There are 10 key issues which make doing business in Africa different than in the rest of the world, and those hoping to operate in Africa must understand these to unlock the strengths of Africa’s budding business environment, according to entrepreneur Ahmed Kajee.
Speaking at AfricaCom in Cape Town, South Africa, Kajee said the first of these 10 issues is the prevalence of conflict across the continent, creating frequent political instability.
“You need to understand that that level of instability subdues the investment appetite,” Kajee said, adding that developmental progress, GDP growth and the social environment is limited as a result.
Government conversations of necessity are about achieving peace and stability in these circumstances; “where are the conversations about business?” Kajee asks.
“When you view Africa in that context you have to understand that businesses have to contribute to the economy,” he said, for example, by assisting with infrastructure development.
Poorer transport infrastructure is the second of Kajee’s key considerations – as it causes significant distribution challenges -; and the underdeveloped communications infrastructure is the third.
“At the tier one infrastructure level it’s not looking too bad, but price is the issue. In Africa we pay a premium,” he said.
“How are we supposed to be as competitive as our counterparts if we have to work with these communications infrastructure disadvantages?”
The perception of the skills base and training levels can also be an issue among businesses coming into Africa, Kajee says.
“There’s no need to import people over here to tell us what to do. We know what to do,” he said, adding that businesses should focus on providing further training and development opportunities.
According to Kajee, corporate governance standards in Africa are different than in other markets and are constantly evolving; and international entrants’ focus should be less on arguing about transparency and more on understanding the differing standards.
“I think maybe the best thing we can say is that there should be Africa specific corporate governance standards,” he said.
“There are also issues around transparency. I don’t think more transparent business is needed, I think more understanding of our business culture is needed.”
The sixth factor to consider according to Kajee is what he terms the “income, knowledge and information asymmetry” felt by Africans.
“Africans have less access to information. So we come across as stupid. But we just have less access and we have to work doubly hard to get it,” he said.
“Information asymmetry starts to affect our competitiveness.”
The large number of base of pyramid consumers, as well as the large land mass of Africa are two further considerations Kajee lists which make doing business in Africa a different game.
The financial and social environments across Africa are the final two factors that entrants to Africa should consider, according to Kajee.
“There’s no risk appetite. None whatsoever. And the traditional VC, funding, loan and debt models don’t work too well in Africa,” he said.
If businesses can understand these 10 factors, Kajee says the “entrepreneurial strengths” of Africa can be unlocked, such as creativity, versatility, durability; adding that Africans are both keen problem solvers and great team players.
