Africa: A New Business Frontier
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While it’s common knowledge the challenges -- real and perceived -- of conducting business in Africa include political instability, loose regulations and -- in some areas -- disease and conflict, what’s often overlooked by entrepreneurs and enterprises alike is the tremendous untapped potential for companies willing to venture into the commercial landscape of this economically emergent continent.
Consider this: Sub-Saharan Africa’s GDP is expected to reach 4.8 percent in 2017, as compared with predictions of only 2.3 percent growth for China between 2016 and 2018. The continent’s economy is expected to grow 5 percent in 2016 and, as of 2014, U.S. exports to Sub-Saharan Africa tripled to $25 billion.
Certainly, these stats, coupled with social and infrastructure development, suggest that launching or expanding a business in Africa merits consideration, at a minimum. Google has been investing in Africa for more than eight years, most recently with a $40 million investment in the Lake Turkana Wind Power Project in Kenya. Africa’s burgeoning tech hubs in Sub-Saharan Africa -- often called Silicon Savannahs -- are also attracting global tech companies and CrunchBase is projecting at least $1 billion in VC funding of local startups between 2012 and 2018.
However for those looking to do business in Africa for the first time, it can be a very daunting undertaking. Executives, contractors and other professionals charged with leading initiatives on the ground need to be aware of various cultural customs and challenges.
Here are seven tips to successfully navigate starting or expanding a business in Africa:
- Business is always personal. A key cultural difference in Africa compared to the U.S. is that there is no separation between professional and personal life. Before locals engage in any business activity, they must like and trust you on a personal level. Invest extra time in getting to know people you’re hoping to do business with and genuinely take an interest in their families, hobbies, cultures (including tribal interests) and aspirations.
- Stand firm on corruption. Despite economic advances, corruption still has a widespread presence in many regions in Africa. According to a recent report by Transparency International, corruption in Africa is actually on the rise, with nearly 75 million people in the Sub-Saharan region estimated to have paid a bribe in the past year. Be clear from the beginning that your company will not engage in corruption and adopt a policy of transparency in terms of your company’s intentions with all concerned stakeholders.
- You can’t compete against free. Africa has been receiving supplies and services from nonprofits and foreign aid agencies for decades. As a result, locals are accustomed to receiving certain goods for free. Therefore, your product or service must be differentiated enough to warrant the price. Partnering with a public agency or NGO so that the “buyer” is someone other than the end user is a strategy some companies have taken to overcome this hurdle.
- Know your surroundings. Africa has a reputation of being a wild, largely uncharted frontier, and in some ways this is still an accurate description. Many buildings, land plots and other resources are not mapped. However, it’s critical to have an accurate and thorough understanding of regions in which you’re hoping to conduct business. RippleNami is a custom mapping platform that enables companies to integrate data from countless sources in order to visualize the information that is most important to their operations in a geographically-relevant way. For example a telecommunications company could plot and track cell towers, Wi-Fi hotspots, customer kiosks, employees and other assets -- all in one view.
- Leave assumptions at the border. Arrogant individuals venturing into Africa thinking they are smarter or savvier than the locals will fail miserably. There are highly educated and seasoned business professionals in all regions in Africa, so don’t make any presumptions and always bring your “A” game to every meeting.
- Be persistent, and present. When attempting to advance business objectives in African countries, you must physically be in those countries on a regular basis. You cannot conduct business from the U.S. or even a neighboring country, or you will be perceived by locals as not being serious or genuine in your dealings. Negotiations can also take longer than in other regions, so persistence is key.
- Leverage the local young population. With more than 200 million people between the ages of 15 and 24, Africa has the youngest population of any continent in the world. What’s more, youth in Africa are hungry for technology, eager to engage in meaningful work and willing to work for very reasonable wages. Tap into this resource as your company expands in the region and hire locally rather than relying on expats who are not only costly, but won’t have the benefit of local cultural competence, personal relationships or a vested interest in growing the local economy.