I wished I could remember what exactly I was searching for on the Internet in August 2012, but it had something to do with my newly found summer-ambition to change gears in my professional career. So I was browsing the Internet, and stumbled on an article that was written in 2011 by David Rowan, the editor of Wired Magazine. It was titled “Want to become an Internet Billionaire? Move to Africa.”
I never forget the title of this article, my obsession to find out more about investing and doing business in Africa started with that. Lack of knowledge is the major obstacle that is hindering many of us to strive towards success in Africa one way or the other. If you want to become make an investment or start doing business with Africa you need to know Africa’s market dynamics better. Let’s start with some basics. Have a look at 6 amazing benefits Africa can now widely offer you, but what you will not find in the West.
1) Low Competition
The level of market competition is your biggest challenge in the West and, right now, your greatest opportunity in Africa, because there is simply low competition and that while Africa’s middle class is rising faster than anywhere else on the globe. There is huge demand for products and service, but that demand cannot be sufficiently met.
Let’s be random: Take bottled water, for example, or baby food, or make up. The store shelves in the West are filled with a huge range and variety, but above all, with leading international brands that are hard or sheer impossible to beat. Not so in Africa. You need to get in there fast – invest in local manufacturers or start a manufacturing company yourself. It will be one of our best bets!
2) Fast Growing Demand In Multiple Industries
While consumers in the West have almost everything that their hearts desire, the African consumer is just waking up to new spending power abilities. According to the McKinsey Global Institute, by next year Africa’s consumer spending will be in the region of $1 trillion, driven by Africa’s exploding new middle class of over 300 million people. In fact, analysts fear that the demand for many products and services cannot be sufficiently met.
3) Affordable Management Costs
Office, storage, utility, service, and labor costs are so much cheaper than the West in most parts of Africa, allowing you to start with smaller capital. However, make special expenditure calculations if you are packing and heading for Luanda – Angola’s capital city is currently the most expensive on the continent !
4) Super Returns on Investment
The average global return on investments are somewhere in the range of 6-12%. Foreign investors in Africa widely report ‘super returns’, many making 15-25% return on their investment. The figures speak for themselves and are not based on stocks, but on direct investment into local companies.
A senior partner of Abraaj Group, a leading private equity investor in global growth markets, said: “The interesting thing about Africa and emerging markets is you can make a lot of return just with equity – you don’t need to use leverage to generate return. We typically don’t use any […] We just put in equity and hope the business grows three or four times over three or four years and you make three or four times your money.”
5) Embracing African Diasporans
While you may face some societal challenges when returning back to Africa after a long absence, fact is that people there will usually welcome you and look up to you admiring the skills and experiences you are bringing into the community after a life on far away shores.
African governments and large companies in particular have made many calls to the African Diaspora to invest in the country. In short, Africa is not only providing you with great opportunity, but it needs you.
Operating in Africa has many challenges, but little can beat the level of appreciation and fulfilment you get when serving the needs of Africa. While your attempts in the West may go unnoticed and you can be replaced only too easily, any venture you start in Africa can be turned into one with a purpose. You are someone who makes a difference and people notice you, respect you, and appreciate you for it. You will find that many of your business and investment efforts will meet basic needs on the ground, and chances are, that it will be very easy for you to turn doing business in Africa into a meaningful purpose.