A panel of thinkers and doers from academia and business hosted by the Gordon Institute of Business Science (GIBS) Centre for African Management and Markets (CAMM) agreed at a recent forum there are a multitude of reasons to be positive about African business.
“You can’t afford not to be in Africa, you will be left behind,” Vice-chancellor and Principal of the University of Pretoria, Professor Tawana Kupe said.
CEO of Sanlam Emerging Markets, Junior Ngulube said positive change on the ground throughout Africa is cause for enthusiasm and optimism: “I have seen cities like Luanda change right in front of my eyes, you can’t help but be positive and excited.” Levels of confidence among businesses operating on the continent have increased, especially in the banking and telecommunications sectors.
While challenges remain, Ngulube, who has been working on the continent since 1987 said: “If you think it’s difficult now, you should have tried it then.”
Founding chair and CEO of Shingai Group and former CEO of MTN Cameroon, Philisiwe Sibiya named the East African region, from Mozambique to Ethiopia as an example that shows the rest of the continent what is possible. “Kenya, Rwanda, Ethiopia. The region is growing in leaps and bounds, new cities are being born from scratch, four airline hubs have uplifted the region in terms of growth and the arrival of the Internet has changed the continent completely,” she said.
Kupe urged those at the gathering to take a long-term view of the economic history of Africa’s development: In 1989 many African countries were one-party state dictatorships, with most sectors of the economy under state control. Now, most African countries are multi-party states and there has been significant privitisation. “There has been a massive sea change,” he said.
However, enthusiasm doesn’t mean there aren’t any obstacles, Kupe said, who pointed out “there is no linear development in economic development, no nation has developed in a linear fashion.”
Doing business in Africa
Many South African firms which expand their operations to the north of the country’s borders approach the continent with a certain level of naiveté, Sibiya said, and are still considered by the broader African continent to be arrogant. “There is a huge amount of hubris on our side, that what has worked locally can merely be replicated in Africa. We need to look at the continent as 54 unique jurisdictions with unique histories and develop an understanding of the laws, both written and unwritten.”
Sibiya said localisation and cultivating successful partnerships were critical factors in determining the success of companies expanding into the rest of Africa.
“Many times when we venture onto the continent we ‘cut and paste’ management teams from South Africa. This creates a two-tier structure within the business.” Companies need to rather develop local staff to have a vested interest in the company’s success. “If they do not see themselves as part of the business, the trust deficit can set in quickly and become too big to bridge,” she said.
Sibiya added that experience on the continent is irreplaceable: “If offered the opportunity to live and work in another part of Africa, take it, as it will change your life and transform your outlook on business.”
“The more South Africans that we send across the Limpopo to gain experience, the more we will understand each other,” Sanlam’s Ngulube added.
Ngulube, who oversaw the completion of the firm’s 2016 acquisition of Morocco-based Saham, forming the largest insurer on the continent with operations in 33 countries, explained that Sanlam’s business model is intrinsically based on local partnerships: “We always appoint local CEOs and boards as they give us guidance as they know the terrain and are invested in the success of the business.”
“Choosing the correct partner for your business can take time. You want a partner who is in your line of business, and who shares your values and ethics. It is not about having a partner with proximity to power who promises big connections, as those connections are transient.”
“You absolutely need partners as a South African business, and who you partner with is critical as it will determine your ongoing success on the continent,” Sibiya added. “It becomes a huge impediment when you arrive in a country and are given partners without conducting the necessary due diligence first.”
African economic integration
In order to fully achieve its potential as a continent, Africa would need to shift towards economic integration. Following liberation, the focus was on governance and establishing the Pan African Parliament, Ngulube said. Now the continent must move towards integration through infrastructure development, opening the African skies and trade through the African Continental Free Trade Agreement.
The African Union (AU) “never fully addressed what economic policies are required to develop the continent economically, and we are seeing the consequences of not developing a Pan-African economic framework earlier,” Kupe said.
“The project of integrating the continent economically is urgent. Political freedom and economic development are actually intertwined. The need now is to create an economic framework, including a free trade zone and a shared currency,” he added.
The AU should play a co-ordination role to achieve this, or it risks becoming irrelevant, Kupe said.
“African businesses cannot wait until the conditions are perfect to do business. They cannot wait for the policies and politicians,” Ngulube said. “The future of this continent is going to be determined by African business.