Regional Outlook on IFM in Nigeria
- Nigeria has regulatory frameworks that encourage facilities management and investors
- There is a well developed FM market with the presence of tier-2 service providers and FM services are also encouraged for government infrastructure
- Initially, FM services were practiced in-house in Nigeria, which later evolved into one of the major outsourcing spend
Awareness about Sustainability : Green buildings and carbon footprints are slowly gaining importance in Nigeria, which will eventually spread to other parts and is a future driver of FM outsourcing growth.
Increasing FDI’s: As more foreign corporates invest in Africa, due to its underlying potential, they demand better infrastructure for their facilities and this is also a major driver for FM service outsourcing.
Cost Concerns: The market is becoming increasingly competitive, and thus cost pressures are fuelling outsourcing of FM services.
Buyer Mindset : Many local buyers view FM services restricted to cleaning services only. The technological and economic benefits of asset maintenance are not fully realized by the buyers.
Cultural Barriers: Many world class practices usually get adopted, as more multinationals enter into the market. This is difficult in Africa, due to language and cultural barriers.
Legislation: Some countries have laws that help in promoting local companies. Due to the low maturity prevailing, international companies find it difficult to enter such markets.
- The majority of African nations still lack the knowledge of technology implementation due to the lack of financial capacity. However with more M&A’s by the FM service providers, they are exploring the service capabilities and more offerings are creating a buzz in the buyer market as well.
- FM services are increasingly outsourced in Africa to the local suppliers. The growth rate is expected to be about 12 percent in Africa over the next two years. Buyers in Africa are interested in cost savings rather than implementing innovative engagement practices because of low market maturity.
- Owing to lower demand, the FM market is highly dispersed with local service providers that are more tactical in nature. The current engagement strategy of having in-house FM services is getting replaced by single services contract, as major suppliers have now entered the African market.
- As the concept of availing FM services is in nascent stages in Africa, the category definition is still being developed by the suppliers to introduce the buyers with efficient and best procurement strategies.
- The African FM industry is striving towards delivering green and sustainable service solution to the global buyers located in this geography with slow but significant adoption of technology. Owing to low labor rates, engaging with local suppliers in African regions is financially beneficial for buyers.
Service Delivery Models
Direct Delivery model
- The service provider is present in the country and delivers all FM services either through sub-contracting or self-performing model
- This kind of delivery is more prevalent during local sourcing of FM services
- Cost saving potential during local sourcing is low, when compared to a more consolidated sourcing approach like bundled/regional sourcing
Managing Agent Model
- The service provider delivers the services either through its affiliates present in the countries or by directly managing the sub-contractors
- In the models where the service provider manages sub-contractors without the presence of partners, the supplier’s experience in the mentioned regions must be well-studied before entering into the contract
- This kind of service delivery is more prevalent when several countries in the African continent are bundled or when a pan-African regional sourcing approach is followed
- Cost saving potential can range between medium to high based on the volume of services/geographies bundled