Major changes in African politics, economics and social characteristics have created a perfect climate for foreign investment activities. Historically, African business activities pointed to corruption in its political and economic systems that were not capable of fostering a more independent business environment. But persistent business development and a new wave of African entrepreneurs have significantly reduced issues such as political distress and monetary instability.
Over the years, many African nations have experienced rapid growth and inflows of foreign investment from countries such as the United States, China and Japan. The gradual increase in foreign investment from multinational companies in Africa further demonstrates the importance of business development and reform as key economic factors shaping the new African business environment in the global marketplace. The analysis of a viable African business environment for investors is backed by a number of African countries that have already reformed their political economies in an effort to provide a more conducive business culture while establishing a strong footing in the world.
Based on years of personal research and travel throughout West Africa, it is my opinion that the old perception of doing business in Africa can be left behind in the history of African business development. The new African business environment is combating political corruption, improving business logistics, strengthening governance standards and adding infrastructure that once was unable to withstand needed business requirements for African and foreign companies.
In order to strategically address one’s competitiveness in the global business environment, it is imperative to understand the top competitors’ global business activities and financial position. Let’s take an example to help understand America’s top competitors’ global business activities in Africa. According to The latest IMF figures (see exhibit 1), US GDP in 2016 is $18.56 trillion, followed by China at $11.39 trillion and Japan at $4.73 trillion; however, the Chinese PPP (Purchasing Power of Parity) which takes in account the US and China exchange rate tells a different story. In 2016 China PPP was worth $21.26 trillion compared with that of the US at $18.56 trillion. Further research points to the need for the US to take steps to confront the challenges posed by China and other Asian countries in the scramble for African trade, thus enhancing US competitiveness in Africa. China is currently Africa’s leading supplier of raw materials, pushing the sub-Saharan economies to their fastest growth with exports of $9.9 billion, up over 32% from 2003. In addition to supplying raw materials to Africa, China is a leading player in Africa’s oil energy and non-oil sector investment. The US could develop a competitive advantage over China and Japan by advancing oil exploration off African shores and by becoming a leader in exporting the raw materials needed to advance many African countries.
US competitiveness through real asset investment in Africa applies to all types of investors. Investors can diversify their portfolio by investing in West African sectors such as agriculture, commercial fishing, transportation and technology.
Africa’s effort to change foreign investors’ views in a positive way directly relates to your personal investment or company’s business interest. You can take advantage of many opportunities Africa has to offer and become part of the continent’s growing integration into the global economy. Interest in African countries through the development of infrastructure such as roads, building, and bridges can lead to strategic partnerships and alliances with local governments. Collaborating with financial or non-financial institutions to provide needed capital to grow African smallholder businesses in return for equity or interest on investment represents a sound investment in a growing market. It is becoming more evident that anyone involved in Africa’s future will greatly benefit from African economic properties. Collaborating with local governments or local contractors to establish a shared value in Africa could be a win-win situation for both you and your company and further enhance your competitiveness in the global business environment.