SAP AG (SAP), the biggest maker of business-management software, is pushing further into oil- and gas-rich African countries as growth in Europe remains subdued and Asian markets slow.
Pfungwa Serima, who heads SAP’s operations in the region, has been meeting with ministers from African countries as good relations with governments are crucial for business expansion, he said in an interview. SAP plans to double the number of employees in Africa to about 1,200 by 2015.
“Africa is the last frontier remaining on this globe where real opportunities are,” Serima said over dinner in Johannesburg, where SAP has its headquarters for the region. “We believe in Angola because of its openness with oil and gas. We believe in the potential of Ivory Coast. We’re very close to what’s happening in Ghana; and the potential of Nigeria, it’s just a matter of time, but it’s one of the giants on the continent.”
The economy in sub-Saharan Africa will grow 5.6 percent this year and 6.1 percent in 2014, the International Monetary Fund said April 16. That compares with a forecast of 4 percent growth for the global economy next year. SAP, based in Walldorf, Germany, last week reported first-quarter software sales and profit that missed analyst estimates as it struggled to seal new contracts in the Asia-Pacific area.
SAP shares rose 0.5 percent to 58.02 euros at 9:53 a.m. in Frankfurt. That brought the stock’s gain to 18 percent in 12 months, giving the company a market value of 71.3 billion euros ($92.6 billion).
Software revenue from customers in Asia-Pacific and Japan, where SAP had posted the most growth in recent years, fell 15 percent. Co-Chief Executive Officer Bill McDermott said the region will be “back on track” this quarter after China’s first-quarter growth dropped and the country’s public sector slowed spending amid a transition to a new government.
By contrast, license sales in Africa grew more than 10 percent in the three months through March. SAP doesn’t break out revenue for the continent.
“We are going to the board in October to present our growth plan and part of that will be talking about amplifying our presence on the continent,” said Serima, who’s had meetings with ministers of Ivory Coast and Senegal over the last four weeks.
Businesses have focused too much on other emerging markets, such as China, while Africa with more than 1 billion people has been misunderstood, Serima said. Problems such as a lack of education and oppressive governments have added to the misconception, said Serima.
“They look at it as one country,” said Serima, a Zimbabwean. “Education and the availability of skills has always been an issue. Africa has had a few issues around dictators that still remain. If we can embrace democracy in Africa that will be a step change in the right direction.”
Since taking office in 2010, co-CEOs McDermott and Jim Hagemann Snabe have expanded the software maker’s offering with mobile and Web-based software and they have deployed the fast Hana database to challenge its biggest competitor Oracle Corp. (ORCL) in its core market. SAP plans to lift revenue to more than 20 billion euros in 2015, compared with last year’s sales of 16.2 billion euros.
Apart from delivering software to foreign companies expanding into Africa, SAP is also seeking local clients.
SAP has been working with South Africa’s Standard Bank Group Ltd. (SBK) to bring mobile banking services to people who don’t have a bank account, reporting 550,000 customers in February, a year after the project started. The company also targets governments with Hana-supported software that helps detect tax evasion and social services fraud.
“If we can assist governments, it gives us an opportunity to participate in whatever they want to do,” Serima said. “They’ve embraced the idea of service delivery and as such it is becoming easier for them to accept the fact that organizations like SAP will make a change.”
To contact the reporter on this story: Christopher Spillane in Johannesburg at firstname.lastname@example.org