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Busines in Africa
ROLAND AMOUSSOU-GUENOU
Today, there is a tremendous excitement about doing business in Africa. And yet, many questions remain unanswered. For example: Where and how to invest? How to secure transactions? How to deal with risks?
In this new series, I hope to answer some of the questions of Asian investors thinking of doing business in Africa.
The present article starts with a picture of the African continent, followed by the state of the African economy, with a broad view of Asia-Africa business opportunities. To conclude, special attention will be given to Thailand-Africa business relationships.
Africa is the second largest (30.2 million square kilometres) and second most populous continent (more than 900 million people) after Asia. Its 53 nations are traditionally divided into five main regions (North Africa, West Africa, East Africa, Central Africa and Southern Africa) each of which presents specific challenges and opportunities for foreign investors.
During the fiscal year 2007, African governments and donors committed $58 billion in priority areas identified by the New Partnership for Africa's Development (NEPAD). Founded in 2001, the NEPAD is the economic arm of the African Union (AU) mandated to materialise the vision and strategy for African business and renewal.
This money is planned to be invested in key sectors that include infrastructure, agriculture, health, education and human resources development.
Africa recorded a relatively high growth rate in 2007 at 5.8%, up from 5.7% in 2006. As in previous years, growth was driven mainly by robust global demand and high commodity prices. Indications are that growth will only accelerate in 2008 (6.2%) and remain buoyant in 2009. The economic performance in Africa points to a net capital inflow of $26.5 million in 2005 and $47.1 million in 2007.
But, like other developing regions, oil-importing African countries are facing higher risks of budget deficits. There are widespread inflationary pressures and also currency appreciation against the US dollar - especially in Francophone countries, where the currency (CFA) is linked with the Euro. Electricity outages in many countries are another issue not to be taken lightly.
Asia-Africa Business Opportunities: The business links between the two continents have deepened significantly over the last decade. A substantial share of foreign direct investment (FDI) to Africa is coming from countries like China, Japan, Korea, India, Malaysia and the Gulf States.
China's influence as a driving engine in Africa's economy was praised by former UN secretary-general Kofi Annan. It is also analysed by Dorothy-Grace Guerrero and Firoze Manji (2008) in their recent book China's New Role in Africa and the South. But Asia-Africa business goes far beyond China alone.
Regarding Thai-African relations, African countries for 30 years have been purchasing rice and agricultural products from Thailand and supplying the Kingdom with textile fibres, scrap metal, jewellery, chemicals, iron and steel.
A seminar on 'Doing Business in Africa' was staged by the Thai-based Asian Institute of Technology (AIT) and sponsored by the Ministry of Foreign Affairs in December 2007. It attracted more than 300 participants, including representatives of leading organisations promoting business in Africa.
Recently, the Export-Import Bank of Thailand and Nigeria's Bank of Industry Limited (BOI) signed a landmark memorandum of understanding to exchange trade and investment information and promote and support Thai-Nigerian business activities.
The Way Forward: For African exporters, Asia is an enormous market that is only starting to be tapped. For Asian investors, Africa offers high potential returns - provided risks are managed effectively.
Subsequent articles will explore a variety of issues such as: the different regions and their characteristics; customs and traditions; individual African markets; business sectors and industries; pitfalls; laws and regulations; local risks; banking and payment issues, and dispute resolution. The author welcomes any comments or suggestions from readers.
Dr. Roland Amoussou-Guenou is a lecturer at the Asian Institute of Technology (AIT) and the Founder and Director of Asia-Africa Business Consulting Co. He can be reached at r.amoussou@2abiz.com or http://www.2abiz.com
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