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Conducive Environments for Leveraging Economic Opportunity in Africa

Guest post by: Lauri Elliott

Article Overview: There is no lack of opportunity in Africa. But the road to converting those opportunities to business success is often paved with obstacles. The question becomes not what opportunities exist in Africa, but how to make them work.

Conducive Environments for Leveraging Economic Opportunity in Africa

Originally published for Afribiz.

If we look at opportunities only, we might focus on countries with large populations like Nigeria and Ethiopia. In doing so, sometimes the best place to successfully start a business in Africa is overlooked. For instance, in some sectors it might be easier and more impactful to start in Namibia than South Africa even though it has a smaller market.

Identifying an environment that promotes the development of your business can be considered a key strategic decision. It is more important to establish a successful business model, which can be replicated and expanded when you start a venture in Africa. While economic opportunities abound everywhere, you need to determine which environments will leverage your strengths to take advantage of those economic opportunities. Consider the following questions, quick facts and resources to inform your decision.

1.Which African countries demonstrate the best overall governance?

Good governance is a boon for business and economic growth through the constraint of corruption. According to the Ibrahim Index of Good Governance 2009 developed and maintained by African institutions, the top seven governance performers in Africa are Mauritius, Cape Verde, Seychelles, Botswana, South Africa, Namibia and Ghana. Of special note, Rwanda was recognized by both the World Bank and Transparency International for making significant improvements in the last few years.

2.Which African countries possess the most economic freedom?

While there is no single definition of economic freedom, one of the key components is the ability to enter and compete in markets. According to the Index of Economic Freedom, the top seven African performers compared globally are Mauritius (18th), Botswana (34th), South Africa (61st), Uganda (63rd), Namibia (71st), Madagascar (73rd) and Cape Verde (77th).

3.Which African countries have the best environment to facilitate business?

The top seven African nations are Mauritius, South Africa, Botswana, Namibia, Rwanda, Zambia and Ghana, according to the Doing Business Report 2010.

4.Which African countries and regions have the best infrastructure for trade?

Infrastructure includes power, roads, rail, air and telecommunications. Historically, the Southern Africa region has remained at the top in all categories with South Africa leading the way. The Maputo trade corridor between South Africa and Mozambique is the most developed corridor on the continent. In the broadband infrastructure arena, East Africa overtook Southern Africa this year. The East African countries involved include Burundi, Kenya, Rwanda, Tanzania and Uganda. Currently, there are initiatives underway to link and modernize infrastructure across the continent. For example, SEACOM is connecting the entire African continent to its international broadband infrastructure. The company has connected most of their coastal nodes and is moving inland, working from the East coast to the West coast. Countries like Malawi and the Democratic Republic of Congo will be online within six months, if plans are on track.

5.Which countries score well in logistics capabilities?

There are some suprises in the top seven African countries in logistics performance, according to the Logistics Performance Index 2007 by the World Bank. The countries are South Africa, Sao Tome and Principe, Guinea, Sudan, Mauritania, Kenya and Gambia.

6. Which African nations have diversified economies?

Diversification means there are broader economic opportunities present, strengthening the ability of the economy to absorb shocks. The Diversification Index of the African Economic Outlook report says that the top seven most diversified economies in Africa are Tunisia (75%), Morocco (67%), South Africa (45%), Tanzania (30%), Senegal (22%), Kenya (22%) and Madagascar (21%).

7.Which African countries are experiencing the fastest economic growth?

The top seven fastest growing economies (GDP%) in Africain 2009 were Ethiopia (7.5%), Congo Brazzaville (7.4%), Uganda (7.0%), Malawi (5.9%), Rwanda (5.3%), Tanzania (5.0%) and Liberia (4.9%), according to the Regional Economic Outlook for Africa October 2009. They are also in the top twenty growing economies globally. These countries are expected to maintain similar growth through 2010. However, Congo Brazzaville (12.2% ) and Liberia (6.3%) are expected to significantly outperform their growth from this year in 2010.

These questions serve to help you navigate doing business or investing in Africa. However, they assume you have developed a high-level strategy. One of the first principles for doing business in Africa is do it with purpose. A strategy provides the framework for implementing your business purpose in Africa.

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Article Tags: africa, business success, commerce, economic opportunity, environments, investment, obstacles, strategy, trade



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