Doing Business in Africa: Ten Things No One Ever Told You

Doing Business in Africa: Ten Things No One Ever Told You

You’ve seen the headlines, you’ve heard the news: Africa is a hot economic commodity. “It’s the next China or Dubai,” you say over the water cooler at work.

“But isn’t it unstable and unsafe?” a co-worker counters hazily; he skims the New York Times on the way to work, and has recently seen headlines about potential violence in Kenya.

But you subscribe to our Daily Top 10 and weekly Business and Finance newsletters, and say,  ”The Kenyan shilling has actually gone up in recent weeks, and Mark Mobius says the improvement in infrastructure makes Kenya a worthy long-term investment.”

You’re ready, willing and eager to do business in Africa. But you have no idea where to start. We sympathize.

Recently, Africa.com’s CEO and founder Teresa Clarke was invited to deliver a speech on doing business in Africa to a packed room in the White House, full of CEOs and investors. She delivered the following ten tips, the ten things no one ever tells you. The audience left the room confident and ready to engage with the continent; you will be too.

Doing Business in Africa: Ten Things No One Ever Told You

1) The African business culture, similar to the Asian business culture, is driven more by relationships and less by transactions.

2) African consumers have more money than you think, and they’re willing to spend less money on food to purchase airtime. As one of our bloggers wrote recently about Kenyans, “basic needs, in the eyes of a growing few, include access to cheap mobile (and internet) services.”

3) When it comes to doing business in Africa, it’s neither one country nor 54 countries. Rather you have to take a regional approach. In our “Insider’s Guide to Business Travel to Accra, Ghana,” for example, we wrote, “Many business travelers to West Africa find Accra to be close enough to access Nigeria’s large market, but prefer the quality of life that Accra affords visitors.”

4) Brand loyalty is high. See the food and beverage and banking sectors.

5) Corruption—it’s not just an American (or Western) concern. Africans take corruption very seriously because it costs entrepreneurs, drives uncertainty, and inhibits growth.

6) Africans think China is good for business. Firstly and perhaps most importantly, Chinese treat Africans as peers, not children who need incentives for good behavior. Chinese are faster to make decisions, and have provided high profile infrastructure–in other words, they have delivered on projects. An example is Ghana’s new international airport.

7) Poor people have market preferences, too. Before entering a market, research is essential. Don’t assume that cheaper is always better; durability is often a core value.

8) Modes of communication are different. Cell phones are ubiquitous, so expect to text–a lot. On the other end of the spectrum, you’ll rely less on e-mail and the post office. Your driver might also serve as your courier.

9) Use local consultants and experts. They’ll have knowledge of local customs, culture and relationships. It’ll minimize “school fees,” and deepen your perceived investment.

10) Americans are the last ones to the party. Perhaps a more apt name for this article might be, “Ten Things No One Ever Told You…If you are an American.” Europeans, Chinese and South Africans—yes, this is one of those weird regionalisms where South Africa is a separate market from the rest of the Continent—are already doing business in Africa and profiting.

I hope this tips prove helpful and that you’ll be contacting me about your next successful business venture in Africa.

7 Myths About Doing Business in Sub-Saharan Africa

EMERGING MARKETS 7 Myths About Doing Business in Sub-Saharan Africa

• By Anna Rosenberg

It’s 2015, and by now even latecomers among multinational corporations have decided to include African countries in their emerging market portfolios. However, many companies are not making the most of the Sub-Saharan Africa opportunity because of misconceptions about what it takes to succeed in the region.

Sub-Saharan Africa refers to countries below the Sahara desert, such as Kenya, Angola, Nigeria and South Africa. (Many companies separate their Sub-Saharan Africa and North Africa operations because of strong cultural, economic, and linguistic differences between the two regions.)

Leveraging a combination of economic analysis and forecasting, on the ground interviews with policymakers, and a dialogue with executives responsible for Africa strategy and operations, we have identified the seven most prevalent myths that skew companies’ perceptions of doing business in Sub-Saharan Africa—and what executives can do to overcome them.

Myth #1: There is no competitive urgency to build a presence in Sub-Saharan Africa.

Sub-Saharan Africa is already a competitive market place. Whenever I travel to an African city, I marvel at the dynamism of business activity taking place on the ground. Asian companies dominate many sectors, while African companies are expanding their footprint and market-leading Western multinationals are also prominent. All are vying for a share of the continent’s growing consumer class and government spending.

As Sub-Saharan Africa continues its strong growth trajectory, competition will only intensify. Executives should build step-by-step long-term expansion plans, but avoid delaying entry as securing market share will become increasingly difficult.

Myth #2: Sub-Saharan Africa’s growth is all about natural resources and consumer spending.

The popular perception is that many African markets are all about energy. But, for example, our research found that oil and gas only made up 11% of Nigeria’s GDP in 2014, compared with 20% for construction.

Many companies are attracted to African markets because of fast-growing consumer spending—but greater purchasing power is also driving economic diversification. Consumer demand for new products and services is creating opportunities across a wide range of sectors. For example, as they want better public services and infrastructure, investment in industries such as healthcare and construction accelerates.

Myth #3: Fast economic growth means quick returns.

Many executives hope to compensate for sluggish growth in the Eurozone by making quick returns in Africa. While Africa’s economy is on track to be worth $3 trillion by 2025 (from $1.3 trillion today),benefiting from Sub-Saharan African growth is a long-term game. The region’s development will likely span several decades. Executives should commit to the region knowing that while top-line growth is likely to be strong, bottom-line returns on investment will take years to materialize.

For example, GE is already reaping the rewards of its long-term approach. It has been present in Sub-Saharan Africa for many decades and established local offices to advise governments of countries that are in the early stages of development on infrastructure projects, such as building railways and hospitals. This required a large upfront investment, but it has generated demand for the company’s products.

Myth #4: Sub-Saharan Africa is too volatile and unpredictable.

Like all emerging markets, Sub-Saharan Africa is exposed to risks. Companies need to be prepared to navigate volatility without losing sight of the fundamentals that make the markets attractive for them. For example, Nigeria has been the number one opportunity market for most multinational corporations in the region. But executives turned attention toward East Africa in mid-2014 when Nigeria was affected by fears over Ebola and tumbling oil prices slowed growth. They were therefore surprised by the country’s peaceful elections, which brought an opposition party to power. And they were reminded of East Africa’s long-standing security risks when Kenya experienced a brutal terrorist attack.

Such reversals and disruptions are unlikely to subside, but none of them fundamentally reduced the opportunities for MNCs in Nigeria or Kenya. Executives should carefully assess the level of volatility to understand if a change in strategy is really necessary, or whether a short-term contingency plan is the best solution.

Myth# 5: Sub-Saharan African markets can be prioritized merely by using data.

Many companies often don’t know which of the 48 countries in the region hold the largest opportunities for their business. Data on market sizes and product categories are largely non-existent or provide little information about the market’s potential.

For example, if a company wants to sell toothbrushes, it would be insufficient to assess the opportunity by only looking at numbers for toothbrush sales. These data points would substantially understate the potential size of demand, because they would not reflect the likely high numbers of people who will begin to use toothbrushes for the first time in the years to come, as they become more health-aware.

Macroeconomic indicators like GDP size and consumer spending are also insufficient measures of market conditions. For example, Angola’s market size and spending potential look attractive on paper; however, the market’s operating environment makes it very challenging to capitalize on these opportunities.

Executives should take a broader approach to finding the best markets for their business. They need to combine available data and forecasts with a thorough qualitative analysis that looks at the operating environment of each market.

Myth #6: Relying solely on distributors is a sustainable Africa strategy.

Many companies are reluctant to put feet on the ground before the market can fund them. But proximity to the market allows a company to adapt products and marketing strategies to local needs. For example, when Nigeria suffered its first Ebola cases and Boko Haram terrorist activity began to rise, consumers shifted to e-commerce to avoid shopping in public places. Companies with representatives on the ground were able to rapidly identify and adapt to this shift in consumer habits.

Companies should focus on putting at least one representative on the ground in priority markets to gather market intelligence, manage distributors, and build relationships with the government.

Myth #7: South Africa is the natural hub from which to manage a Sub-Saharan Africa business.

Many companies locate their African headquarters in South Africa as they usually already have a presence there for historic legacy reasons since South Africa is more integrated in global markets than other African economies. However, South African businesses are sometimes regarded with a certain amount of resentment in many countries in the region. Moreover, with scarce and expensive talent and increasingly unreliable power, South Africa does not offer a particularly welcoming business environment.

Leading companies are already beginning to think creatively about how different cities might be better suited to different priorities. For example, GE re-located its HQ from Johannesburg to Nairobi, because the latter is known for benefiting from a strong talent pool and strategic geographic location.

Companies should accelerate their expansion into Sub-Saharan Africa as the region continues to grow, becomes increasingly competitive, and is unlikely to be derailed despite sporadic volatility. To succeed in the continent, executives must develop long-term plans while remaining prepared to weather short-term disruptions.

I hope you're ready to take the bold step into this fascinating and opportunity filled Market? Let me know what you think in the comments section below and feel free to add any contributions too.

Starting a Business in Africa: 10 Lucrative Opportunities

Are you an investor or entrepreneur looking to invest or start a business in any of the African countries? Do you want to know the best investment opportunities or small business opportunities in Africa? Then read on.

Centuries ago, Europe was the darling economy of the world; until America rose to become the world’s economic power. Now, Asia has the most countries with the fastest rising economy followed closely by Africa. Africa is perceived to be one of the frontrunners of future economic growth next to Asia.

Africa’s foreign development investment has significantly improved over the past decade. It is forecasted to have a $150Billion growth by 2015 with Africans themselves leading the investment growth across the continent. So without wasting your time, here is a list of top 10 investment ideas and small business opportunities in Africa.

1. Fiber Optics + Internet service provision

As Africa open up to the world, there is a tremendous increase in the demand for quality telecommunication and internet service. Take for instance, video and web conferencing, web TV are yet to fully utilized in Africa because of the poor internet speed experienced in most African countries.

This is where the need for Fiber optics cable comes in. This opens doors for outsourcing business and e-commerce ventures as the price of internet connection will be lower. In my country Nigeria, companies such as MainOne and Glo have taken the lead in the laying of fiber optics cable but the industry is not yet competitive; and other African countries are still untapped.

2. Industrial Zones and Free Trade Zones

Industrial and free trade zones are springing up rapidly in Africa and South Africa is taking the lead. This is proof that the African government is determined to improve its world ranking.

If you run a manufacturing firm or you have plans to go global and tap into Africa’s potential, then you should consider the industrial zone because it offers strategic economic advantage with its location near local and national transportation links. This also opens doors to employment opportunities. And businesses that will be established in this zone will help support the expanding manufacturing industry and add value to the economy.

3. Government Tenders and Contracts

Responding to government and non-government tenders is next in the top 10 business opportunities in Africa. Since Africa is a fledging industrialized continent, the governments of various countries have an open market policy making it tenders an opportunity for business.

4. Outsourced Business Process Services

Another small business opportunity in Africais Business Process Services. BPS lowers administrative and operating costs. Thus, it makes it easy and possible for the business to provide new services, improve core business activities and enhance customer service. With the massive population and high number of jobless graduates, technicians and technologist, you can set up a firm that will deliver administrative services to developed countries at a cheaper rate.

Take for instance data entry services, database management services, call center services and customer care services are examples of services that most developed countries outsource to countries with skilled but cheap workforce.

5. Real Estate Development

In the list of the top 10 business opportunities in Africa is real estate. Purchasing or developing commercial property in Africa is very advantageous since it has appreciated over the past ten years. Evidence to this is the fact that demand for commercial real estate in countries such as South Africa, Ghana, Nigeria, Egypt, Kenya, etc have gone up to 400%, a growth caused by foreign investors and the increasing demand of offices by new businesses.

But is commercial real estate the only lucrative aspect of real estate in Africa? My answer is no. There is also an overwhelming for residential properties and the rest. In fact, regardless of the area of real estate you venture into; you are bound to reap bountiful profits.

6. Health Care

Sixth in the top 10 business opportunities in Africa is health care. The standard of health care in Africa is very poor when compared to the standards in Europe, Asia and America. Secondary and tertiary healthcare services have a high investment potential in Africa as health management, research and information technology are lacking. This also offers the opportunities to serve a social cause.

Taking my country Nigeria as an instance, the health care facilities on ground are obsolete and unreliable that most people seek medical checkup abroad and delicate surgeries such as heart and kidney transplant are done abroad.

7. ICT Infrastructure

Since Africa lacks infrastructure in the field of communication and information technology, it is a good investment opportunity. There are local IT and communications companies looking to expand their business and is seriously looking for foreign investors to make it possible; thereby creating opportunity for private investors to help make a thriving company improve its operations in return for a profit.

8. Power generation

Eighth in the top 10 investment opportunities in Africa is Nigeria’s need for infrastructure in the field of power generation. The government in fact has announced its plan to attract $100 billion in investments over the next five years for its power sector. And when there is a need to be satisfied, there are much business opportunities behind.

In fact, there is a plan privatization process in place and to be sincere with you; power generation is the next big business not only in Nigeria but Africa as a whole. In fact, power generation is highly untapped because the primary source of power in Africa is Hydro and it is still under-utilized while solar, wind, nuclear, etc are still untapped.

9. Agro-Allied investment

Next in the list of business opportunities in Africa is still in Nigeria which needs agricultural equipment, chemical supplies, waste recycling operations and fertilizers. But I want to emphasize the point that that the need for agro-allied equipments is not peculiar to Nigeria alone but all African countries.

In conclusion, I want you to know that every sector of the economy in Africa has huge untapped potential; from technology, agriculture, food industry, services, real estate, etc. They all have the potential to yield good return on investment.

I read this post from a great blog and thought i should share it with you guys for a start. From today, we are starting a series of posts focused on ideas to start a profitable business in Africa . We will present them segment by segment. Here are 10 ideas to start a business targeting expatriates in your country.

Overall, our purpose is to simulate your mind, and encourage you to start your next business in Africa.

100 ideas to Start a Profitable Business in Africa

By: Mawuna ramarque Koutonin

1. International Aid and investment segment opportunities

The international aid for Africa is a $40-billion-a-year industry. Most of this, is easy money to take, mostly for corruption and overpaid expatriates; however smart startups would be wise to explore the needs of this huge international organizations full of the laziest people in the planet always in search of someone to do their job for them or make their life easier. Here is a list of 10 ideas to create customized services or application for their use:

#1: Personal Service provider for local expatriate

More and more foreign people are heading to Africa, the last frontier of economical opportunities. Additional to the foreign aid employees, there are also more and more expatriates coming to Africa with the $48 billion-a-year foreign investment in Africa Business.

In some cities like Accra(where i currently reside) Nairobi, Luanda, Dakar,  Addis-Ababa these expatriates are thousands. They are rich, noisy, visible. They have very specific needs compared to local people.

Any smart company that would successfully create a set of services (travel, visas, registration, residency status, dual nationality questions, legal issues of marriage and divorce, visa runs) for this community in any given country, could easily expand the same concierge service to other countries. There is lot of money here waiting for smart and opportunist entrepreneurs.

#2 First-world quality Internet, mobile services or application customized for local environment

These guys have money. They are used to some first-world internet and mobile service they won’t have locally. It’s important to study their daily life in your city, survey them about their needs, and find out about things that might be very helpful for them to survive in Africa jungle. They will thank with their easily earned dollars and smiles.

#3 Food delivery for infrastructure/construction workers

It’s the easiest and quickest way to become rich. Design a mobile food service specialized in construction sites. You move your restaurant to serve breakfast, lunch, snacks, sandwich and casual drink close to the workers. You move and follow the sites. You are the first to know all new construction sites where will be hundreds of workers and expatriates. Deliver good food, cheap, and fast with a friendly touch.

There are hundreds of construction sites in many countries, financed by foreign aid or investment.

#4 Online expat forums

There are many expatriates forums online, but very little cover African countries, with ground information and assistance.

This forum could started with very little effort in connection with local expatriates. You might first start by creating a local association for expats in your city/country with social gatherings and activities, then move on to have an online version focused on providing useful and relevant information.

2 girls and one guy could start this on their free time, and finally make it a profitable business with add-ons services.

One advise: focus your forum on one country, yours.

#5 Controlled origin vegetables and meat delivery service

Most of the vegetables, and meat in the local market in big cities in Africa are not trusted by expatriates.

There is a huge opportunity in putting in place a good logistic to identify and deliver to urban market a controlled origin food that these expatriated population can trust. They are ready to pay 10 times local prices.

#6 Create a full-service job agency

One of the biggest issue you have when you start a business in Africa is how to find good employees, with required competencies, work ethics and good health.

Most of the international organizations, corporations in Africa spend countless hours on their hiring process, but to find out that they have failed to hire the right people. Employees turnover is huge.

There are very few professional head hunters, and very few job agencies with specialized skills. This is one of the best opportunity to pursue at this present time in Africa.

#7 Field Data collection & statistics

Independent projects monitoring and postmortem data collection is one of the fields where international organizations in Africa needs help. They need this data for their report and spend huge amount of money for that.

Currently this job is done by hiring huge consulting firm in London, which in turn subcontract to some small consulting firms in Europe which organize data collection teams on the ground. The teams are disband at the end of each project.

A local company which will specialize in field data collection will fill the gap for the international organizations, but also be a good service provider for local government which in most case doesn’t have any reliable statistics institute.

These kind of company could be started by a group sociologists and statisticians with the support of a networks of niche experts.

#8 Local investment opportunities / banking services

Africa is currently perceived as a new land of opportunity by the whole world. Old colonial powers and Chinese are in fight to have access to the emerging opportunities. Expatriates living in Africa are now better off investing their money in African banks or companies’ stocks than into their failing banks and economies. That create a huge opportunity for investment advisers and personal finance planners to create tools and services for this community.

This opportunity could be explored as a confidential investment newsletter, investment boutique, index fund or index tracker agency.

#9 Procurement services for international projects

This is a huge opportunity for young business administration graduates who have deep passion for international commerce, procurement, and have the discipline to manage large scale logistic projects.

Many African countries still lack reliable and large scale Procurement outsourcing services providers in front a huge and growing demand either by local entrepreneurs, and administration or by international organizations.

#10 Expat newspapers, magazine, Classified

Expatriates communities classified paper and online magazine is a profitable niche business to explore in big African cities where there are thousands of expats.

It could be done as an extension to a large circulation magazine or an independent endeavor

That’s all for today. During the next days, this series on Business opportunities in Africa will continue to cover the following areas:

2. e-government or mobile-government

How to empower African administration to server their citizen with internet and mobile technology. You’ll receive 10 ideas to start a business in this segment.

3. Physical Security and data encryption and protection

Security is a huge issue in many African countries. Opportunities for business are endless here: from physical security to helping African governments protect their data from hackers and spies, You’ll receive 10 ideas to start a business in this segment.

4. Servers farms for local e-commerce

Currently most of African websites are hosted in Europe or United States. As the continent Internet and mobile applications usage grows, there will be a huge need for reliable servers farms and hosting companies in Africa. You’ll receive 10 ideas to start a business in this segment.

5. E-libraries and affordable e-books readers for students

Africa will by-pass the area of huge physical libraries and go directly to digital libraries where students and citizens could access millions of books and materials through tablets. This digital revolution is a huge opportunities for education in Africa, but will need smart entrepreneurs to negotiate the deals, clear the patch of adoption and build the necessary platforms that will support that revolution. You’ll receive 10 ideas to start a business in this segment.

6. Housing

Africa is young and buoyant, but has a huge housing problem in all its urban areas. Government and private investors in this area will need the support of edgy and ambitious entrepreneurs. You’ll receive 10 ideas to start a business in this segment.

7. IP and patents protection

As the African economy will continue to grow, business will start slowly caring about their brand and IP (Intellectual Properties) protection and will need companies to help them in doing the ground work of monitoring, identifying breaches and taking actions.

Young lawyers in search of business opportunities will receive 10 ideas to start a business in this segment.

8. Review & Rating

Trust is important in any economy, and for new and growing capitalist economies like in Africa, good and independent Review and rating agencies and services providers will be well positioned to take on this lucrative market. You’ll receive 10 ideas to start a business in this segment.

9. Energy and Transportation

Everything in this segment is to be done. From the smallest village to the biggest cities, Africa needs the most courageous, the most pragmatic, and the most compassionate entrepreneurs to succeed here. You’ll receive 10 ideas to start a business in this segment.

10. e-commerce

E-commerce in Africa is only in its very early stages, however there are lot of opportunities to seize. A good positioning, and a well rounded branding and customers service will help any well funded startup in this segment to make fortunes. You’ll also receive 10 ideas to start a business in this segment.

If this post has in some way got you thinking like it got me, then please subscribe to our blog to get more of stuff like this, if you have other ideas worth spreading to enable more and more Africans get on there feet in the ares of business please don't hesitate to add them in the comments section below, finally any contributions will be highly welcome. Thanks for taking time out to step by, have a nice week pals.