Gauteng Business News

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BUSINESS: Doing Business in Africa Becoming Easier


Recent Gauteng Business News

Growth forecasts higher than global average

The attractiveness of Africa as an investment destination has been positively impacted by a number of developments in the regulatory environment affecting potential new entrants to markets, infrastructure development and the presence of professional services firms which have experience of the complexities the continent poses. In addition, increases in productivity on the continent, the diversification of African economies as they move away from resources, the size of the African market and urbanisation are creating conditions that could potentially be favourable to investment.

These were some of the views to emerge at the inaugural African Conversation to be convened by professional services firm KPMG in Johannesburg.

Moses Kgosana, Chairman and Senior Director for KPMG Africa and Chief Executive of KPMG South Africa, pointed to higher than average growth forecasts for Africa for 2011 as a motivating factor for investors to look at African markets. “It is estimated that the sub-Saharan African economy will grow by 5.3% in 2011, with individual economies – such as Nigeria and Angola projected to grow at over 7%. Clearly, there is increasing confidence in Africa’s economic potential as a collection of diverse emerging markets with much to offer the global economy.”

According to Nicolas Maweni, an independent marketing and communications consultant with extensive experience in sub-Saharan Africa, there has been particular interest in the continent by multinationals,: “One reason is that places like Europe and the US are not experiencing rapid rates of growth. Africa – or the Dark Continent, as it’s often perceived to be - is now presenting these large companies with great opportunities. The challenge for these companies is to ask themselves whether they will do a ‘copy and paste’ as they’ve done in other parts of the world, or whether they will develop solutions that are relevant for Africans.”

Lullu Krugel, senior economist at KPMG, pointed to some factors revealed in a survey conducted by KPMG into business and economic conditions on the continent which could enable the accelerated diversification of African economies: “Business would like to see a greater mobility of highly skilled labour, and hence, these skills could being transferred across economies. The retail sector has also been identified as a growth key area, given the size of the African population. However, consumers need incomes to bring about the growth of the economy through the retail sector.”

“From a regional perspective, East Africa represents a powerful market comprising five countries and 130 million consumers”, said Josphat Mwaura Managing Partner at KPMG in East Africa. Mwaura, who joined a live, continent-wide, broadcast of the event from CNBC Africa studios in Nairobi, Kenya, added that that region also “has historical linkages with India, China and Pakistan – what one would call the ‘monsoon countries’ – which serve as crucial export destinations.”

On the issue of political volatility, Mwaura maintained that “political risk is a way of life in business.” However, he urged the business community “to engage more proactively in identifying the issues before they blow up into a crisis.”

Maweni added that from a marketing perspective there is a need to conduct a proper analysis of the four ‘p’s before undertaking business in Africa: “One of them is political stability in any territory one enters. If one is going to get involved in Africa, one must be patient, because Africa is not for the faint-hearted. One must also persevere. Lastly, there are lots of profits to be made in this continent.”

On strengthening private-public partnerships (PPPs), Krugel pointed out that that had worked well in some sectors such as telecommunication infrastructure and that there have been mixed results in the energy sector. However, in other infrastructure areas such as water, sanitation and irrigation there seems to be challenges which need to be addressed. Where PPPs have worked well, it could be attributed to the private sector understanding the needs of the public sector, communicating with the public sector and not imposing business models applied in other countries, on Africa.

“We believe that Africa is a continent whose ‘time has come’ and we would like to encourage business to participate in and contribute to what is turning out to be an extraordinary continent, potentially offering extraordinary returns on investment,” said Kgosana.


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