Sub Saharan Africa – The Next Frontier?

Professor Nick Binedell, Dean of the Gordon Institute of Business Science (GIBS) addressed some 200 business owners and managers at an event hosted by Nolands, The Finance Team, FNB Vumela and Aon insurance. His topic explored the possibilities of South African companies expanding their businesses into Sub-Saharan Africa. “The opportunities abound in Africa especially when one considers that the African continent is the second-largest and second most populous continent on earth with an estimated population in 2013 of 1 billion people” said the Professor.

Professor Binedell noted that the biggest challenge to doing business in Africa is the lack of basic services; such as roads, electricity and communications. However if one can work around these challenges the opportunities and related returns are immeasurable. Six of the twelve fastest growing economies in the world today come from the African Continent. Four out of the five most populous countries in Africa are:

•Nigeria: 177 million

•Ethiopia: 87 million

•Democratic Republic of the Congo: 75 million

•South Africa: 53 million

Africa currently has a very low population density of about 29 people per square kilometre, which puts it behind Asia, Europe and South America. The population of Africa is currently projected to double in just 37 years to 2.1 Billion by 2050, with a growth rate that will make the continent more important than ever to the global economy. At this stage 25% of the world’s population will be concentrated in Africa compared to just 6% in 1950.  Nigeria is currently one of the most populous countries on earth and as China’s population shrinks and India’s plateaus, Nigeria will reach nearly 1 billion people by 2100 and will come close to surpassing China. It will surpass the population of the USA by 2050. This is pretty amazing considering the country is about the size of Texas. Nigeria is set for one of the biggest population booms in world history and it’s expected to increase by a factor of eight in just two or three generations. Some of the most rapid population increases are expected in the world’s 49 least developed countries, with Tanzania and Zambian populations expected to increase fivefold by 2100. In contrast, the populations of 43 countries (mostly European) are expected to decrease over the next 2 decades.

But what does this mean to South African businesses that want to expand their operations into Africa? “Africa’s biggest resource is its people. If you as a business can harness this resource and provide products and services that people want and need, your chances of success are excellent and your returns will be phenomenal. Doing business on the continent is challenging, to say the least, but my advice is to get out there and visit these countries, walk the streets and get a feel for the people and the culture. You cannot think of doing business in these northern territories until you yourself have experienced it first-hand” said Professor Binedell.

The Professor further commented, “While a lot of attention is focussed on the amount of Chinese investment in Africa, I am of the opinion that there is more investment coming into Africa from North America and Europe. The incorrect perception around the Chinese is because they are involved in the more high profile infrastructure projects such as road and rail networks throughout Africa. Either way, Africa is the next frontier and any world economy that ignores this fact does so at its own peril. No continent has the potential to deliver super profits over the next decades greater than the African continent.”

“In line with Professor Binedell’s observations, we have seen a massive increase in the need for qualified and African experienced South African financial executives up in Africa as the region explodes economically and local expertise is found wanting on the ground. Those professionals that are available and up to the task are extremely expensive as are the related housing and security costs. We send suitably qualified and EXPERIENCED associates into Africa on an interim or project basis to assist South African companies that are already involved and established in the area or who are currently setting up African operations for the first time. We also have an extensive network of like-minded professionals who offer world class advisory and consulting services to companies wanting to spread their wings into Africa. These companies typically focus on Capital Raising, Company and Tax structuring as well as logistics handling on the ground. As Professor Binedell stated, one has to understand these markets to be able to work in these markets. Both Grant Robson (Executive Chairman) and I, have personally worked in and serviced clients in Namibia, Botswana, Zimbabwe, Zambia, Mozambique, Tanzania, Kenya, DRC, Uganda and Ghana for many years and our deep understanding of the cultures and the way business is conducted in these territories has certainly assisted The Finance Team in providing effective financial management services to these companies in Africa,” concluded Richard Angus, CEO of the Finance Team.