Germany is one of the world’s largest exporters, distributing cars, machinery, aircraft, pharmaceuticals and medical apparatus all over the world. The German economy grew by 8,5% in the 3rd quarter of 2020 despite the Covid-19 pandemic. Thus, if you are a German exporter looking to export German products into Africa, now would be a good opportunity.
Exporting products into Africa has always been a daunting and risky task, as Africa is well known for its lacking infrastructure, complicated payment methods and wide-spread corruption, this is a valid turn-off. Therefore, we have created an online B2B E-Commerce platform, Enterprise Africa International, to assist companies exporting into Africa. Enterprise Africa International (EAI), allows exporters to sell products in African countries without the setting up of a permanent establishment, to test the products in a particular African market and to sell locally. Additionally, EAI also assists with tax authorities and B-BBEE policies (in South Africa), gives the exporter a choice between dropshipping or warehousing and allows the exporter to work with trusted logistics partners across Africa.
Exporting from Germany:
Before any German goods can be exported, they need to be evaluated by the Federal Office for Economic Affairs and Export Controls, known as BAFA. BAFA has the ultimate decision when it comes to whether a product is to be deemed fit for export. Thus, BAFA needs to be provided with all information of the product’s potential uses for their evaluation prior to export.
Because Germany is a key member of the European Union (EU), it has adopted the EU’s export policy. It is notable that there are restrictions on certain goods such as agricultural goods and armaments.
To export out of the country, German sellers need to apply for an Economic Operator Registration and Identification (EORI) number, which is provided by the German authorities free of charge. This number is mandatory and can be used both for import and export in Germany. The EU requires all exporters, importers and transporters of goods to use the EORI reference number when in contact with customs.
After goods have been packed for export, certain documents are required for clearance by German customs. The invoice, packing list and other required documents must be prepared prior to movement of the goods into the customs port. These documents are then electronically filed with customs and the goods are moved to the export hub. There they undergo the export process and once permission is given by customs; they can begin their journey to the importing country prior to a final inspection.
Required documents for export:
- Customs Entry Document
- Weight Certificate
- Certificates of Inspection
- Customs Declaration
- Export License
- Purchase order or Letter of Credit
- Commercial invoice and packaging list
- Certificate of Origin
- Insurance Certificate
Additional Documents that may be required:
- Customs bond
- Legal Undertaking
- Temporary Shipment Certificate
- Certificate of Analysis
- Certificate of free sale
- Consular Invoice
The top exported goods from Germany:
- Chemical goods
- Electronic products
- Electrical equipment
- Transport equipment
- Basic metals
- Food products
- Rubber and plastics
The top export destinations from Germany:
Germany’s major export destinations are the United States, France, China, the Netherlands and United Kingdom. It is notable that the top importers of German products are all well-developed countries with a strong economy. Many of Africa’s economies are rapidly growing which will only spike the demand for the well-known high-quality German products. With the formation of the African Continental Free Trade Area (AfCFTA), Africa could well become one of the globes top export destinations.
Why German SMEs should sell internationally:
Taking one’s business international may have many benefits.
- It allows for the access of millions of new potential customers and gives businesses a chance to research new markets, thus increasing sales.
- Allows for the access of new markets, such as lesser-known African ones.
- It will give a business a new customer base and allow it to offer new services, thus increasing business and sales.
- If your business already has a good reputation, selling internationally will further spread your businesses good name, as new customers meet your products.
- Selling internationally will allow a business to diversify, thus making it more able to adjust to changing markets.
Why German SMEs should sell in Africa:
In January 2021, the African Continental Free Trade Area (AfCFTA) entered its operational phase. The AfCFTA is a trade agreement between the African nations, that is set to boost trade on the African continent exponentially. 54 of the 55 African states have already signed the agreement, making the African continent one of the largest trading areas to date. Thus, any German seller looking to sell their products internationally should strongly consider exporting to the growing markets in Africa, as they are likely to become one of Germany’s top exporters.
The Benefits of Exporting from Germany:
Whether it is a car, kitchen appliance or industrial machine, it is well known globally that German goods/products have adopted the German standard of high quality, strict hygiene and good research. The term ‘Made in Germany’ has become the seal of quality, reliability, durability and excellent innovation over the years and with such a good reputation it comes to no surprise that Germany is one of the world’s most successful exporters. Thus, if you are a German seller wishing to sell to Africa, there will most likely always be demand for your product on account of the good German reputation alone.
The market in Germany and its neighbouring countries is very saturated, making it harder for SMEs to stand out. However, in the developing markets of Africa the markets are often relatively untouched, and many lucrative opportunities lie ahead for smaller SMEs wishing to make a name for themselves. Selling into the African markets may also do wonders for your brand as many Africans do not have as much exposure to the ultra-popular brands of Europe and the United States. Thus, your brand has a better chance of reaching such a status in the African market.
How to start exporting:
- Assess your export potential.
The first step of exporting is always to assess the potential of your products or services to be exported into foreign markets. There are many reasons why companies start exporting. Some of them are:
- Increased Sales – Exporting can take advantage of demand across the world.
- Economies of scale – Operating in a larger market, companies can produce on a bigger scale, which reduces variable costs.
- Reduced vulnerability – Companies that have a presence in many markets are less vulnerable to market downturns of specific markets.
- Gain knowledge and experience – Companies might learn new strategies, marketing approaches or other techniques that could be useful in the domestic market.
- Increase competitiveness – A successful international market presence will strengthen foreign and domestic competitiveness.
Exporting goods and exporting services present different challenges. The former, for instance, have to deal with packaging, customs and physical delivery, while the latter face issues such as work permits, validation of certificates, language and travel to and from the market.
An export-capable company is one that has the capacity, resources and management to deliver a marketable product or service on a global scale at a competitive price.
Researching demand is a crucial point. Things that need to be researched include:
- Does the company have existing customers in the foreign market?
- What is the target group, that need or want the product or service?
- What product modifications need to be made for a specific market?
- How to transport products to foreign markets?
- Is local representation needed?
- Evaluating potential links to Global Value Chains
If the product is something that another company uses as an input, you may be able to plug into their global value chain by becoming a supplier. This is a very common approach and certainly the simplest. New opportunities are constantly emerging for SMEs, especially those with niche technologies or specialisations, to sell to multinationals or their suppliers.
When a company manufactures either finished products or intermediate goods, it can build your own global value chain. Purchasing inputs, such as raw materials, components, subsystems and other goods and services from foreign suppliers can help to produce own products either at lower cost or with greater responsiveness to market forces.
- Planning export strategy:
Bad planning can lead to major failure abroad and could severely damage your domestic operations as well.
An export plan is a business plan that focuses on international markets. It identifies your target markets, export goals, necessary resources and anticipated results.
An export plan should generally contain the following:
- Introduction - Business history, vision and mission statements, purpose of the export plan, organizational goals and objectives, international market goals, short- and medium-term objectives for exporting, location and facilities.
- Organization – Ownership, management, staffing, level of commitment by senior management, relationship between exporting and domestic operations, corporate experience and expertise in exporting, strategic alliances, labour market issues abroad.
- Products and services - Description of products and services, key and/or unique features that distinguish your product/services from those in the target market adaptation and redesign required for exporting, production of products and services, future products/services pipeline, comparative advantage in production.
- Market overview - Political environment, economic environment, size of market, key market segments, purchasing process and buying criteria, description of industry participants, market share held by imports, tariff and non-tariff barriers, industry trends and other market factors, market outlook.
- Market-entry strategy - Target market(s), description of key competitors, analysis of competitive position, product positioning, pricing strategy, terms of sale, distribution strategy, promotion strategy / development of sales leads, description of intermediaries and partners.
- Regulatory and logistical issues - Intellectual property protection, other regulatory issues, modes of transportation and cargo insurance, trade documentation, use of trade service providers.
- Risk factors - Market risks, credit and currency risks, political and other risks, Implementation plan, key activities, evaluation criteria and process.
- Financial plan - Revenues or sources of funding, operating budget, cost of sales, marketing and promotion costs, other expenses or expenditures.
- Research potential customers
Once you have a product range ready, you should consider what type of customers you are targeting. You should look for the following aspects in your buyers:
- What language do they speak?
- Are they interested in bulk or single items?
- Is there a minimum order requirement?
- Are they using a laptop/computer, smartphone, or tablet?
- What are their interest and values?
- Are they end to end consumers or another business?
- Will you offer discounts to repeat customers?
- Will you be providing a sample?
- Is price or quality a bigger concern to them?
- Assess expenses of exporting:
Before a company decides to export their products, it is important that they evaluate their financial situation and determine that they are capable of managing the additional work that comes with exporting.
These costs may include:
- Transportation costs (Road, Rail, Sea, Air)
- Port and inspection fees
- Import Duties
- Agent fees
- Setting up local offices
- Distributor fees
- Packaging and labelling
- Entering the target market
Developing a market entry strategy means finding the best methods for delivering and distributing your goods. Or, if you export services, it means finding ways to obtain and manage contracts abroad.
There are different methods of market entry, including:
- Direct exports - market and sell directly to the client.
- Indirect exports - market and sell to an intermediary such as a foreign distributor or retaining a foreign agent or representative who does not directly purchase the goods.
- Partnerships - partner with a local company whose strategic position complements or enhances your own.
- Licencing - granting of rights to another business so that it can legally use your proprietary technology and/or intellectual property.
- Franchising - the franchisee is given the right to use a set of manufacturing or service delivery processes, along with established business systems or trademarks.
- Cross-licencing - each firm licenses products or services to the other for sales purposes.
- Cross-manufacturing - a type of cross-licensing in which companies agree to manufacture each other's products.
- Co-marketing - carried out on the basis of a fee or a percentage of sales to take advantage of existing distribution networks and domestic markets.
- Co-production - the joint production of goods, enabling your business to use its skills and resources to provide cheaper manufacturing.
- Joint Venture - each business contributes capital to a newly created corporation that they operate together.
- Delivering the goods
To export goods, you need to familiarise yourself with the import regulations, product standards and licensing requirements of your target market.
There are several ways to get your product to the customer: by truck, train, plane or ship. Choose the right shipping method or combination of methods for you product and target market.
When shipping products abroad, you have to deal with a multitude of documents. Use freight forwarders and customs brokers to reduce the workload abroad.
Freight forwarders help you improve your delivery times and customer service. These agencies negotiate rates for you with shipping lines, airlines, freight forwarders, customs brokers and insurance companies. They can handle all your logistical requirements or just negotiate your shipping rate.
Assume that your products will have a bumpy ride, especially if you are shipping overseas.
Pack them to withstand rough freight handlers and bad roads.
During transport, handling and storage, your goods may be exposed to bad weather and extreme temperatures. If they require special temperature controls or other protective measures, make sure they get them.
Products must be labelled correctly. Products may not be cleared through customs if the labels do not comply with local requirements, for instance product weight or electrical standards.
The markings on the shipping container must match those on the bill of lading or other shipping documents and may include some or all of the following:
- Name of the buyer or other form of agreed identification.
- Place/port of entry into the importing country
- Gross and net weight of the product in kilograms and pounds
- Country of origin marking, for instance "Made in Germany".
- Number of packages
- Appropriate warnings or precautionary markings
- Provision of a packing list that identifies and breaks down the contents of each container. Each container must also include a packing list that lists the contents.
International forwarders assume only limited liability and hold the seller responsible for the goods until they are delivered to the foreign buyer. For this reason, you need to obtain international transport insurance.
You will also need shipping documents as well as collection documents.
Shipping Documents allow the shipment to pass through customs, be loaded onto a carrier and be transported to the destination. Key shipping documents include:
- Commercial invoice
- Special packing or marking list
- Certificate of origin
- Certificate of insurance
- Bill of lading/air waybill
The most important collection document is the commercial invoice, which describes the goods in detail and lists the amount owing by the foreign buyer. This form is also used for customs records and must include:
- The date of issue
- The names and addresses of the buyer and seller
- The contract or invoice number
- A description of the goods and the unit price including the total weight and number of packages
- Shipping marks and numbers
- The terms of delivery and payment
Other collection documents include:
- Certificates of origin
- Certificates of inspection, used to ensure that goods are free from defect
- Import and export licences, as required
- Export financing
Export finance offers a way for companies to free up working capital, especially from overseas transactions, that might otherwise remain tied up in invoices for long periods of time.
This type of trade finance is very specific and tailored to the financial needs of companies exporting trade transactions. It enables businesses to grow overseas. It also increases your trade with large foreign multinationals.
There are many benefits to a business selling invoices overseas, but there can also be a lot of financial risks involved. It is important that you fully understand the risks and government regulations before selling abroad.
- The legal side of international trade
International business contracts must be specific and all-inclusive. This goes a long way in avoiding misunderstandings, miscommunications and disputes.
Seek out a legal expert who specialises in international trade to avoid regulatory and legal pitfalls and, if necessary, to resolve disputes. You should also acquire some knowledge of international conventions, the economic laws applicable to your target market and existing trade agreements between the target market and Germany.
Problems in international business contracts can occur because of differences in the laws of the countries involved. When different laws are applied, results may be inconsistent and substantive rights may depend on whose law applies. Therefore, it is important to establish the applicable law in the beginning.
- Selling online
Opportunities for online sales are huge and growing. By selling online, companies can:
- Find new customers in overseas markets
- Conduct business 24/7
- Build brand awareness
- Access new markets in a low-cost manner
- Monitor real-time sales to understand what customers are searching for
If you want to be successful in E-Commerce, you need to start with a clear assessment of your company's potential for online business.
Important points to consider include:
- IT resources: How mature is your web presence? Do you have experience in managing IT projects? Are you aware of new technologies and how to use them?
- Management: Your E-Commerce strategy needs to be developed in the context of your overall business objectives. Is the management determined to move in this direction?
- Staff: Do your staff understand your E-Commerce strategy? Do you have a plan to train them in the new skills they might need?
- Customers: Are you tracking competitive trends and identify potential new business? Does your E-Commerce strategy address your customers' security and privacy concerns? Is your website customer-friendly?
- Competition: Do you know your competitors' E-Commerce initiatives and how they might affect your competitiveness?
- Suppliers: Do you know if you can reduce your procurement costs by buying online? Do you use the Internet to search for suppliers? Have you used input from suppliers to plan your E-Commerce strategy?
- Profitability: Have you carried out cost-benefit analyses for your E-Commerce strategy?
If you are thinking about making E-Commerce a bigger part of your daily operations, you should first determine if your company is ready for E-Commerce and the return on investment. If it looks good, you can follow-up with a plan.
The Internet is a good source of electronic business contacts from all over the world, usually called E-Leads. There are several ways to track down such virtual opportunities in international E-Markets. Companies can reach consumers overseas through E-Marketplaces, which are online locations that provide a platform for retailers of all sizes to conduct business through E-Commerce.
An E-Commerce exporter can be paid by any of the traditional methods. Retail customers, though, tend to pay by credit card. When a credit card payment is not possible or advisable, you might consider using the services of a company that, for a transaction fee, obtains the customer's electronic payment (E-Payment) and then remits it to you.
Support for your customers is crucial to ensuring repeat business. You can do this, of course, through traditional methods such as telephone, email, fax and the postal system. But a good e-business customer support system can give you an edge. The potential impact of social media—positive and negative—should also be considered, especially when dealing with tech-savvy customers.
Social media is an effective business development tool. It is best used as an interactive platform for listening to and sharing information with members of an online community. Social media can also represent a cost-effective channel to directly reach out to, and engage with, thousands of potential consumers and enterprise customers. Remember to keep your posts social and conduct yourself appropriately, in compliance with the established practices of the community.
SMEs should not believe that they are too small to export or that it is too risky. They should rather evaluate their true potential and make a plan on how to export and enter new markets. There is no need to do everything on your own. There are agencies and local distributers there to help you do business.
E-Commerce is a growth sector that does not only help SMEs sell products locally but also enter new markets by making overseas selling easier. It does require planning due to the exporting process and laws and regulations in different markets. Following this step-by-step guide for exporting will assist you with making an informed decision on whether and how to start exporting.
E-Commerce may take away some of the risks of exporting. You will not have to establish a physical presence but start selling products online fist. Although E-Commerce is digital, the exporting process will still stay more or less the same because in the end, the products will have to be shipped to the target market, whether you are selling through E-Commerce or physical stores.