International_Business_Topics_Chapter_2

Introduction

• Overview of International Business Topics at Thomas University.

• Chapter 2 covers various aspects of doing business in Africa.

Topics of Discussion

• Doing business in Africa.

• Challenges and opportunities in the African business environment.

• The geopolitical landscape and institutional frameworks.

• The role of the African Union (AU).

• Introduction of the African Continental Free Trade Area (AfCFTA).

• The growing entrepreneurial ecosystem in Africa.

Doing Business in Africa

• Potential for Economic Growth:

  • The World Bank suggests Africa may experience significant economic growth similar to that of China and India in the past decades (World Bank, 2013).

• Opportunities Available:

  • Business opportunities are as prevalent as buses in transit—always looking for the next one (Richard Branson).

• Improving Business Environment:

  • Nigeria has improved its ranking in the World Bank's ease of doing business index.

Business Challenges

• Perception Issues:

  • New entrants often have skewed views about the risks in Africa due to misconceptions.

• Cultural Nuances:

  • In West Africa, cultural reluctance to say 'no' complicates business negotiations.

• Operational Barriers:

  • High levels of corruption, skills deficits, regulatory issues, and labour union conflicts complicate business operations.

• Staffing Challenges:

  • Sourcing qualified talent is difficult; training expenses are high due to a skilled labour deficiency.

• Contract Negotiation Issues:

  • Contracts often viewed as starting points rather than conclusions; international arbitration clauses are essential.

• Infrastructure Concerns:

  • Lack of reliable infrastructure (roads, utilities, internet) affects business viability.

• Financial Risks:

  • High transaction costs, advance payment recommendations, and inflation present significant risks.

Business Opportunities

• Growing Workforce:

  • African workforce set to grow dramatically, potentially surpassing China by 2035.

  • Focus on productivity is essential to achieve broad economic growth.

• Agricultural Potential:

  • Africa possesses 60% of the world's uncultivated cropland, presenting agricultural investment opportunities.

• Natural Resource Richness:

  • Africa’s rich oils and gas deposits are attracting foreign investments significantly.

• Household Consumption Growth:

  • Rapid increase in consumer spending projected to reach $2.1 trillion by 2025 driven by a burgeoning middle class.

• Urbanization:

  • Urban populations will increase; cities with over 1 million residents are expected to double, necessitating infrastructure and services.

• Technological Advancement:

  • Young entrepreneurs are innovating in technology with initiatives like mobile money transfers (e.g., M-Pesa) and e-health solutions.

Geopolitics and Institutions

• African Union (AU):

  • Established to enhance African integration focus; evolved from the Organization of African Unity (1963).

  • Agenda 2063 aims for economic transformation, unity, peace, and empowerment across Africa.

• Regional Economic Communities (RECs):

  • Eight established RECs facilitate trade and political stability; increasingly essential in mitigating investment risks.

Continental Free Trade Area (AfCFTA)

• Creation of a Single Market:

  • AfCFTA aims to establish a single continental market for goods and services.

• Economic Benefits:

  • Expected to lift millions from poverty and create significant income gains across the continent.

• Challenges to Implementation:

  • There are multiple overlapping memberships and trade restrictions affecting progress.

Notable Industries in Africa

• Key Sectors:

  • Agriculture, Manufacturing, Mining, Tourism, and Energy sectors show great promise for business growth.

• Innovative Startups:

  • Encouragement of startups through various foundations to foster vibrant entrepreneurial ecosystems.

Conclusion

• Strategic Approach Required:

  • Companies need well-structured strategies for entering and succeeding in the diverse and complex African market.

• Personal Relationships in Business:

  • Business in Africa heavily relies on building trust and relationships over time.