Business
The allure of doing business in Africa
Other than consumer companies, businesses that can offer Africa food, energy and water resources, which the continent sorely lacks, will do well.
For instance, despite the abundance of agricultural land available, Africa is a net importer of food. Companies that have the capacity to transfer skills and competence, as well as financing options to the farmers of Africa, are highly sought after.
Singaporean companies that have tapped into this opportunity include Olam, Tolaram and Wilmar. Feeding Africa is a daunting task and Africa can use all the support it can get.
Potable water is also highly in demand. Not only is water scarce, but it is also frequently not suitable for human consumption. Entities that can help Africa solve its water issues are likely to prosper.
As for energy, a very large number of Africans are without electricity. It will take decades to serve this large group of people. In order to deal with the relatively high capital costs associated with energy supply – frequently unaffordable for most energy users in Africa. African telecommunications companies are using locally designed platforms such as M-Pesa to empower users to pay an affordable monthly operating cost instead of a high up-front capital cost. Asian companies that can provide affordable renewable energy alternatives to grid-based electricity will generate high returns.
Africa’s Challenges
Yet there remains many daunting challenges, especially in supply management, due to inadequate infrastructure such as proper roads and transportation.
There are also a lot of trade barriers. It has been said that it is easier for African firms to do business with Europe than with each other, with intra-Africa trade at only 12 percent of the continent’s total trade.
For instance, due to import permit requirements, a cargo truck that seeks to cross borders may need to deal with a lot of paper work.
The recently announced Tripartite Free Trade Area (TFTA), however, brings hope to businesses. It will integrate three economic communities: the East African Community (EAC), the Common Market for Eastern and Southern Africa (COMESA), and the Southern African Development Community (SADC), providing free-trade access to 626 million consumers across 27 countries.
