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Nigeria and Kenya still investor favourites in Africa

Oct 06 2017 21:45
Natalie Greve

Nigeria and Kenya remain the countries in Africa most ripe for investment opportunity and business growth, despite the former’s ongoing flirtation with recession, and despite political tension brought on by Kenya’s repeat presidential election.

This emerged from a panel discussion of African trade experts in Johannesburg on Wednesday, 5 October.

“Nigeria is one of those countries that you can never write off,” Nigeria specialist and Africa@Work CEO Dianna Games said at a University of Cape Town Graduate School of Business round table on doing business in Africa.

“Its market is the same size as the East Africa cluster, so keep it on your radar, even though growth has slowed,” she added.

Nigeria’s economy slipped into recession for the first time in over two decades last year, reflecting adverse economic shocks, inconsistent economic policies, and deepening security problems in the northeastern and Delta regions.

But Games believes the country’s fortunes remain in the spending power of its 186m-strong population, as well as the fact that the economy has demonstrated resilience in the face of negative pressures.

“Nigeria succeeds in spite of itself. It’s a population game; people that sell things are doing well, despite the downturn. Inflation is high, but it’s a resilient country,” she commented.

Standard Bank group card and emerging payments head Lincoln Mali – whose employer had firmly established itself in Nigeria – added that a longer-term mindset was crucial to any Africa investment or expansion strategy.

“The reality on the continent is that you’ll always have issues, but you have to stay the course. If you’re seen as a runner, it’s hard to succeed in other countries. If you want Africa to be your home, Nigeria should be your main bedroom,” he said.

Shifting focus to elsewhere on the continent, Castrol regional sales manager for East Africa Henri Mizero said well-formulated trade policy between countries in East Africa had opened up the region and led to the establishment of a resilient trading bloc.

In Kenya specifically, an entrepreneurial market, increasing levels of education, a returning diaspora and a push by government for economic growth made it a compelling investment destination.

“The biggest opportunity is the size of the East Africa cluster - with 190m people. There is a huge consumption spend and the population is predicted to grow by 20% by 2025,” he said.

Spring Lights Gas CEO Nkosinathi Solomon cautioned companies interested in exploring opportunities further north not to fall victim to the same flawed expectations of their predecessors, many of which adopted a “frontier mentality” of Africa and failed to develop a proper understanding of the local business environment.

Companies should not expect to set up satellite offices in African countries that were run from abroad or from SA, but should leave locals to manage the business.

Solomon said companies have made a great many mistakes in adopting the frontier mentality in Africa, specifically mentioning Telkom and Tiger Brands.

“There was a sense of easy money and people are now starting to realise that it’s just like anywhere else – it’s a complex environment in which to do business,” he explained.

Games added that it was easier to find an African business partner than it was 20 years ago, as the domestic markets had become more sophisticated and the diaspora had started to return.

Most crucial to business success was having people on the ground who understood the nuanced local regulatory and security environment and even this did not exempt companies from possible operational challenges, emphasised Mali.

Solomon, meanwhile lamented the fact that Africa currently had more remittance inflows than foreign direct investment (FDI), which he believed demonstrated the extent to which the continent was underperforming in its potential to attract foreign cash.

“There are more people sending money to their gogos than investing. It doesn’t make sense, we should be attracting far more,” he said.

FDI flows to Africa declined 3% year-on-year in 2016 to $59bn, according to the United Nation’s Conference on Trade and Development World Investment Report 2017. 

africa  |  kenya  |  foreign direct investment  |  nigeria

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