When operating in another country, remember you are a guest in that country and should behave accordingly. It can sometimes be difficult to do things the way you would at home because of the different business culture and standards in other countries in Africa. There are times a company may have to take a stand if they are being asked to violate a principle held dear at home by shareholders, owners and other stakeholders. However, at the end of the day, the company has to decide to stay or go based on that. Companies can also be a force for change but cannot do it by putting undue pressure on their hosts.
Regarding the much-publicised growth in Africa – the reality on the ground is not always reflected in the statistics. Countries with high growth figures, for example, are often also the most difficult places in which to operate. Not properly understanding the terrain can mean failure. Often the soft issues can trip up investors.
To do business in a new market, you need to be aware of a range of issues such as what the local business culture is, you need to do deep due diligence on potential partners, look at the shopping habits of potential consumers and understand that what works in one market may not work in another. It can also mean knowing how to get around problems that you encounter along the way and how to mitigate risk.
In terms of Africa’s growth, it is important to note that for all the impressive statistics, most growth is coming off a very low base, often in highly undiversified markets – resource-rich countries - that are unable to deal effectively with exogenous shocks. Additionally, a lot of the growth is on top of a rather wobbly platform of progress that does not necessarily include factors that more developed economies would take for granted such as good public health systems, investment in education and availability of electricity and portable water.
Is Africa on track to realising a truly enabling business and investment climate and good intra-trade numbers? Africa is a long way from reaching a satisfactory situation with regard to an optimum business environment or realising strong intra-African trade. The one often affects the other. For example, a lack of support for manufacturing in many countries means goods are not able to compete effectively with cheaper imports that are also often of better quality.
The high cost and inefficiency of rail transport and the delays at border posts and other non-tariff barriers for exports moving by road are affecting the growth of trade between African countries. These problems also reflect the fact that insufficient attention has been paid to trade facilitation and focusing on not just infrastructure but also to impediments in doing business that push up costs and slow down efficiency.
While there have been many improvements in some countries in terms of the operating environment, as reflected in the annual Doing Business survey conducted by the World Bank, there are many more that could be tackled but have not been. Although governments complain about not having sufficient funds to improve things, there are many improvements they could make that do not cost money but do require political will.
Going forward, a significant rise in investment is expected from emerging markets such as China as well as Turkey, South Korea and others, but also from the more traditional investing nations such as the U.S, which really raised its profile in Africa in 2012. It is also important to watch what improvements African countries are making towards creating a better operating environment for business and whether infrastructure projects and upgrading of key facilities such as ports and railways gain momentum.
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