This May, it is entirely understandable for many business owners, especially those who trade internationally, to put things on hold as they anxiously wait for the effects of revisions in America’s trade policies on the world economy. But Joel Andrews, Regional Investment Manager for Business Partners International, proposes a different approach.
Rather than simply hunker down, take some time during Africa Month to look . “The population of Africa is young, there is a thirst for advancement, knowledge, services, goods, capital and ideas,” says Joel. “It is a very exciting, high-energy space.”
Joel believes that the concept of Africa Month, which culminates in the anniversary of the founding of the Organisation of African Unity (now known as the African Union (AU)) on 25 May 1963, has never been more relevant for business owners. As a period dedicated to focus, showcasing and collaboration, it comes at an opportune moment when countries are looking to strengthen regional trade ties in response to the tariff walls put up by the US.
For Joel, the growth of Africa’s economy is symbolised by the sight of the expanding rail network spreading ever wider from Mombasa port as he flies into Kenya. “You can see it from the sky, railway lines on a massive scale, just huge numbers of containers. It’s happening,” he says.
Business Partners International (BPI) finances business owners from regional offices in Kampala in Uganda, Kigali in Rwanda, Blantyre in Malawi and Windhoek in Namibia. Since its launch in 2006, BPI has financed businesses across East Africa to the tune of more than US$150 million.
The factors that have always been seen as obstacles to doing business in Africa also double up as opportunities, says Joel. The lack of infrastructure, including road, rail, electricity and stable internet connections has certainly made it difficult to build businesses in Africa. It still is difficult, but with the awakening of the African economy, these shortcomings now present as major opportunities for construction and service industries.
Every community reached with a new road or enhanced internet connections add to the size and depth of the African market, not only for goods. There is a significant demand for formal education and training. Rapidly formalising sectors such as retail demand the development of logistics networks and business services, while tourism continues to grow as infrastructure improves.
Doing business in Africa is still not for the faint-hearted. There are countless opportunities, but you have to be cautious, warns Joel. Some businesses launched in the north from South Africa have failed because of a misunderstanding of the markets, the trends, and the different regulatory systems, leading to slower sales or higher costs than expected. The key is to do extensive research and due diligence about the market that you want to enter and not to simply base your plan on your South African experience. Ideally, your first foray into the new market should be a scaled-down, capital-light pilot business to test your assumptions, says Joel.
Another approach is to seek out strategic partners in the target country and to incrementally build relationships and networks before a full-scale launch.
Some useful systems that South African businesses take for granted, such as regulation and the maturity of their financial services sector, relative to the rest of Africa for now. Despite the increasing sophistication of African commerce, the enforcement of contracts still varies widely from region to region. This does not make doing business impossible, it simply means that you have to adapt your business approach to focus on cash-on-delivery or upfront payment processes.
The idea of Africa Month is to focus attention on the original dream of the OAU and its successor, the African Union, for an integrated, prosperous continent, says Joel. Every business that reaches across the border to the north, brings that idea one step closer, and at the same time strengthens itself in a time of global trade turmoil.
About the Author: Joel Andrews
