Opportunities abound on the African continent. It’s home to six of the world’s fastest-growing economies; and has an average annual GDP that has consistently outpaced the global average. In addition, the African Continental Free Trade Area (AfCFTA) — ratified in July 2019 — holds the promise of greater economic development, job creation and poverty reduction, as well as a healthy return on investment for those looking to expand into developing nations.
It is clear that these factors, and others, have encouraged global investors to sit up and take a closer look at Africa as an opportunity for growth. The UN Conference on Trade and Development’s (UNCTAD) World Investment Report 2019 stated that Africa has not only defied the previous year’s global slump in foreign direct investment (FDI) but it actually saw an 11 percent increase in investment up to June 2019.
In order to achieve meaningful growth by harnessing the opportunities the continent has on offer, companies need to take calculated risks, and expand their footprint and their capabilities. It’s important to understand which countries are appealing to investors, and why. Ideally you want to focus on strong markets, with a large pool of potential customers. Countries that are making it easier to do business there, by offering rebates, or shortening the length of time it takes to register a business, are also attracting investment. Countries that can act as hubs, potentially opening supply chains into different regions, are equally as important.
Apart from regulatory compliance, one of the biggest challenges you’ll face as you move into the continent is understanding how to identify and speak to local stakeholders, and connect with local audiences. The ability to address them — not in a homogenised, global voice — but rather one that is localised, authentic, and relevant will prove a critical step in your expansion journey.
Where the opportunities lie
There are 54 countries on the African continent, each one as diverse as the next, and each one offering different opportunities, in different sectors. If you’re planning on expanding your company’s footprint across the continent you need to confront this diversity and work towards understanding the accompanying nuances, and the regulatory environments that can affect your ease of doing business.
As we’ve worked towards our own expansion into Africa, we’ve made a point to consider markets that are consistently growing, that are attracting sizeable international investment, that offer us the opportunity to connect with the different regions from a logical and strong base, and very importantly – growth in sectors in which we are well-experienced in servicing.
According to UNCTAD’s report, much of the continent’s FDI comes from France, the Netherlands, the United States, the United Kingdom, and China, and it is interesting to see which regions, and specific countries and sectors are drawing the bulk of inbound investment.
FDI in North Africa rose by seven percent to $14 billion spurred on by investment into Morocco which increased by 36 percent. In Sub-Saharan and Southern Africa FDI rose by 13 percent to $32 billion. FDI held steady at $9 billion in East Africa — the fastest-growing region of the continent. West Africa’s overall inflow of FDI, dropped by 15 percent to $9.6 billion
Notable countries included Kenya, and Nigeria. Kenya’s FDI grew by an impressive 27 percent during the reported period, with investors favouring the manufacturing, hospitality, chemicals and oil and gas sectors. Their progress in facilitating private enterprise and foreign investment has improved the country’s Ease of Doing Business ranking, and its export processing zones (EPZs) are also proving appealing to investors.
Nigeria experienced a 43 percent drop in FDI, with most investment going to extractive sectors including oil, gas and minerals, however it was among one of the world’s top improvers in The World Bank Group’s latest Doing Business Study, having conducted reforms that impacted six indicators in the study. Kenya also carried out six reforms including improving the reliability of its electricity supply and introducing an online system for social security contributions, positioning it third-highest in the regional rankings.
Expanding your footprint and capabilities
One of the most important lessons to learn when you’re thinking of expanding into Africa, is that it’s not a one-size-fits all scenario. You are not simply expanding into Africa, more specifically you are expanding into Ethiopia, Ghana, Kenya, Mauritius, Nigeria, or Rwanda, etc. Each country has its own set of rules and regulations, culture and traditions, legacies that need to be embraced or enhanced, and most definitely its own ways of communicating. Each market is different. Each audience is unique. Your strategy for expansion will need to be well-researched, and appropriately focused, and communications strategies will need to be created with each specific market and industry in mind.
Expansion is always a risk — no matter who you are — and when you do decide to take the plunge and invest in new operations in a new country, realise that you will need to give it time to gain traction, sometimes years. Growth is about the long-term view. You will need to be prepared to weather any temporary storms that might result in a subdued income, such as an election, or a sudden rush for your product or service that could cause problems on the production side of your business, requiring you to suddenly scale to answer demand – which may not be possible. At such times, you’ll need to quickly manage the risk and protect your brand’s reputation too, to ensure the sustainability of your business, not just in that region, but in your home market too.
You will need to stay current with local market trends and consumer behaviours, as well as regulatory developments, all of which can have a huge impact on your bottom line. This is something that you can achieve by developing deep local connections and partnerships that can not only give you solid insights into your market and but also help you connect with customers.
By having the right partners in place at the start of your journey or acquiring local assets, expert talent and localised business models, you can gain a more solid foothold as you begin your journey, and can increase your organisation’s skillset, abilities and offering across a diverse geography. Building relationships and partnering with trusted local advisors who are able to assist you by providing context into local culture, regulations, working practices, and insights into your customer-base is hugely valuable.
Working closely with partners and affiliates across the continent will bring localised insights that really make a difference, enabling you to take bigger risks with your business solutions and create truly unique and carefully targeted communications. Having insights into infrastructural and regulatory challenges in the countries that you’re operating in will enable you to build comprehensive risk profiles, and craft specific and strategic reputation management plans. Fostering these important relationships allows an otherwise impossible level of oversight, and the ability to talk authentically to your audiences in their own language could be lost and your overall success impaired.
Growth is brought about by change, by taking risks, and by giving your business the best possible chance to succeed, and it all starts with confidently taking that first step. Let 2020 be the year you take that risk, that you set your business on a path to growth. Allow yourself to try something new — especially because you can’t be entirely sure of the outcome — and see where it takes you. You’ll certainly learn something new, and who knows, you might discover strengths and capabilities you didn’t know existed within your business — and that’s growth.
Story By Jordan Rittenberry, CEO of Edelman Africa