Satellite Manufacturing in Africa for Global Markets; Excerpts
Today, 12 September 2024, Space in Africa hosted its seventh webinar series, “Satellite Manufacturing in Africa for Global Markets.” This webinar explored the challenges facing African satellite manufacturing companies, highlighting how some of these companies have overcome obstacles unique to operating on the continent. The discussion covered expansion strategies for entering foreign markets, techniques for navigating the global market to exploit growth opportunities, and common hurdles faced when entering new markets.
In addition, the webinar also addressed strategies for expanding beyond initial clients and markets, the complexities of managing supply chains in Africa and globally, and how successful African satellite manufacturers balance their dependence on government contracts with the need to develop strong public-private partnerships. The webinar provided insights into how these companies have managed to thrive despite the complex business environment in Africa and the global space industry while also addressing approaches to satisfying the growing need for satellite components amidst these various challenges.
The webinar speakers included:
- Ana-Mia Louw, Chief Operating Officer, Simera Sense
- James Barrington-Brown, Group Chairman, NewSpace Systems
- Oliver Muoto, Principal, 615VC
- Mike-Alec Kearney, CEO, CubeSpace Satellite Systems
- Mustapha Iderawumi, Senior Analyst, Space in Africa (Moderator)
Key Takeaways from the Event
James explained how NewSpace Systems has navigated varying regulatory environments, noting that the process is relatively straightforward. He mentioned that it’s primarily about complying with export regulations from South Africa, which involves managing a fair amount of bureaucratic paperwork. James pointed out that while there are concerns like the export control regulations, such as the International Traffic in Arms Regulations (ITAR), they only apply to technology from the United States. NewSpace Systems works with two main organisations in South Africa to secure the necessary approvals and licenses. He explained that once those are in place, the challenge becomes more about ensuring compliance on a per-customer and per-country basis, which is a repeatable process.
However, James emphasised that navigating cultural differences across their markets is the bigger hurdle. He noted that space is inherently global, but how business is conducted varies widely. In the US, he said, the process is very transactional—customers want to see a product, a price, and close the deal quickly. In Europe, there’s more of a focus on partnerships, while trust and long-term relationships are paramount in Asia.
James explained that NewSpace Systems adapts its approach accordingly to address these differences. In the US, the company has a local office with a sales team that understands the market. In Asia, they work through agents, emphasising personal visits and speaking the local language. Most of their European direct sales come from either their South African or European offices. Ultimately, James noted, it’s not so much about the regulations themselves but more about understanding how people buy in each region and adjusting their strategies to fit.
When asked what advice he would give to other African companies looking to enter the global satellite manufacturing market, Anna responded that understanding where you can and should capitalise on each region’s benefits is the most important thing. Each region has its advantages, and it is crucial to understand how to exploit those benefits. For instance, Europe has a rich infrastructure, especially in manufacturing large systems, which we don’t necessarily have access to in Africa. So, looking at what each region can offer is important, but at the same time, it’s essential not to lose the competitive edge that comes from being an African company.
In addition, she mentioned the need for diversification, which is key as it unlocks funding opportunities and contractual benefits. “Many programmes require regional operations to participate, so it’s important to factor these things in and optimise your regional presence depending on where you can benefit most, she concluded.”
Mike-Alec noted that the challenges African satellite manufacturers face regarding supply chain and logistics and how CubeSpace manages these challenges to meet global demands have evolved over time. He explained that during COVID, supply chains were in disarray worldwide, making it difficult to source even basic components like electronic chips and processors. However, this situation has since stabilised, as it was a global challenge, not one unique to Africa.
Mike-Alec further pointed out that the more specific, ongoing challenge for African satellite manufacturers lies in machining, surface treatments, and other manufacturing services that require the high-quality standards demanded by the space industry. He highlighted that the level of precision needed—such as surface finish quality and cleanliness—is much higher than in other sectors, and many local machine shops across Africa are not equipped to meet these standards. In South Africa, CubeSpace benefited from the existing infrastructure tied to military activities requiring similar quality levels. Over the last five to ten years, CubeSpace and companies like NewSpace Systems have worked to significantly upskill local suppliers.
Mike-Alec acknowledged that this issue would be more pronounced in other African countries without established space industries. While outsourcing internationally is an option, he cautioned that it raises costs and can erode competitive advantages. Services like surface finishing, soldering, and testing (such as vibration or vacuum testing) are generally available only in countries with mature space industries, further complicating matters for African manufacturers. To manage these challenges, Mike-Alec explained that CubeSpace has focused on upskilling its local supply chain, working with the best local suppliers to help them meet space manufacturing standards. This approach, he emphasised, has allowed CubeSpace to maintain its competitive edge while meeting global demands. However, he acknowledged that overcoming these barriers will require significant investment in local capacity building for other African countries with less infrastructure.
In response to the question regarding the stage of development at which African satellite manufacturing companies are most likely to attract venture capital—whether seed, early-stage, or growth-stage—Oliver Muoto shared his observations. He acknowledged that he is not an African satellite manufacturing industry expert, as he is based in the US. Still, he noted that much of his understanding comes from studying and observing the sector. Oliver stated that many African companies have done a great job establishing themselves in the global marketplace. He emphasised that much of the success for African satellite manufacturers is happening at the growth stage. As he pointed out, companies on the panel (Simera Sense, CubeSpace and NewSpace Systems) have recently been rewarded by investors to expand into global markets or further their local reach.
To illustrate this, Oliver mentioned that NewSpace Systems secured investment from Horizon Equity Partners and 4Di Capital. At the same time, other companies like Dragonfly Aerospace have also received acquisitions or investments in recent years. According to Oliver, this success stems from these companies’ ability to sell products, build partnerships outside Africa, and achieve success, attracting investors looking to scale that success globally.
Oliver further noted that what has been less common in Africa, compared to regions like the United States or Europe, is success at a very early stage, where companies can attract large-scale investment based on big ideas. In those regions, early-stage companies often tap into local funding sources to secure substantial investments early on. However, he stressed that the focus on revenue, product success, and expansion that African companies demonstrate at the growth stage is not necessarily bad. It has become the blueprint for success in Africa’s space manufacturing landscape.
Mike-Alec commented on the scarcity of early-stage funding in Africa’s space sector. He noted that this financial constraint has benefited companies like CubeSpace, NewSpace Systems, and Simera Sense. These companies have managed to thrive despite the challenging funding environment. The lack of easy money has forced them to operate more efficiently, focusing on precise manufacturing processes. As a result, they’ve become more resilient and innovative in their approach to business. This environment drives companies to achieve product-market fit earlier because they need to generate cash quickly. This focus ensures that they are aligned with customer needs and what customers are willing to pay for.
“Thus, CubeSpace, NewSpace Systems, and Simera Sense have excelled in constantly innovating to meet market demands. In contrast, companies that receive ample funding early on might become complacent and develop products based on what they think the market needs rather than what it requires. This efficiency and market alignment, born from a scarcity of resources, are key factors contributing to the success of these companies, Mike-Alec concluded.”
Anna emphasised the importance of a solid heritage and proven track record in attracting venture capital, pointing out that venture capitalists are often reluctant to invest in products without historical background or established reputations. According to her, the companies represented at the webinar have successfully leveraged their heritage and team expertise to their advantage, as this established reputation helps build trust with investors and reduces the perceived risk associated with the investment. By capitalising on their past successes and proven capabilities, these companies can position themselves more favourably for investment, as the trust they’ve built and their demonstrated ability to deliver help mitigate risks for investors, making it easier to secure funding at various stages of development.
In response to the question about how NewSpace Systems adapts its products and services to meet the specific needs of different global markets and what strategies have proven most effective, James explained that adapting to global markets involves several strategies influenced by cultural and regional preferences. He noted that employing agents, setting up direct sales, or establishing remote offices closer to customers is crucial.
Furthermore, James emphasised a significant focus on localisation in Africa and other regions. This involves setting up factories within the country, providing funding, ensuring that intellectual property remains in that country and generating long-term economic benefits through local production and taxes. In addition, he highlighted that retaining customers requires strong business fundamentals, such as excellent customer service and reliable products. A company’s heritage plays a critical role in this regard. According to James, the only real proof of a product’s quality is its performance over time, especially in demanding environments like space. Customers typically require products to operate reliably for five to seven years, so a long track record of successful operations is essential.
James further explained that once a product is integrated into a modular or recurrent platform, it becomes expensive to redesign or replace. Thus, maintaining high quality, performance, and delivery schedules creates strong inertia against redesign. He acknowledged that gaining initial design-in is challenging, but having a solid heritage—whether personal or company-wide—helps build credibility and trust with customers. Demonstrating a deep understanding of design issues and having a proven track record significantly enhances a company’s ability to meet global market needs.
In response to the question about how he has positioned himself against established global competitors and what advice he would give to other companies looking to compete on a global stage, Mike-Alec explained that luck plays a significant role in achieving success. He acknowledged that, despite extensive experience and market knowledge, having a breakthrough opportunity is crucial and noted that each webinar speaker has had their moment of opportunity.
In addition, Mike-Alec emphasised the importance of a relentless pursuit of understanding customer needs. He advised that companies should focus on shaping their services, hiring practices, and product development around the customer’s needs. In addition, he noted that many larger global companies tend to become complacent due to less pressure to perform, whereas companies in resource-scarce environments are driven by the need to generate cash and sustain growth, which fuels their success. He highlighted critical strategies to stay efficient, focus on lead times and costs, and avoid excessive pricing. Mike-Alec concluded that the core to success is solving customer needs and focusing strongly on them.
In response to the question about the key challenges and opportunities for private investments in the African NewSpace satellite manufacturing segment and how they can be addressed, Anna noted that a significant challenge is that institutional and financial investors in Africa often lack a clear understanding of the commercial space industry.
This lack of knowledge makes them more reluctant to take risks with investments. To navigate this challenge, Anna explained that her company approached investors who specialise in funding space companies, particularly within the European investment pool, as this type of investment was not readily available in South Africa then. By bringing on board a sector-specific investor who understood the technical and commercial benefits of the space industry, they were able to gain credibility and attract additional institutional and financial investors.
Anna also highlighted the importance of securing an anchor client to reassure investors and forming partnerships and agreements with other industry players to strengthen the investment proposition. She noted that as investment in the African space sector grows, with companies like Simera Sense serving as examples, investors will become better informed about the industry’s potential benefits. This growing awareness will help reduce perceived risks and encourage further investment in the continent’s space industry.
Please tune in to our YouTube page to watch the entire session. You’ll learn more about how African manufacturing companies are overcoming challenges specific to operating in Africa, expanding into foreign markets, and navigating the global marketplace to capitalise on growth opportunities.