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The challenges and rewards of the African business market

Africa is the market of the future, declared Novartis CEO Joseph Jimenez in a recent presentation on the topic, “Global Trade and Innovation”.

This content was published on October 10, 2014 - 11:37
Chris Watts, AAA (Americas, Africa, Arabia) and Switzerland Global Enterprise

This assertion is supported in many respects by the recent African Economic Outlook 2014 report of the Development Centre of the Organisation for Economic Co-operation and Development (OECD), the African Development Bank and the United Nations Development Programme.

Last year the economies of the 54 countries of Africa grew on average by 4%, compared with a global growth rate of 3%. The forecasts for 2014 and 2015 indicate a further increase in economic growth in Africa. The proportion of non-African direct investment has risen steadily in comparison to the amount of development aid, demonstrating the growing attractiveness of the continent for investors. At the same time, these funds today originate mainly from growth markets such as China and India and less, as was still the case recently, from the OECD. For years, poverty in Africa has been decreasing. 

'Fifty-four countries cannot be measured by the same yardstick,' says Chris Watts s-ge.com

Despite these positive developments public debate is dominated by recurring arguments about why Europe’s southern neighbour is not doing well: corruption, crime, inadequate infrastructure, unwieldy state institutions, armed conflict, lack of protection for minorities, overexploitation of natural resources and much more. 

The striking statement “Africa is in bad shape” must be countered. Never before has such a large proportion of the population between Cairo and the Cape had access to drinking water, education and medical care as it does today. At the same time it is true that in the face of population growth and the accompanying uncontrollable urbanisation, measured in real terms never have so many people in Africa had to live under abject condition as today. 

Chris Watts is regional director AAA (Americas, Africa, Arabia), Switzerland Global Enterprise (formerly OSEC). Switzerland Global Enterprise works all over the world to support entrepreneurs and promote Switzerland as a business location. It fosters exports, imports and investments, helps clients develop new potential for their international businesses and strengthens Switzerland as an economic hub. 

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Impossible comparison 

In order to understand the reality of Africa in all its contradictions, above all we need a more nuanced view. Fifty-four countries cannot be measured by the same yardstick. It is not only several thousand kilometres of desert, steppe and jungle that lie between Tunisia and Botswana. There are also significant cultural, historical, linguistic, political and economic differences that make a meaningful comparison between these two countries difficult if not impossible. 

To avoid overlooking important new developments in individual countries, we should pay more attention to local businesses when trying to ascertain the state of African economy and society. 

For example, if people had spent some time recently at the Forum for African CEOs in Geneva, which was organised by Rainbow Unlimited and the French media company “Jeune Afrique”, they would have learnt from many of the African executives that a growing number of African governments have now made a commitment to “good governance”. 

This is generally due less to noble intentions than utilitarian motives and has led to marked improvements in the ease of establishing businesses in countries such as Rwanda, Ghana, Mauritius and the Ivory Coast. For example, Rwanda comes 32nd in the World Bank’s “ease of doing business” rankings. Switzerland is 29th

Another phenomenon reported by African entrepreneurs is the increasing inclusion of the informal sectors in the economies of many African countries. This improves the chances of firms to grow through financing and contribute to job creation. The African economy is increasingly becoming its own “agent of change” in these rapidly changing societies. In the meantime, many in Africa have come to see entrepreneurship as an attractive professional choice, whereas previously it was well-paid government posts that were considered desirable. 

‘Forgotten’ continent 

But it is not only from African entrepreneurs that we can get a differentiated understanding of their continent. Many Swiss small and medium-sized enterprises (SMEs) are also doing business there. 

Company founder Anat Bar-Gera and her husband Dov had originally never even considered Africa as a market for their business, the Zurich-based telecom company Yoomee. Their breakthrough came about only after some initial difficulties. In the meantime, having established a new standard in mobile internet access with the construction of the first 4G network in Cameroon in 2011, Yoomee is expanding to more and more west African markets. It is benefitting from the improving conditions in many countries and its knowledge of local needs and conditions. 

For example, about 90% of all mobile customers use prepaid cards sold at gas stations and kiosks. This leads to reduced customer loyalty as well as a lower threshold for entering the world of mobile technology than is the case with subscriptions. Yoomee therefore focused on the rapidly growing younger generation by offering special rates for university and younger students. This target group also responded very positively to the growing range of online education options that are widely accessible thanks to 4G technology. 

Experts predict there will be a total of 930 million mobile users in Africa by the end of the decade. The vast majority of these users prefer accessing the internet directly on mobile devices and skipping PCs altogether due to insufficient supply and high costs. This means that some African countries have faster internet on the go and more sophisticated smartphone services than exist in Europe. The “forgotten” continent has overtaken the industrialised world. 

It is not only in this field that the days are long gone when Western countries could sell outdated products at inflated prices in Africa at a large profit margin. 

Even if there is still light and shadow, we can safely discard the image of an entire African continent adrift. Those who see the continent with a more differentiated view can, even as an SME, start by offering services and products adapted to local needs and conditions and find themselves rewarded with sustainable success. Whether or not the African market will be the market of the future, is yet to be determined. But that Africa has a future is now undisputed.    

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