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African Business - Understanding the Risks (Part 1)
6 months ago by Jack Evangelides

African Business - Understanding the Risks (Part 1)

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The African continent is a vast landscape, composed of more than 50 countries, which hold diverse values throughout. This incredible landmass has been subject to recent scrutiny and concerns when conducting business. Worryingly, despite recent investments into the continent, Africa is a harsh area to conduct business if you do not pre-emptively take the right procedures. Political instabilities, technological deficits and social upheaval have ravaged the continent, making it a very difficult place to invest and instigate business. Before we understand how we can strategically and successfully manoeuvre across the African continent and reap the rewards, we have to take a realist approach and assess the situation.  

Setting the Scene

Technological advancements across the African continent are still lacking in implementation. We can look at Egypt for a direct example. When travellers enter domestic airports within Egypt, a popular tourist destination, they are required to manually write their names, passport numbers and flight number into two red books - one to enter and one to exit the airport- all in the name of their security process. So what does this mean? The North-African country is yet to install functional computing systems to hold traveller data. This automated system may go unknown to many, taking for granted the efficiency of travelling, however, it is still a reality in Egypt and other African countries. Additionally, Egypt is subject to further technological deficits such as when obtaining extracts of corporate registration documents - this requires the physical presence of an agent and is still paper documented. The lack of digitalisation may make Egypt a hard place to instigate business, especially if you are unfamiliar with the region and its customs.  

Over-regulation - Elongating Business 

Due to existing trade tensions between many of the countries of Africa, it can be hard to import and export goods from within the continent. Ironically, in some cases, it would be more efficient to import from an entirely different continent. We can look at a case between Kenya and Tanzania that highlights this. Kenya had restrictions on wheat flour and cooking gas imports from Tanzania, however, despite a truce between the two countries, Kenyan products still witnessed various barriers leading to further political complications. As a result of this trade dilemma, Kenya`s exports to Tanzania dropped 34% in the first half of 2017, this only further weakens their relationship.

Policy Uncertainty 

The implementation of efficient procedures, from state to society, amongst African nations commonly hit a gridlock. A multitude of ideas and innovations may be constantly deliberated to enhance a country`s wellbeing on a socio-political and economic level, however, the implementation of ideologies rarely ensues on-time. We can use Kenya again as an example, and, unfortunately, not a unique example, of where policy uncertainty is prevalent. The nation planned to fix the issue of awful traffic congestions that Kenya frequently faces. The idea was to create a Bus Rapid Transit (BRT) and it was much awaited before it was indefinitely suspended due to weak planning and informative procedures. This is just one example of a common occurrence when policy deliberating and policy enacting seems to be two separate ideals that do not go hand-in-hand. 

Cedar Rose - Your Map to Success

Although the African continent may show signs of difficulty when conducting business, some procedural methods are outdated and hostility between nations can act as barriers, there is a way to mitigate these uncertainties. Africa is a popular destination for foreign investment, due to the vast landscape, the magnitude of the natural resources and the overall potential of the continent. But how can you sieve through the uncertainty and mitigate risks? Cedar Rose can provide integral information that can help you better understand the environment in which you are dealing and the background of any potential trade partners. With 22 years of experience and a network of local contacts, our credit reporting, data and Due Diligence services for Africa are trusted worldwide - enabling safe, secure and well-informed trade and investment in this unique part of the world. 

*** The sole purpose of the article above is to generate public discussion, it has no intention to constitute legal advice. ***
  • Africa
  • African Investment
  • Business
  • MENA
  • Trade
  • Foreign Investment