Africa is a continent of opportunities and across its 55 states, the continent of Africa presents endless business opportunities. From new oil and gas discoveries across the region, huge growth in mobile banking and mobile technology and under-developed tourism potential countless reports show that Africa is on a growth trajectory. The economic fundamentals are clearly in favour of Africa; steadier exchange rates, robust commodity prices, increased private capital flows and modest inflation. These have given rise to an ever increasing pace of urbanization and the opening of new consumer markets as Africa’s exploding middle class comes into unprecedented disposable income. This has not ...view middle of the document...
As the ratio of people of working age to dependants rises, economic growth could get a further boost as a demographic dividend. Multiparty democracy is now firmly established and Africa is pulling itself out of the conflict trap – the vicious circle in which conflict hampers growth, and low growth breeds conflict.
All of these factors have contributed to a steadily improving business corruption, helped by a range of global and regional initiatives aimed at improving transparency and stemming corruption. These have benefited the natural resource sector, in particular, just as a wave of oil and gas discoveries confronts a new group of countries with the need to manage resource contracts and revenues wisely. At the same time, striking growth rates in countries that lack such resources, such as Ethiopia are pointing the way to a more stable, more prosperous future in which growth is built on a more diversified base. African countries need investment partners to help them confront and exploit the particular mix of challenges and opportunities they face. With youth unemployment already high, African needs to create jobs fast. The private sector is now the major source of jobs for Africans. Expanding trade and investment is vital to ensure that Africa has sustainable and equitable job creation.
1. Obstacles/Challenges of doing business in Africa
While Africa is a land of opportunities and considering the historical context, it is evident that there are external interference with many African countries and some of those challenges include;
• Political, legal and regulatory uncertainty,
• Lack of institutional capability
• Opaque procurement processes
• Shortage of skilled workers
• Excessive bureaucracy, corruption and graft
The above challenges are by no means exhaustive or exclusive to Africa. It is the concentration of several of these challenges combined with the inherent complexity of delivering public-facing infrastructure projects that hampers the improvement of such basic infrastructure. Given the opportunities and the associated challenges, doing business and in particular developing and funding power and infrastructure projects in Africa requires patience, persistence and a fair thinking.
Political instability is perhaps the largest perceived challenge to doing business in Africa, particularly in the power and infrastructure space where the government and its parastatal entities are often the procurer of and ultimate payee for these essential public services. Despite international headlines, armed conflicts and political instability, these have become less frequent occurrences in the last decade, with a gradual move towards more stable, transparent and accountable governments. There have been 21 successful coups on the continent in the 1960s and 18 in the 1980s. Despite improving the macro environment however, the capital markets in most countries remain relatively under-developed, with local banks not being...