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In Africa, beware 
growth at all costs

There may be massive opportunity, but chasing rapid growth across the continent is risky, F5 CEO Francois Locoh-Donou tells ARTHUR GOLDSTUCK.

By Arthur Goldstuck

It’s a given that sub-Saharan Africa is the world’s fastest growing region in numerous industries, from music to cloud computing. Not so given is how to take advantage of this growth.

The biggest hurdle facing any business expanding across the African continent is not only the geographic size of this market, but that it in fact comprises 50 markets.

“The challenge of the continent of Africa, is that it’s fragmented  across so many countries and geographies,” says Francois Locoh-Donou, president and CEO, of global networking applications company F5, an $8-billion business with a strong presence in South Africa. “We see Sub-Saharan Africa as a growth market for F5 because of the increasing digitalisation that’s going on here. But for an American company to build the right coverage model here takes quite a bit of time.”

He said during a visit to Johannesburg that South Africa was one of F5’s largest markets in Africa, with clients including banks, government entities and telecom companies. It saw tremendous growth opportunity, but growth for its own sake would be costly.

“What is gating our growth is not the market opportunity or a competitive dynamic, but our coverage of the continent. The strategy is to have more of the right partners in the right geographies with the right distributors, and augment that with our own resources along the way.

“But we have to be measured in how we do that. Our strategy is not to say, okay, we’re going to hire 200 people in Africa tomorrow. If we did that, we would take way too much risk that we wouldn’t be able to manage. It’s growing in a way that is measured, and finds the right priorities around the best opportunities in the market.”

While that makes business sense, it is hardly typical of the gung-ho messaging that accompanies many a breathless forecast of business riches awaiting on the continent. It helps that F5 has never made promises of rapid growth to its investors.

“IT companies go through stages,” says Locoh-Donou. “F5 has been around for 25 years, we now have close to 20,000 large enterprise customers around the world. So, we do gain customers every single week, but a large part of our strategy is not to go in and find new customers; it is to grow within our customers, because we bring new solutions to them.”

Such incremental growth does not always satisfy the stock market, but Locoh-Donou says F5 has managed expectations.

“We are a publicly traded company and we also want to reward our investors as we grow, but we have a disciplined approach to growth. As we grow, we want to grow profitability. One of the big drivers for the company is to deliver double-digit earnings growth every year. That involves the right balance of pursuing growth, but doing so in a way that is disciplined in how we spend.”

The wheels did not come off during the pandemic, but they did go somewhat flat last year as the global supply chain crisis arrived at F5’s doors.

“We got a lot of orders, but we couldn’t ship them. If we were just religiously obsessed with that double-digit earnings growth, we would have cut costs, but that didn’t make sense because demand was still very strong. So we deliberately chose not to grow as much in 2022.”

That also meant F5 did not join the global IT bandwagon of over-hiring during the pandemic and then having to lay off a big chunk of its workforce as the market cooled.

“We want to continue to bring the best solutions to our customers, which does require continued investment. If you stop investing, you will increase your bottom line in the short term but, down the road, it gets tough.”

* Arthur Goldstuck is founder of World Wide Worx and editor-in-chief of Follow him on Twitter on @art2gee

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