How do you identify business opportunities in Africa? Africa, with its 54 different countries and approximately 1.07 billion people is described as resource rich and population poor and yet economic growth is happening.
Industry experts are beginning to view Africa as the “new Asia” in terms of economic growth and business opportunity. Consider these interesting points:
- As reported in Bloomberg, the growth for sub-Saharan Africa in 2015 is estimated at around 5.8%, exceeding that of the U.S. (estimated 3%) and slightly behind China (estimated 7.1%).
- In 2013, Africa was declared to be the world’s fastest growing continent, growing at 5.6% per year, as reported by the International Monetary Fund (IMF) in 2014.
- Six of the world’s 10 fastest growing economies between the years 2001 and 2010 were from Africa (according to the 1/6/11 edition of The Economist).
- Foreign investors are increasingly interested in Africa due to the political, economic, and social reforms across the continent.
With these significant indicators of increasing economic growth, investment groups, corporations, and individual entrepreneurs are searching for business opportunities in Africa to invest in.
Business Trends in Africa
There are several highly diverse and dynamic business trends that are currently influencing growth and business opportunities in Africa, and they are likely to be driving the advancement of Africa’s economy well into the mid-21st century. Let’s consider business opportunities emerging or expanding in Africa today.
Business opportunities in Africa
According to the African Development Bank Group, Africa’s pharmaceutical industry is “the fastest growing in the world.”
A 2015 report by McKinsey & Company states that every sector of Africa’s pharmaceutical markets is growing. Prescription, generic, and over-the-counter (OTCs) drugs are currently growing at an annual compound rate of 6, 9, and 6%, respectively. Medical devices are growing at 11%. The report cites several reasons for this growth, including:
- Urbanisation of Africa’s population.
- Africa’s business environment that is more supportive to government-introduced price controls and import restrictions that encourage domestic drug manufacture, increased efforts to reduce counterfeiting, and tighter laws relating to import, wholesale, and retail margins.
- Increased healthcare capacity that has seen rapid expansion in the numbers of doctors and nurses as well as new hospital beds, as well as improvements in healthcare provision efficiency and introduction of innovative healthcare delivery models.
Business opportunities are also present in the manufacturing and distribution of pharma products, marketing and sales, and investment groups.
Africa, the second largest continent in the world, contains approximately 60% of the world’s arable land. Yet the agricultural productivity of Africa is desperately low and nearly 600 million hectares of its own arable land go uncultivated. Economists, industry observers, and entrepreneurs concerned about the future welfare of Africa and its peoples agree that Africa must focus considerable effort on facilitating the productivity of small-scale producers and provide long-term solutions that will enable them to:
- Increase production and productivity.
- Ensure sustainability and preservation of natural resources.
Development of eco-friendly, sustainable agriculture is dependent on improving the infrastructure of arable farmland including easy access to water, expanding mechanisation processes, providing the energy necessary for operating equipment and processing facilities, etc. For me, this is one of the most lucrative business opportunities in Africa.
Another interesting potential opportunity is bio energy and the development of non-food agriculture products for use as eco-friendly bio fuels.
Africa is experiencing rapidly increasing industrialisation and the expansion of free markets.
Its people are moving away from economies that are labour intensive and toward those driven by banking/finance, telecommunications, and retail. The expansion of information technology (IT) in Africa is influenced by several factors:
- Increased use of smartphones across the continent.
- Dropping cost of high-speed Internet.
- Banking/payment technology innovations.
Of those three factors, smartphones may play the most significant role in IT expansion as mobile phone usage is having the greatest impact on the everyday lives of Africans.
Estimates are that Africans mobile subscribers and mobile device users will reach the half billion point within the next 5 years (2020).
Africa has become an increasingly popular location for the application of renewable energy technology. Sustainable renewable energy established on a small scale is already providing power to urban and rural communities in many African nations.
Renewable energy shifts consumers away from depending on fossil fuels and utilises the resources available in abundance in various African regions.
Solar, wind, geothermal, and hydroelectric power are all potentially viable resources. Several areas in Africa are already developing large-scale solar power facilities not only to power industries and residences, but also to power urgently needed water pumping.
The World Bank reported in 2013 that tourism in Sub Saharan Africa will significantly boost Africa’s economic growth through 2021. As of 2011, tourism was responsible for an estimated one in 20 jobs in the region (and also one of the few industries in which women are well represented in both employment and management).
An important factor in the expansion of tourism in Africa relates directly to the number of private companies attracting regional and international investment. Evidence of this growth is in the number of global hotel chains that are investing in major projects in Africa.
Strengthening the Present, Building the Future
Each of these African business opportunities offers significant direct and “satellite” opportunities. For every major enterprise, there are countless associated needs that can be met by creative entrepreneurs.
It is also important to consider the opportunities available through macro businesses. For instance, there are numerous franchises (like KFC) that are increasing in popularity across Africa, as are Internet cafés. Entrepreneurs are responding to the rapidly increasing need for tech support by developing independent consulting and contracting firms to handle the demand.
Although Africa can copy development paths and practices from other countries, Africa and its 54 countries have uniquely different governments, laws, practices and cultures. This means there is an increased need for people who specialise in national and international law, intellectual properties, financial management, etc.
Investors and entrepreneurs who want to do business in Africa must look for the direct and indirect opportunities (and risks) and turn them into pioneering opportunities that will find solutions to African problems. This will ensure that you find and create genuine and sustainable business opportunities in Africa.
All of these business opportunities have great potential, and the potential to help you generate great returns on your investment, but remember the success is in the planning, and your ability to execute your plan. This is even more important when operating in the somewhat unpredictable African business landscape.
Do you agree with my list, and are there any other business opportunities in Africa that you can think of?