Depending on which statistics one chooses to dwell on, the African continent could either be a favourable or a daunting business prospect. But with Africa now boasting some of the highest returns on foreign investment worldwide, its opportunities evidently outweigh its risks, or at least make the risks worth reconsidering.
Significant economic data and forecasts abound which positions Africa as the new frontier for international businesses; especially with its accelerating GDP and expanding middle class. However, conducting business in a continent with a very high rural population and considerably poor infrastructure would require an innovative corporate mindset.
Most successful multinationals are not new at engaging emerging markets, but effectively utilizing Africa’s market would clearly involve less short-term, single-industry solutions but take a long-term multi-layered social approach. In broad terms, this encompasses the following:
Collaborative Infrastructure Development
Studies indicate that urbanisation is fast catching up in Africa and some reports projecting up to 60% over the next 50 years. This poses a problem if infrastructure is inadequate. This is a perpetual problem with a continent estimated to need almost US$100 billion yearly to sustain its infrastructural needs. Infrastructure, as a catalyst for growth provides an opportunity for businesses and government to work together to the benefit of their regional economies. German-based Siemens seized on the opportunity to help African cities cope with the challenges of urbanisation, to the extent of integrating ‘Infrastructure’ as a sector in their global business framework. Siemens has sought to provide answers to the continent’s infrastructural questions, at the same time ramping up its overall operations on the continent with boosts to manufacturing and its sales teams.
Collaborative infrastructural development is also cited as one reason Chinese companies have been particularly successful in Africa – often heading infrastructure projects (roads, schools, hospitals, irrigation systems) rather than channelling funds through potentially corrupt government officials as Western companies have done in the past without success.
Local Business Relations
Multinationals cannot successfully participate in Africa without guaranteeing that the communities in which they operate have significant vested interest in their business. For example, Coca-Cola with a presence in every country on the continent makes it a policy to engage local investors in their businesses. It operates on a franchising model whereby it sells the syrup concentrate of its products to bottlers with Coca-Cola franchises for the geographical area. The bottlers go on to produce the final product, then sell and distribute. The aggregate result of their strategy is that the business creates a business opportunity that unifies other investors.
High Level Partnerships
Having a strong network of partnerships with professionals in various business fields and within the government serve to ensure a firmer foothold, and enhances a degree of continuity in a continent often rocked by unpredictable political circumstances.
For more and more businesses, achieving the African dream has become a reality. For many more businesses hoping to invest in the continent, the key is in adopting a long-term view.