Africa Business Opportunities
From a long term perspective, by population alone, Africa offers enormous opportunities. UNICEF has predicted that in the next 35 years, Africa’s population will increase by 1.8 billion people, and with a number of the world’s fastest growing economies located in Africa, the opportunities for business will continue to increase.
Below is a compilation of suggestions for people seeking to establish a small to medium sized business in Africa. In order to make the jump from the States to Africa, there are at least three prerequisites which are essential, if not mandatory.
1. Visit the country and city where you intend to reside—and not once, but multiple times. After you get over the warm glow of being in Africa, you’ll need to get down to the nitty gritty of actually living there full time. You’ll have to understand the nuances of your new home and this can not be done in one visit. It may take years of going back and forth but you don’t want to face any surprises you simply weren’t prepared for.
2. Have reliable people whom you know and trust on the ground. This is essential and without people who won’t rip you off, charge you exorbitantly high amounts for simple paperwork and who will simply answer the phone or respond to an email when you contact then, your stay in Africa will be short lived.
3. Make sure you have enough capital. A few years ago, the Harvard Business School published a report which noted that if a person wants to go into business for themselves, they should have at least one year’s salary saved up. Yes, the dollar does go a long way but this same theory applies in Africa. Due to the poor infrastructure and high electricity costs, life in Africa can be more expensive than expected. Besides being taxed to death, you’ll also find you have to pay for all sorts of business licenses which seem redundant but are required. In addition to the setup costs, you’ll want to make sure you have enough financial backing to start your business and survive a few months or even a year, without turning a profit.
Once you make the decision to move, it’s time to discover what potential business opportunities await. Here are 10 business opportunities that you may want to explore if you’re seriously considering moving to Africa. This information is based upon my experiences as a Philadelphia, Pennsylvania native living and doing business in Kenya, information from friends and associates, along with relevant data from various sources.
1. Trade – Import
This is an intriguing option as it allows for a person to maintain business links back home in the States, while growing their business in Africa. The idea should be to identify a product which is in demand in your host country, procure a global supplier and then open up your business.
Within this process, you’ll want to make sure you have an outlet for your business, therefore you can either open up your own shop and retail the products yourself, or you can identify viable outlets for the product and wholesale the items to the market. McKinsey & Company estimate that 200 million new customers will enter the African marketplace by 2015. This means that products such as truck parts, clothing, computers, home appliances, paper products and everyday food items (rice, beans, corn, etc.) will continue to be in demand.
Many small shops don’t have the capital or connections to purchase large amounts, thus due to economy of scale, you’ll be in a position to be the link to wholesaling items. My advice is to focus on only a few items and don’t try to do too much. Opportunities are plentiful but you don’t want to spread yourself too thin.
2. Trade – Export
The other side of trade is to come to Africa and export products. The preferable scenario would be for you to establish a location in Africa, and then export local resources back to your business contacts in the States. This can be a great opportunity, as you’ll learn that products such as shea butter, coffee, honey, flowers and other products can be purchased for very low prices in Africa. In addition, it’s actually much easier to export from Africa than it is to import, therefore, the associated business startup costs are much cheaper. The key here is to have a reliable outlet in the States that will actively promote and sell your products. AGOA (African Growth and Opportunity Act) can facilitate trade links at a macro level but also provide great resources and links at the micro level.
The more adventurous minded people may be interested in items such as diamonds and gold, which are available and at bargain rates. However, be warned this is a notoriously shady market and requires a lot of skill and understanding of the business. You really can’t go wrong with importing or exporting out of Africa. If you can ascertain the market and develop viable outlets, it’s a sector worth considering.
3. Open a school
Due to the fact that the under 18 demographic represents one-third of the population, education has become a business in Africa. As a result of the poor state of the public school system, many families from the middle class on up prefer to send their children to private schools. In many countries, not only is it normal, it’s the standard. An American opening a school (elementary or high school) would immediately generate interest from prospective parents because they’d see the value in the U.S. brand of education and quality. With a background in the American educational system, you’ll also bring international best practices and ideas to a community who view education as a means of climbing social and economic ladders.