Industrialists (KASİAD). The partners, who built a huge residence in the downtown area, are currently constructing concrete power stations and brick factories. Suat Özekli, one of the partners in the initiative, says: “We also included a friend who lives in Mozambique and then, two more friends moved there. We are also traveling back and forth.”

In fact, the industrialists in Kocaeli long considered making investments abroad. For this purpose, the businessmen visited 35 countries to look for investment opportunities and Mozambique in particular attracted their attention where they met with Zübeyir Değirmenci who migrated from Turkey to Mozambique. The partners decided to make the investment in 2010. A total of 25 Turkish engineers and 100 Mozambique workers are employed in two companies, Samanyolu and Akdeniz LDA.

Özekli said the partners drafted a company constitution -- or bylaws -- to ensure the company remains successful. The rules were set out at the beginning. Noting that the partners were successful businessmen in Turkey, Özekli also says: “We are already making money in Turkey; our goal here is to feel the excitement of becoming an international investor and businessman rather than making money.” Despite the close relationship between the partners, Özekli recalled that they decided to cement a partnership agreement. Özekli refers to some major factors for success in the partnerships abroad: Everything should be based on rules, partners should not pursue their individual interests at the expense of other partner, at least some of the partners should supervise the investment and top executives from Turkey should be transferred abroad.

You need to have a referee in your company

Uganda is a rising star on the African continent and has become one of the favorites for Turkish investors in recent years. Four partners from Nazilli who decided to make an investment in Africa started their business in Luanda, the capital of Uganda, one-and-a-half years ago. The founders of Bereket İnşaat -- Mehmet Ali Aytan, Mehmet Aytan, Saim Topaloğlu and Mesut Algan – are trying to grow their business in the African market. Noting that they explored the business opportunities in the continent through the trade bridge programs sponsored by TUSKON, Aytan says: “We first identified the field we would be making an investment in; we traveled to a few countries and in the end we went to Uganda and made our investment there. There are great opportunities in Africa for doing business in the field of construction.”

Like in many other companies active in Africa, Bereket İnşaat also has a written constitution. Aytan says they also have a referee or arbitrator. Noting that they have appointed a reliable figure who previously served in the Turkish schools in Africa, Aytan further says: “In case of a problem between us, the arbitrator has the power to interfere. We are bound by his final decision. In such investments abroad, a written constitution as well as the appointment of an arbitrator is extremely important.” Aytan said many people considering making investments abroad seek opinions from them all the time and he often makes the following recommendations: “There are specialized offices at TUSKON which provide detailed information on the African countries. First they should obtain information from these offices, and after they should get the opinions of those who have made investment in Africa. And they should absolutely consider manufacturing and production. It is no longer reasonable to think that they could do business by taking two containers from Turkey and sell the products in Africa. It should be noted that there is shortage of production in every field. For instance, white meat is more expensive than red meat because there is no production facility. It is very important to do your research before making any sort of investment.”

An Ottoman-style market (Bedesten) in Somalia

Economic vibrancy in Africa is not limited to investments for production and manufacturing. Turkish businessmen rely on different projects to revive the overall economy in the continent. One such project is the construction of a trade center that Mustafa Erkan, a businessman from İstanbul is in the middle of preparing in Mogadishu, the capital of Somalia. The facility, which will be named the İstanbul Bazaar, will host wholesalers of furniture, carpet and dry foods. The bazaar, also known as a bedesten, will likely make a $500 million contribution to Turkish exports every year.

Noting that they have been doing business in South Africa for many years, Erkan says they are familiar with the continent. Erkan, recalling that Somalia is one of the best places to do business, stresses that the sources are scarce in the country and that it is not possible to find most products. Erkan further said: “It is almost as though there is no toothpick or needle in this country. This is also the case for the construction industry. The cement factory is idle. Iron is brought from other countries. The products imported from China are of low quality. In addition, the goods imported from Dubai are expensive.” Security is the greatest problem in Somalia. For this reason, the investors are hesitant to start business in the country. The İstanbul Bazaar offers a reliable and secure environment for investors.

Noting that the Bazaar will serve the interests of both Somali and Turkish businessmen, Erkan says: “No VAT tax is levied on our products in places like Mogadishu. There isn’t a significant amount of transport cost because we are wholesalers. The profit margin is not so big. But because we are not retailers, we will not have to deal with the complaints by the local people.”

So far, $15 million have been invested in the İstanbul Bazaar. In addition to contributing to the development of the Somali economy, the bazaar, which will open its doors in 2013, will also improve the overall employment in the country. Erkam Meriç who was assigned as general manager of the bazaar says that they will follow the traditional code of business inherited from the Ottoman times and they would like to revive the ethical code of the time.

Details about the second phase will be announced after the construction of the first phase of the bazaar. Erkan says that further details can be obtained at www.istafbazaar.com.

ASIL investments and Turkish schools

Erdoğan Akbaş who has extensive experience doing business in Africa says that businessmen who consider making investment in the continent need to first do the proper feasibility research. He stresses that without this the results will not be satisfactory. He has developed a solution for African investments that he has neatly abbreviated down to ASIL (Adam, Sermaye, İnanç and Lisan - - workforce, capital, belief and language). The solution basically indicates that the framework of the partnership should be drawn clearly by a protocol, that the amount of capital should be adequate, that the partners should have strong belief so that they do not give up and that you need to work with people who speak the language of the country very well. For the success of the partnership, even the partners should learn the language, if necessary.

Akbaş also recommends that those who are considering making an investment in a foreign country get the opinion of experienced businessmen who have ties to these countries. In addition, the businessmen need to transfer the executives and key workers from Turkey. And of course, the local conditions in Africa should be considered including power outages, security problems and political instability. The businessmen who do business abroad also have a chance to rely on resources and connections provided by Turkish schools in foreign countries. The teachers and officials at these schools are able to help with many problems the businessmen encounter including helping get past language barriers. In addition, those involved in the opening of these schools also have vital connections within the foreign communities.

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