Tips for successful investment in Africa

African business analyst, Dianna Games, gives insight on investing in Africa.

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.

Visit www.frontiermarketnetwork.com to view a comprehensive database of business and investment opportunities in Africa.

Trends and prospects for the livestock sector in Africa

The high demand for animal-sourced products is presenting major business and investment opportunities for companies.

The consumption trends of a product or service are key indicators of the investment potential of any given sector. For the livestock sector in Africa, the prospects are positive, according to a recent report by the United Nation’s Food and Agriculture Organisation (FAO).

In the developing world, livestock production grew on the back of steady gains in real per capita income, population growth and urbanisation. In recent decades, while consumption of animal-sourced foods picked up in Latin America, South Asia and Southeast Asia, Africa lagged behind.

The good news contained in FAO's Investing in African Livestock: Business opportunities in 2030-2050 report is that the sector in Africa is catching up. The continent’s GDP growth rate is expected to grow by 4.8% in 2013. By 2030, GDP growth is projected to be four times the 2010 level of 4.6%. The population is predicted to 1.5 billion by 2030, up from the one billion of 2010, and increasingly urbanised.  

These conditions are a fertile ground for a ‘livestock revolution’ in Africa, according to FAO.  

Future meat and milk market

By 2050, the meat market in Africa is projected at 34.8 million tons while the milk market will be at 82.6 million tons. Market growth ( as measured by the additional volume of livestock products consumed from 2005/07 to 2050) is estimated at 24.3 million tons for meat and at 50.2 million tons for milk, putting the continent’s consumption at par with that of the developed world and Latin America.

Annual growth rates for meat and milk consumption are projected to be higher in Africa than in other regions, with the exception of meat in South Asia.

The livestock market in Africa has the potential to generate major business and investment opportunities. The FAO report notes that local producers will find it increasingly difficult to satisfy the growing demand for animal-sourced food, presenting lucrative import opportunities for companies.

Regional perspective

Development and opportunities in the sector will vary across regions.

• Southern, Northern and Eastern Africa account each for about one quarter of the beef market. The regions hold the greatest potential and business opportunities for beef producers. The market is however relatively uniform in terms of its importance in the various African regions.

• Central and Eastern Africa , followed by the Northern Africa, are projected to be the largest mutton markets in Africa and will contribute almost 70% of the additional demand for mutton, lamb, and goats by 2050, mostly a reflection of ethnic preferences.

• Almost half (46.7%) of pork consumption is currently concentrated in Southern Africa, followed by Western Africa (28.1%). Southern Africa is anticipated to further increase its share in the pork market in the coming decades.

• Poultry consumption is and will largely remain concentrated in Southern Africa and Northern Africa. Future increases in consumption will be high in the Western region, which should become a major target market for poultry producers.

• Northern and Western Africa jointly account for almost 65% of the eggs market in Africa. Major market opportunities for egg producers are expected in the Southern Africa.  

Import opportunities

Although there are ample business opportunities for livestock producers in Africa across all products in the coming decades, FAO’s projections indicate that producers will be increasingly challenged to respond to the demand. Consequently, with the notable exception of Eastern Africa, the continent is set to be a net importer of livestock products, with the volume of imports steadily increasing for all major livestock products in the next decade.

Central Africa depends and will depend more on imported livestock products than all other regions, followed by Northern Africa.

Imports of milk are and will remain critical for Western, Southern and Northern Africa due to the rising demand for dairy products.

Beef imports will rise in Western, Northern and Central Africa.

Eastern Africa is the only region that will maintain a positive trade balance for some livestock products, including beef, mutton, pork and eggs.

Harvesting the opportunities

To exploit the opportunities in livestock production, increased investments and policy and institutional reforms that target the livestock sector are required. This calls for an understanding of ‘typologies’ of producers that are able to tap into market opportunities, and adoption of farm-to-fork business models that are sustainable and create employment.

The FAO report says decision makers need to pursue a dual-track approach to livestock development:

• Market-oriented or potentially market-oriented producers should be supported, as increasing livestock production and productivity of emerging farmers will generate spill over benefits to employment and consumption.
• Poor or relatively poor livestock keepers should be supported to make full use of their livestock assets, which is an effective way to sustain their livelihoods in the short to medium term while utilising resources with few alternative uses.

Formulating effective livestock sector policies and institutional changes require a flow of information on market conditions and on the constraints to market entry. These are rarely readily available and investments in data collection and in data collection systems should be given appropriate priority, as the basis for supportive policies and investment.

Visit www.frontiermarketnetwork.com to access business and investment opportunities in Africa's agriculture and livestock sectors

Guide to doing business in Nigeria

Download Frontier's complimentary eBook and learn how business is conducted in Nigeria.

Nigeria is one of Africa’s powerhouses with the potential to be a key player on the global platform, thanks to its huge population, a fast-growing economy (the second largest in Africa), an expanding middle-class that wants to spend money, substantial natural resources, and diplomatic influence.

As one of the largest producers of oil in Africa, it has attracted significant investment into the sector. Current policy initiatives indicate government’s commitment to overcome existing challenges and to diversify the economy. Diversification, for example transforming the agriculture sector, can bring double-digit growth rates by next year, which would put Nigeria’s growth rate ahead that of Brazil and Russia, and slightly behind India and China.

The explosion of sectors such as mobile telecommunications and construction drove growth in the past decade, with many non-oil foreign businesses making profitable investments and often in partnership with reputable indigenous companies. Rapid economic growth is expected to continue; Nigeria aims to be one of the 20 largest economies of the world by 2020.

Crude oil exports dominate the economy and account for about 90% foreign exchange earnings and 70% of budgetary revenues. Other exports are rubber, cotton, cocoa, timber, palm oil, groundnuts and ginger. Major imported goods include machinery, chemicals, equipment, food and live animals. China is the largest import partner followed by the U.S., India, The Netherlands and South Korea. The top three largest exporters to Nigeria are the U.S, India and Brazil.

The country has many investment and business opportunities available to companies seeking growth in fast-growing frontier markets. There are generally no restrictions on foreign investment. However, a few areas are strictly regulated, for example, defence, supply of uniforms for officials of the executive arm of government, and narcotics. Various sectors, for instance, oil and gas, may have specific investment.

Download a complimentary Frontier Market Network eBook on Nigeria and learn:

• How to set up a business 
• Taxation
• Investment climate
• Legal system
• Intellectual property
• Incentives
• Human resources
• Employment law
• Useful facts

Are you looking to invest in South Africa?

5 specific investment projects in South Africa

1. R100bn aerotropolis project in seeks investor - The aerotropolis node is part of the spatial development framework of Mangaung Municipality in Free State Province.
2. Opportunity to develop mixed-use economic zone - A joint venture partner is required to build a mixed economic zone development project in Gauteng Province. 
3. Seeking investor for water-heating system - The developer of an efficient hot-water-heating system requires between R5-million and R10-million investment to commercialise the product.
4. Investors wanted to manufacture styrene-butadiene rubber latex -The Richards Bay Industrial Development Zone is seeking investors to manufacture Styrene-Butadiene Rubber Latex, a product that is used by tyre makers.

5. Investment needed to expand kitchen furniture business - An established supplier of kitchen units seeks investment of US$900 000 to penetrate the Australian market.

View Frontier's comprehensive database of business opportunities and investment projects in South Africa.

8 top agriculture investment opportunities in Malawi

Malawi provides potentially lucrative investment opportunities for foreign investors in agribusiness sector.

Malawi has vast untapped agribusiness potential. The Southern Africa country has good transport connections for exports to regional and international markets. It also has preferential access to major markets represented by COMESA, SADC, LOME IV and AGOA.

The agriculture sector has seen hard times in the recent past due to drought and political instability. Government’s reaffirmed commitment to democracy and good governance and significant flow of international development funding are helping to resolve historic problems.

There are a few good news stories for agriculture coming out of Malawi, including the resumption of peanuts exports after a long lull, and high level political support for agricultural development initiatives.

Investment opportunities

Cotton production

Malawi has been a cotton growing country since the colonial era. The cotton sector was vibrant for many years but started to slump in the early 1990’s due to the decline in global prices for cotton and the increasing cost of cultivation, which eroded the profitability of the crop for many smallholder farmers.

More recently, things have been looking up. Agricultural research institutions in the country have developed cotton varieties suitable for local climatic conditions and yields are improving. It is hoped that, with the introduction of foreign investment and expertise, yield levels can be increased from a current estimated 800 kg/ha to as much as 3,000 kg/ha in coming years.

Investment opportunities exist in the commercial cultivation of cotton through contract farming, village adoption, cooperatives and associations. These help to improve the production and quality of cotton with the objective of providing raw materials to the textile industry for its preferential markets under the African Growth Opportunity Act (AGOA), and the EU.

There are also larger-scale opportunities, such as the call for an investor to establish a second spinning, weaving and knitting plant in the country – to meet the demand of garment manufacturing companies operating under Export Processing Zone (EPZ) status. The investor will address the issue of inadequate raw materials, particularly of knitted fabric.

Increasing capacity and moving up the value chain are two major issues for the cotton sector in Malawi. With existing ginneries using only 25% of their ginning capacity, there are opportunities for investors to help increase productivity and add value to the cotton crop by converting it from raw cotton into other cotton products.

Tea production and processing

Tea is the second most important export crop for Malawi and it contributes around 8% of total export earnings. Tea is exported to European, Asian and American markets. Since tea is a major foreign exchange earner, additional investments are necessary through joint ventures with Malawian companies in the processing of tea and other byproducts and also in the actual farming of the crop. New opportunities also exist in the processing of green tea for East Asian markets. The Tea Association of Malawi coordinates information on the production and processing of tea in Malawi

Macadamia nuts processing

Macadamia is among the most important cash crops in Malawi. The nuts have a variety of uses, ranging from usage in confectionery products, eaten raw or roasted as dessert nuts. They are also used for household oil extraction and cosmetic manufacturing. Macadamia products are exported to both Asian and European markets. The current total area under macadamia cultivation is 2,200 hectares. Production of macadamia nuts is by both smallholder farming and large-scale estates. The cost per hectare in Malawi is very low. So far, macadamia bodies have been established and two processing plants are already operating. However, due to increasing demand for the product, more foreign investment is being sought to boost the production and processing of the nuts into various

Arabica coffee production and processing

Arabica coffee is the fourth most important export crop in Malawi. Exports are made to European markets, Asia markets and American markets. Coffee offers more profits than most other crops.  In order to boost production, the government has privatised the Smallholder Coffee Trust, which empowers smallholder farmers to control coffee production. Opportunities for investment exist in form of joint ventures in production and processing of coffee into marketable products.

Soya bean processing

Malawi produces more than 35,000 metric tons of soya beans per year. Most of the soya bean is exported raw and little is processed for food domestically. Malawi’s soil is very conducive to soya bean cultivation and farm gate prices are internationally competitive. There is a growing demand, both locally and internationally. The government is encouraging increased growth, production and utilisation of soya beans. As such, investment opportunities exist in the processing of soya beans into soya milk, soya oil and other secondary products.

Cut flower production

Investment opportunity exists in the production of cut flowers exclusively for the export market in Europe. There are already some firms that are successfully exporting to Europe and additional investment in this sector will create economies of scale and hence make Malawi’s cut flower industry more competitive on the international market. Malawi has a favourable climate and weather for the production of cut flowers. Since flowers do not do well in cold seasons in Europe, Malawi has an advantage over producers in Europe during the festive cold seasons of November-February in Europe. Investments are likely to yield high returns and an initial investment capital might be no more than US$2m. Sufficient labour is readily available for such a project within the city of Lilongwe and surrounding districts where cut flowers can be directly exported by air to Europe.

Fruit processing and canning plant

Malawi currently has no processing plant using local fresh fruit. The country has a favourable climate for the production of a wide range of fruits that include pineapples, tangerines and mangoes. The local market for these products is good and there are export opportunities to South Africa and other regional markets. An investment opportunity exists to set up a fruit juice processing plant in the southern region of Malawi. The estimated project cost is US$5mn and the expected return on investment is 33%.

Sesame processing

Sesame is used in Malawi both for consumption purposes and as a cash medium in some rural areas. It is used in confectionery products, for seasoning side dishes, and in soap making and cooking (including sesame oil). The crop grows along the lakeshore, in the Shire valley and on the warm plateau areas of Lilongwe, Mzimba, Rumphi and Chitipa. Estimated annual production has averaged 205 tons over the past 10 years. Opportunities exist in production and processing of sesame oil into marketable products.

Source: Developing Markets Associates

Visit www.frontiermarketnetwork.com to view business and investment opportunities in the agriculture sector.

7 business trends to watch in Ethiopia

Trend #1: Investment in infrastructure 

Ethiopia’s economy grew significantly in the past decade, driven mainly by major activity in the infrastructure and construction sectors. Annual per capita growth could increase by 3.8% if the country can get its infrastructure up to the quality of facilities found in Mauritius or South Africa. The Ethiopian government has an ambitious infrastructure development plan that will see to the delivery of adequate power, road, air, rail and telecommunications facilities. The plan will quintuple power generation capacity (to 10,000 MW) by 2015, according to the Growth and Transformation Plan; triple the capacity of the road network to 136,000 km, build new 2,000 kms of railway and facilitate mobile phone operators’ quest to increase the number of subscribers. Additionally, the national carrier, Ethiopian Airlines, plans to expand facilities to become the largest airline in Africa. These programs and others such as the ones that were designed to enable the country fulfil the Millennium Development Goals (MDGs) present huge opportunities for private companies. The key to identifying the opportunities lies in understanding the inputs the government requires to implement various development projects.

Trend #2: An agricultural revolution

Agriculture accounts for 40% of Ethiopia’s GDP and 60% of exports. Despite the lingering perception of the country as famine-struck, there is immense unexploited agricultural potential. The varied agro-climatic and altitude differences allow farming of a wide variety of crops including coffee, tea, oilseeds, pulses, cereals, which are the traditional crops grown, and newer crops such as fruits, vegetables, sugarcane, and palm. Ethiopia is a big exporter of floricultural products, fourth largest sesame exporter in the world, and top ten in the production of oilseeds like linseed and a wide variety of pulses. The livestock sector has the largest base resources in Africa but is grossly unexploited. The high value horticulture sector is likely to overtake floriculture in the coming years as an export earner. Future growth in the agribusiness sector will be driven by improved production by small-scale farmers and further foreign investment in commercial farming and agriprocessing. Some foreign companies are already invested in agri-procesing, for example, beverage production. It is likely that the sector will attract more investment especially in agriprocessing.

Trend #3: Growing market for consumer products

Ethiopia’s population of 93.8m, a rapidly expanding economy (% figures), high urbanisation rates and a young population – 73% of population is under 30 years of age – supports the case for investing in the Fast Moving Consumer Products (FMCG) sector. Foreign investors have recognised this potential, with Diageo buying a minority stake in state-owned brewery, Meta Abo, in 2011 for $225m, while Heineken bought two smaller breweries for $85m and $78m respectively. Diageo is looking to complete the acquisition soon, as it seeks to increase its market share. UK company, Duet Group followed the beer giants in Ethiopia by acquiring a 41% stake in Dashen Brewery for $90 million. Interest in the beer industry has continued with greenfield investment projects such as Raya Brewery and Habesha Brewery taking off. The beer market is expected to grow more than 10% each year to 2015 amid the country’s rising economic growth, which is expected to reach 8% by 2015, according to the IMF.

South Africa’s Tiger Brands acquired majority stake in East African Holdings’ FMCG operations, which is the largest manufacturer of household goods in the country. With industrial parks under construction and government-focus on the development of the light manufacturing sector, the sector is set to take off.

There will be interesting opportunities for smaller companies who aim to supply products and services to big investors. In the barley-malt-beer value chain, for instance, one can see opportunities, from contract farming, distribution and marketing, to advisory services, packaging, and input supplies. In the broader FMCG industry, interesting opportunities exist for expansion of market outlets such as supermarkets, distributions systems, and wholesale/retail operations. The next drive in the growth of FMCG sector may see expansion into regional markets of Somalia and South Sudan.

Trend #4: Unparalleled regional trade expansion

Ethiopia’s trade with neighbouring countries is likely to present a major business and economic opportunity in the near future. This will be made possible by bilateral and multilateral trade agreements under the auspices of COMESA and IGAD. However, a more important factor are the planned transport corridors in the region. There are established road linkages with Ethiopia Djibouti, Sudan, Kenya and to parts of Somalia. New projects are on the way to link the country to the emerging market of South Sudan, which operators in Ethiopia can also reach via river transport on the Baro. Perhaps the most interesting project is the Nairobi-Addis Ababa highway. When complete, it will represent one of the largest business opportunities in Africa, linking Ethiopia’s over 90m population with 130m consumers in the East African Community. There are talks of building a rail transport network, which will link with West Africa, perhaps from Senegal to Djibouti.

Trade figures are growing despite the current inadequate infrastructure - in 2010, Somalia and Sudan were Ethiopia’s fourth and seventh largest export markets, registering more than $200m in value. Imports from the Sudan and Somalia have also reached significant values at 4.5% and 6.6% of total Ethiopian imports respectively. Ethiopia has started supplying power to Djibouti and the Sudan and with additional multi-million dollar agreements to supply Kenya and South Sudan. Kenya in the meantime is developing the port of Lamu, with the aim of supplying South Sudan and Ethiopia. This region is likely to benefit further from a planned railway project connecting Ethiopia and Kenya along with South Sudan.

People are moving freely between Kenya and Ethiopia, while trade between Djibouti, Sudan and Ethiopia is tariff free. Any FMCG business with a good foothold in Ethiopia is thus also in a good position to supply these countries. The emerging interconnection of the East African and Horn of Africa trading blocks will represent some of the best opportunities for investment and value addition.

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Five top investment opportunities in Ghana

Ghana one of Africa's high-growth markets. Real GDP is projected to grow on average 5.16% per annum over the next five years. The West African country has maintained positive FDI trends in the recent past and has immense investment and business opportunities.

Power generation and supply

Ghana’s power sector has close to 2,500MW of installed capacity. Demand could exceed 5,000MW by 2016, driven by strong economic and industrial growth, population increases and government’s goal to be a major energy exporter into the West Africa Power Pool. Independent power producers are contributing to the current capacity, and are important in government’s bid to achieve its energy objectives.

Demand for energy is growing at a rate of 10% to 15 % yearly, but supply is not catching up. The government is consequently diversifying  the energy mix to ensure security, and is reportedly looking for investment into renewable energy projects to the tune of US$1-billion in the next eight years.

The renewable energy potential lies in wind, solar and hydro resources. More than 50% of installed capacity is currently provided by the large Akosombo and Kpong hydropower projects. Biomass also makes a significant contribution to the energy mix. West Africa’s second-biggest economy plans to increase the contribution of wind and solar power to 10% of the capacity by 2020 and enacted a Renewable Energy Law to enable the investment goals. 

It is estimated that, about US$9-billion is required in the short-term to finance the numerous initiatives in the energy sector, including oil and gas activities, which alone require over US$5.5-billion.

Companies can find a number of opportunities in generation, transmission and distribution of electricity, and supply of street lighting, energy-monitoring equipment to meet increasing demand for power monitoring and tariff analysis, and solar energy products and systems to off-grid communities.

A few foreign companies are planning big power generation projects in the country.

UK-based renewable energy investment firm, Blue Energy, announced it would construct a photovoltaic (PV) solar power plant in Ghana at a cost of US$400-million. Installation of more than 630,000 solar PV modules will begin by the end of 2013, and electricity generation will start early next year, with sections coming on stream as they are completed.  Blue Energy expects to power 100,000 homes when the plant reaches full capacity by October 2015, and claims it will be Africa’s biggest PV solar power plant.

Another recent big investor in Ghana’s solar energy space is Canadian solar company Siginik Energy Ltd, which plans to build a 50MW ground-mounted solar power installation in northern Ghana. It signed a power purchase agreement worth over $280 million, for 25 years, with the Electricity Company of Ghana Ltd., Ghana’s second largest utility.

Meanwhile Chinese Energy Company, Shenzhen Energy, is proposing to build a 700 megawatts coal-fired power plant that will cost US$700-million. Shenzhen, through its local unit Asgoli Power, entered Ghana in 2006 to build a 200MW plant that provides affordable energy to consumers.

Mining

With its political and social stability and strong mining infrastructure and services, gold-rich Ghana is a high-class target for mining investment.  As one of the most important producer nations for the global market – it is Africa’s second-largest gold producer, behind South Africa – mining is a major source of revenue for Ghana.

The country has diverse mineral resources, but the revenue balance is skewed towards gold. 14 of the 16 major mining companies operating in the country are extracting gold. Gold fields, AngloGold Ashanti, Golden Star and Newmont account for more than three-quarters of gold production. Other resources that are currently being mined include diamonds, manganese and bauxite. Deposit of Kaolin, silicon, limestone and other minerals exists.  The government is promoting the potential in these other areas with the hope of drawing interest from investors.

Gold prices soared in 2012, attracting attention to Ghana’s  deposits from big and small companies. This has also significantly increased illegal mining, which is now encroaching on the territories licensed to the majors, and using harmful methods to the environment.  

The falling prices of gold  could shift focus to other resources like limestone and bauxite. Limestone production would be potentially lucrative – the rising demand for clinker by the manufacturing and mining sectors (one million metric tons per year) could provide a ripe market locally and internationally.

Investment opportunities in the sector include production of industrial minerals for local and international markets, processing, provision of support services, e.g. contract drilling, contract mining, laboratories and geological services, manufacturing plants to produce key inputs and machinery for the mining industry.

Real estate and construction

Ghana’s growing population, buoyant economy and favourable investment environment make its real estate market increasingly dynamic. In spite of complicated issues over local lending and land ownership, demand for housing spans the entire spectrum of the population, from wealthy Ghanaians and a growing number of expatriates through a rising middle class to lower-income groups.

The current housing market boom began in the early 1990s when the financial sector was liberalised, and the sector’s expansion has since gone hand-in-hand with that of the economy as a whole.  With Ghana as one of the fastest-growing countries in the world, investors and authorities alike are realising the potential of the nation’s real estate sector.

Ghana has an encouraging framework for real estate investment, with freely-transferrable capital and profits, but projects have generally concentrated towards the middle and the top of the market, where margins are bigger and demand has remained relatively stable. As a result, a shortage of affordable housing is one of the biggest challenges facing the country. While the gap between supply and demand is most acute at the bottom of the income scale, there is also rising demand in the middle- and high-income segments, in which local and international developers are showing increasing interest.

One of the most significant drags on residential real estate growth has been the difficulty of obtaining a mortgage. But there is a growing willingness among banks and other lenders to provide home loans, whether through traditional mortgage structures or other forms of periodical payment.

Agriculture

Despite the changing demographics due to increasing urbanisation and industrialisation, agriculture still represents one of the largest GDP contributors in Ghana. The country is a major producer of a wide variety of cash and stable crops, including cocoa (second largest cocoa-growing country in the world), palm oil, maize, rice and cassava. Though maize and rice are primary staple crops, domestic demand has outpaced local supply in the past decade. Increasing production is a key part of the government’s long-term development plan.

A number of government- and private sector-led programmes could help boost production in the coming years. The World Bank, IMF and several pan-African NGOs are actively involved in the sector. The government continually engages major financiers to secure easier access to credit for farmers, which should decrease the amount of funding needed from international aid organisations and government sources.

The country is a major exporter of fruit and vegetables to EU markets. Other leading processed agricultural export products include tuna, cut fresh pineapples and tomato paste.

There are many opportunities for investors to get involved in Ghana’s agriculture sector such as commercial farming of crops and flowers, processing of produce and dairy products, supply of inputs, equipment, agrochemicals, veterinary drugs and animal feed, manufacturing of agri-chemicals packaging materials, cold chain systems and factory building and irrigation technology. Other opportunities include  capacity building for management and market-oriented enterprises, market intelligence research and development of agricultural finance and insurance. 

Insurance

The insurance sector in Ghana has grown rapidly in recent years. The fast growth and low entrance requirements over the past decade have resulted in a top-heavy sector, dominated by a handful of large firms and brokers. Competition is fierce, with over 40 insurance companies and 42 insurance brokerages. Corporates bring in the most business firms, but Ghana’s rising middle class is expected to boost the retail side. As new segments open up and the market continues to mature, smaller, more undercapitalised insurance companies are merging with competitors. 

The challenges facing the industry include under-pricing of policies and bad debts, which has badly affected insurance companies, forcing them to make significant underwriting losses.

The opportunities for strong companies and well-positioned new entrants are many. Micro- insurance initiatives in particular are set to tap into a massive, previously untouched market. The oil and gas sectors are expected to continue bringing in substantial amount of new business to insurance firms. The underinsured agriculture sector is another area.

The overall penetration is currently at almost 3%, and Ghana could play a leading role in the West African insurance market where total penetration is less than 1% in most countries, according to a report by international re-insurer, Munich Re. There are opportunities for companies to expand into the region.

Click here to view more business opportunities and investment projects in Ghana.

Top ten export products to Angola

Download Frontier's free eBook now and get advice on how to export goods to Angola, a fast growing economy with attractive business opportunities.

More businesses are now exploring cross border trade to take advantage of the huge export and import opportunities in fast-growing markets in sub-Saharan Africa. Angola is one such market promising market. 

With an estimated 43% of its population under the age of 15 and a rapidly emerging middle class that is fuelled by oil wealth, Angola has a huge consumer base with money to spend. 

The South African Institute of International Affairs put the scenario in context in a recent report on Angola: “…despite only having a population of around 19 million, the country is the third-largest domestic market for alcoholic drinks, behind South Africa and Nigeria. With so little being made or produced locally, there is enormous scope for exports...”

As the oil-rich nation continues to grow (about 6.2% this year, according to the IMF), so does its appetite for South African made products. Angola aims to attract US$4-billion a year in non-oil foreign investments by 2017. Foreign direct investment, excluding oil, was US$1.9-billion by the end of September 2013.

China is the top source of imports. Statistics by the National Freight Council in Luanda show 810 000 tons recorded in the second half of 2013, a significant rise from last year. Portugal is the second-largest trading partner with 410 000 tons of products, 8.8% less than the 450 000 tons recorded in the same period in 2012. Brazil, Vietnam, Turkey, Belgium and South Africa followed closely. Imports totalling three million tons were recorded in the period under review. Hydraulic cement was the biggest import product, at 526 000 tons.

Frontier has put together the top ten products that are in demand in Angola, and expert advice on how to get your goods into the country. 

Download the Top ten export products to Angola report.

Frontier has helped to connect investors, business owners and distributors in many sectors. 

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Practical tips for success in Africa

Financial services group reveals the secrets to successful investing.

Mark Tunmer, CEO of financial services group, Imara Holdings, shared with us the secrets to the company's success. The BSE-listed company operates in nine African countries.

What factors are driving the growth of your company at home and on the continent?

Our growth as a financial services group rooted in Africa is underpinned by a range of positive developments, including the growth rates achieved by many economies in sub-Saharan Africa, often above 5% a year, growing liberalisation of most  economies, the growth of the middle class, growing disposable incomes, growing demand for consumer goods and financial services, growing liquidity on some markets, growing share values, and the development of African institutional investors such as pension funds, insurance companies and asset management firms. Another factor is growing awareness among ordinary Africans that provision has to be made for the future through savings, pension funds and other wealth-building instruments such as shares.

Growth can be quite dramatic. For example, in the year up to our fifth annual investor conference in Zimbabwe in early June the market capitalisation of Delta, Zimbabwe’s biggest brewer, rose from US$836-million to US$1.7-billion. Over the same period, the market capitalisation of the Econet telecoms group was up from US$677-million to US$1.1-billion. In the same period, the Zimbabwe Stock Exchange has registered gains of 39% in US dollars.

Gains of that magnitude indicate growing participation by equity investors in African listed companies and explain growing international investor interest in our markets. Rates of growth and levels of sophistication vary tremendously across Africa. The South African and Zimbabwean stock exchanges have been in place for over 100 years while a stock market has only recently opened in Rwanda. Varying levels of development obviously affect the rate of growth of our own business and the prospects in individual markets.

What problems did you overcome to find success that you are enjoying in other African markets?

The fundamental challenge relates to education. At an individual level, it takes time to develop a proper understanding of the need to save and invest. Our offices in all markets engage in on-going shareholder education and commit to constant communication. At a corporate level, you do also confront a similar educational challenge. For a financial services business like Imara to grow, we need instruments in which to trade, meaning market liquidity has to grow.

For this to happen, more private companies need to list on the stock exchanges. However, family owners traditionally grow their businesses out of their own cash flow or borrow money from a bank. The alternative is to issue equity or raise cheaper long-term finance. This in turn means a commitment to transparency and full reporting to shareholders or new partners. This involves a seismic shift in the mindset of owners who might have held total control of their businesses for generations. It is a slow process. Patience is required. Education takes time.

Where do you see future growth for your company coming from, and how do you intend to leverage on these opportunities?

There are specific opportunities relating to developments in certain markets, for instance, the plan to open a stock market in Angola and, hopefully, the opening up of opportunities in financial services in Ethiopia. But, the strategic opportunity for future growth relates to macro-developments such as the realisation in many of the world’s financial centres that Africa represents the last great opportunity, from a low base, to achieve sizeable growth for decades to come. This realisation will tend to support the growth in foreign direct investment and in portfolio investment.

Clearly, oil and gas discoveries in East Africa and other parts of the continent will have sizeable impact, but we also see potential for substantial growth in the non-oil economy across sub-Saharan Africa. The growth of the African middle class will deliver knock-on benefits across the financial services industry as families save, contribute to pension funds or drive the continued growth of listed companies through growing demand for consumer goods and services.

We see this as a 20-year journey. Being well placed on the ground across Africa will enable Imara to identify opportunities at an early date and then offer appropriate solutions.

What do you look for when deciding which countries/markets to enter?

The criteria we use to decide which countries to enter differs from case to case. However, there are some common themes such as political stability and some evidence that government has launched programs to liberalise the economy or has made a firm statement of intent to begin the process of reform.

We also scrutinise the regulatory and legal framework within which we are expected to work. A key factor is the presence on the ground of good potential partners. The search for credible partners may take two to three years. We are firm believers in the need for deep understanding of local conditions and will not enter a market unless we have a strong local partner.

How do you compete and interact with foreign companies in Africa?

Our competitive advantage that has put us ahead of our foreign competitors is our presence on the ground. Every Imara professional, with only two exceptions, lives and works in Africa. Imara has direct representation in eight African countries and has strong links in another two through enduring relationships with local partners. Our researchers do not depend solely on desktop research. They take a bottom-up approach and speak regularly to the executives of African listed and unlisted companies. They visit factories, speak to the local banks and have first-hand knowledge of the markets they study. This level of understanding and our direct, local representation bestow a sizeable advantage versus foreign competitors.

What tips would you have for companies that are interested in the African market?

The need for patience cannot be stressed enough. Coming in as a total outsider can be challenging. Invest time in finding the right local partner. You can’t achieve success from afar. A foreign investor looking to make a success of their investment should visit Africa, take time out to visit companies, speak to executives and local professionals and build a personal understanding of specific markets. Personal relationships count for a lot in Africa. You need to look people in the eye and make personal assessments for yourself.

Once you have developed better market understanding, commit to the long haul. Africa has boundless potential, but it will take time.

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