The Africa rising story is now old news but are you missing the boat? Pamela Whitby reports after a month-long trip to South Africa

When Stephan Ekbergh, the founder of the Swedish born firm TravelStart decided to move to the southern tip of the African continent in 2004, he was bored. Bored of the travel industry in Europe, and bored of his business. “We wanted a change of scenery, and a change of life. I was a bit tired of the business in Scandinavia,” Ekbergh told me in an interview on a recent trip to South Africa. “

On arriving in Cape Town, he had to do something so he half reluctantly launched travelstart.co.za, and in spite of early and on-going challenges he has been surprised by how much fun– and how successful – it has been. “Doing business here is completely different to the way it’s done in Northern Europe,” he says.

Admittedly even today, the South African e-commerce sector lags the rest of the world, but back then the country’s telecommunications infrastructure made it tough to set up a business. “The internet was incredibly slow, if there was heavy rainfall access speeds dropped significantly, there were no payment connectors and you just couldn’t find people with the right skills sets,” says Ekbergh.

Doing business here was completely different to the way it is done in Northern Europe

Stephan Ekbergh, Founder, TravelStart

At the time most developers worked for companies that outsourced labour to blue-chip companies, so starting a young company was tricky. The result was all the firm’s early development happened back in Europe.

“Back then even setting up call centres was a problem because of the general lack of bandwidth,” admits Tim Cohen, the editor of South Africa’s monthly business title Financial Mail "but that’s not true now.”

Today, when it comes to the IT and digital space, skills are still hard to come by, but things have improved. “When you want ADSL you don’t have to explain to Telkom [the incumbent telecommunications operator] what that is,” says Ekbergh. And yes, thanks to 2010 World Cup investment, and regional and international investments in submarine cables connecting the continent to the rest of the world, capacity is no longer a problem and the internet, though still a bit expensive, is much faster.

That could explain why after a recent – still unresolved - spat over service with my mobile operator O2, I found myself talking to somebody in Cape Town where it, among others like Lufthansa, have established call centres. It could also be that labour costs are lower (especially now given the exchange rate) but also that once training has taken place staff deliver a better service – so everybody wins. Judging by my encounter with certain 02 staff in the UK that was certainly the case.

What Ekbergh has to say backs this up. His experience has been that that if you provide training and a career path for your staff in South Africa, they will be hardworking, driven and loyal. In fact, in the eight years since he has been in South Africa, staff turnover has been in single digits; in Europe, it was closer to 30%.

Not only is it easier to build a service culture within an organisation, he says, it’s also much easier to acquire customers – and the costs of acquisition are much lower than they are in Europe. Poor service delivery is the bane of many South Africans’ lives, and so this really is one area that companies really can differentiate.

That said, the e-commerce ready market is still pretty small – Ekbergh says around 2 million. But it’s growing, and it's not as if the capacity isn’t there.

Take Uber, the driver-sharing taxi app. Recognising that its’ business model could be hampered by regulatory issues in the developed world, it recently launched in South Africa and growth has reportedly exceeded expectations. According to Andrew Fassnidge, the founder of AppsinAfrica take up of the service has been incredible, and he may have a point. Every middle class person I met in Johannesburg was already using the service; Uber has also responded quickly to the market by launching a low cost version uberX, as well as its premium uberBlack service. So the opportunities exist for those willing to brave what some would describe as a bit of a wild west. “There is still a new world-ish feel here that you don’t get in Europe,” says Cohen.

African take-off

Ok, so the middle class is still pretty small, but it’s growing. According to a Goldman Sachs report titled Two Decades of Freedom: What South Africa is doing with it, and what now need to be done, 12.3 million people are now classified as middle income. The middle class is emerging across Africa too, more people are travelling and many travel brands are recognising that. Marriott hasn’t recently closed a ZAR2bn acquisition of the Protea Group with its 10,000 rooms across 79 hotels in South Africa and 37 elsewhere on the continent for nothing. Other international brands like the Hilton Hotel Group, Carlson Redizor, the InterContinental Hotel Group have already invested in the country.

Nor has FastJet, the fast-growing low-cost Tanzanian airline backed EasyJet’s Stelios, missed the relevance of South Africa in the Africa rising story. Richard Bodin, chief operating officer, of the airline tells me that for a company set on being the first low-cost pan-African airline, a South African office is inevitable. Right now the ownership constraints are a bit tough (South African law requires that just a foreign airline company control just 25%) so they are opening up their second African office first in Zambia and then in Kenya.

There is still plenty of opportunity for low-cost air travel on the continent, something that the South African Minister of Tourism, Derek Hanekom acknowledges. Yes South Africa is behind the rest of the world and projected to grow more slowly than the BRICs, but Africa has also shown that, with the right policies, it can leapfrog the rest of the world (think mobile - Informa Telecoms research says that the continent is on target to hit a billion mobile subscriptions by 2015). So could low-cost for Africa be where it’s at? Uber seems to think so. 

The online environment has yielded phenomenal results for our destination

Derek Hanekom, Minister of Tourism, South Africa

The e-commerce opportunity certainly hasn’t passed by South Africa’s tourism minister. “The online environment,” he says, has yielded “phenomenal results for our destination”.

Hanekom continues: “South Africa has a very dominant and valued online presence on global travel platforms. Digital marketing continues to evolve at lightning speed and our commitment is to remain on the cusp of this curve.” According to Hanekom, in 2011 total gross bookings from bookings made online were at ZAR600 million but by 2013 this had more than doubled to ZAR1.62 billion.

The broader tourism arrivals numbers, which great at average annual growth rates of 7.4% between 2011 and 2013 also paint a positive picture; that’s well above the global average of 4.5% during the same period.

As Ekbergh points out, it may be a small country and the last stop before the South Pole, but he also believes that e-commerce is the future.

It’s also a good place to play the rest of Africa as Marriott’s recent move has shown. On a small scale, TravelStart has used its experience here to foray into Africa and now has offices in Kenya, Nigeria, Namibia, Tanzania and Egypt, as well as Turkey and Dubai.

And with Africa rising, there are worse places you could be.