11
Mar
AFTER attending a business summit recently I was surprised with how many people (and so-called experts) still insist on using the “doing business in Africa” tagline to attract audiences.
If an investor intends to understand the peculiarities of operating a business in Nigeria, Liberia, Namibia or Tanzania, this does not mean that an “Africa” strategy (whatever that may be) is a good starting point.
There are often events that, in some way or other, include in their titles “doing business in Africa”. Such seminars or workshops are directed at “equipping” foreign investors with the required “Africa insights” that are needed to exploit business opportunities on the continent.
But what does it really mean to “do business in Africa”? I am yet to meet a business person who is looking for unique insights on “how to do business in Oceania” or “how to do business in Europe”. I have, however, come across people from companies that are looking to explore business opportunities specifically in Brazil, India or Australia.
Journalists and some public figures need to think more carefully before engaging in the misleading (and one might add, patronising) exercise of portraying the African continent as one homogenous country.
Of course, when one examines aggregated information, Africa is an attractive region for investors by today’s terms.
The continent has a total gross domestic product of more than $1bn; it possesses vast unexplored and underexplored natural resources and it has a young population, with 41% (compared to a world average of 26%) of its people younger than 15 years, according to 2012 United Nations statistics on world population.
In theory, these young people will in the future be ready to acquire skills in order to be productive as they enter the world of work. Of course, this assumes that a great number of social, political and economic factors are in place and managed successfully.
In addition, the continent’s agricultural potential is very promising: vast tracts of arable land have drawn interest from China, which directs most of its investments at Eastern and equatorial Africa where the focus is on grains, sugar cane and palm oil plantations.
You have probably noticed that until this point I have not named a single African country. Instead, I have been referring to aggregates, and this is precisely where some so-called “Africa” experts stop, leaving potential investors to join the dots between the many specific sets of information required to make an informed choice — such as what opportunities are available in specific countries, what are the local conditions in relation to labour, legal constraints, political stability and economic policy.
Investors are anxiously looking for specifics these days; they are looking for a different picture of country specifics that captures the recognition that each African country has its own peculiarities, regulations, culture and local dynamics.
It is important, therefore, to have a sound understanding of the complex aggregated issues on Africa and hence to be “Afriwise” as an initial part of investor research.
For instance, as far as the quality of supportive infrastructure is concerned, the continent presents you with a very mixed picture, where SA’s physical infrastructure is one of the most developed in sub-Saharan Africa.
The country possesses an extensive road network, covering about 754,600km in total, the longest road network of any African country. Likewise, the railway network in SA stretches for a total of 20,872km, making it the largest rail system in Africa.
On the other hand, at 68GW, the entire generation capacity of the 48 countries of sub-Saharan Africa, is no more than that of Spain. Without SA, the total falls to a mere 28GW.
With this information available, it becomes clear that Africa is not SA. In such situations you have to examine information from a local perspective as an investor or else you will miss the point.
The continent remains fragmented due to the need for visas when travelling between African countries.
According to the African Development Bank’s regional integration strategy paper for 2009-12, the continent still faces real and complex challenges that include “soft” constraints such as underdeveloped financial markets; overlapping memberships and mandates of the regional economic communities; and the lack of harmonisation of policies, regulations and procedures governing investment, trade and infrastructure development at regional and continental levels.
In addition there are the “hard” physical infrastructure constraints already identified above. Alongside “hard” and “soft” infrastructure constraints, cross-cutting issues such as institutional capacity, governance and co-ordination also present significant challenges.
There is still much to be done to achieve the harmonisation of regulations, standards and laws across the continent. This is cited as one of the reasons for Africa’s widely varying infrastructure development.
A case in point is the East African Community (EAC), where the lack of synergy in regulations is often seen as an impediment to progress, for example in the financial sector. Without harmonised regulations governing the structure and terms of financial products, the development of uniform products for cross-border transactions and associated economies of scale is difficult to achieve.
Also, in the absence of cross-border credit information, which enhances the ability to collect debts effectively and with certainty within the EAC, commercial banks generally find it difficult to operate optimally.
There are security related issues to take into consideration when considering an investment in Africa. The ever-evolving threat of terrorism is affecting West African countries such as Cameroon, Mali and Nigeria, and those within the EAC such as Kenya and Uganda. In Nigeria, more than 230 girls were abducted from their school in Chibok in the state of Borno, north-eastern Nigeria in April last year. Several months later most of the girls remain missing.
Boko Haram, a Nigerian-based terrorist group whose name is loosely translated as “Western or non-Islamic education is a sin”, claimed responsibility for the attack, drawing international condemnation. The violence perpetrated by Boko Haram is becoming more extreme, and it is increasingly nonselective in its targeting.
There have been multiple bomb attacks, striking as far south as Abuja, the country’s capital city. Boko Haram is gradually becoming a serious threat throughout the Sahel and West Africa.
In Kenya, the ever looming threat posed by the Somalia-based al-Shabaab terrorist group continues to cause much concern for local authorities. One of the group’s biggest attacks on Kenya happened in September 2013 on Nairobi’s Westgate shopping centre as a response to the presence of Kenyan forces in Somalia where they have been actively supporting that country’s transitional government.
Kenyan troops entered Somalia in 2011 in an attempt to stabilise the countries’ shared border and prevent cross-border kidnappings. Kenya’s troops in Somalia are now integrated with the African Union Mission in Somalia, and have taken a leading role in expelling al-Shabaab from urban areas in the country.
These are only some of the continent’s security and terrorism threats and, although similarities exist in these situations, the fundamental issues that drive them are very different indeed.
When looking through the security threat lens we are reminded again that Africa is not a country, and that it requires expertise that is localised and grounded to do business.
A one-size-fits-all approach to the continent is not sensible or logical. It is also not a good idea to aggregate the continent’s challenges and opportunities into “how to do business in Africa” summits or workshops without effectively conveying the reality that each country in Africa has its own unique set of rules, standards and conditions.
Investors and business people need to understand this from the very onset because if they fail to do so, they will be setting themselves up for setbacks, in one way or another.
Source: http://www.bdlive.co.za/africa/africanperspectives/2015/03/09/see-africa-as-just-one-country-and-you-may-miss-the-boat