Posts Tagged ‘Foreign Investors

08
Sep
09

We don’t want money, we need Skills!

The views expressed on this blog are my own and do not necessarily reflect the views of Oracle.

“We don’t want money, we need skills” was a comment of some of the attendees during the Ghana Competitiveness Forum that was held in Accra in August 2009.

Following the visit of President Barack Obama to Ghana the Business Council on International Understanding organized the forum. A delegation of Members of the House of Representatives of the United States and participants from the public and private sector met over a round table discussion to seek solutions to make Ghana more competitive and attractive to foreign investors.

Not only has Ghana transitioned peacefully to a new government after its recent elections but today you will find that the private sector is taking a leading position as well to drive the economy forward. A new generation of business men and women are now limited by available skills more than by venture capital or other financial impediments.

With the discovery of oil in Ghana an entire new set of skills are required and some international companies operating in Ghana have already started to train people to get ready to embark on deep sea oil exploration.

If you drive around Accra you will also see a lot of activity in the construction sector. New hotels and office buildings are under construction and houses in the residential areas are being built to accommodate the increased demand.

Tema, one of the ports of Ghana receives cargo that finds its final destination in some of its neighboring and land locked countries such as Burkina Faso for instance.

Most of this economic activity also requires information. Here lies in itself another great opportunity for improvements on productivity and efficiencies to become more competitive using today’s information technology.
Border formalities for the most part rely on paper based systems and delay a swift passage. Trucks lose a lot of time during this process. This is just an example of course to illustrate the vast amount of opportunity that exists and at the same time the challenge we face to get enough skilled labor to fulfill the demand.

Golden times for training institutes, vocational education centers, universities and business schools.
Golden times for the Diaspora as well who would like to return to their country and exploit the opportunities benefiting from the acquired international experience.

Training however is only part of what a country like Ghana needs. Some of those who are driving business in Ghana are either locally trained staff or staff trained overseas but in both cases these business leaders have enjoyed international exposure that has provided them experience to deal with complex business situations. These leaders can run businesses up to international standards. They have the capacity to compete internationally. If companies are certified to international standards they will find it easier to export their products and services. Skills and standards are key to achieving sustainable growth in today’s global business.

One of the requests to the members of the House of Representatives was to support an exchange program that will allow for talented Ghanaians to work for a period of time on overseas projects and to receive skilled labor from the US in this case, to work and transfer skills in Ghana so that both business leaders and companies become more competitive.

Of course there are areas where foreign direct investment and loans are still required to assist the development efforts that Ghana is undertaking and where the public interest is better served by a public sector owned solution rather than a private sector one.

When the business community starts asking for skills rather than for money as a first priority it means that its leaders clearly see the opportunity. The opportunity has probably been there for a long time, but today the country is enjoying the fact that democracy and private initiative have both evolved and met each other ready to execute.

Things are changing in Ghana and in Africa and for the better.

© Desi Lopez Fafié

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16
Jun
09

Money Talks In Africa Like Anywhere Else!

The views expressed on this blog are my own and do not necessarily reflect the views of Oracle.

handshake

If you consider doing business in Africa you have to ask yourselves the question:

Do we really want to do business in Africa?

If the answer is yes, you should approach the opportunity just like you would approach any investment decision anywhere else on the planet and prepare yourselves accordingly.
A cost-benefit analysis can give you a go or no-go, based on what you feel is an acceptable level of return on the investment you are willing to make, considering possible alternatives.

Recent studies have identified that some projects in Africa yield up to four times the returns these projects would yield in Europe and twice as much as they would yield in Asia.
exploring oil fields

When the opportunity is there and the understood risk is high, the measures that should be put in place to manage the associated risk, should be properly defined.
The initial cost of identifying exploitable oil fields are significant but the returns of the production side of the business are hugh as well, if the studies turn out correct.
Needless to say what the impact can be of mistakes….

woman analyzing

Some companies make half-hearted decisions when it comes to running their operations in Africa and may end up getting disappointed after a while because they are caught by surprise on various fronts from productivity and efficiencies to facing infrastructural issues nobody had even thought of as potential challenges.

A recent CNBC broadcast titled “Dollars and Danger” had the intention to portray Africa as the final investment frontier.
The first 3 minutes of the program give an example of a Chinese project in Libya where China is accused to export their labor problems to Africa running more Africans into unemployment.
I think it is well understood by now that the US and China are both competing for African energy resources and one can read this between the lines here again.

Not to mention that the US is slowly losing its first trading position with Africa and of course this is not something that the US is happy with.

Most people in the US still believe that the investment and official donor assistance their country provide to Africa are among the highest in the world.  Facts have proven the contrary.

The next 4 minutes discuss the risks and dangers of doing business in Africa, where one could end up believing that you cannot walk the streets of Africa without at least one bodyguard because of the way that one conflict zone, limited to a small region of one country, is blown up to a level as if this is the standard across the continent. The reality is that the number of wars and conflicts at this point in African history are lower than ever before and lower than in Asia for instance.

I am not sure how many potential investors made it all the way to the end of the program. If there still were people watching I wonder how many of those ended up seriously considering Africa as an investment opportunity.

It is sad that this has become the standard of portraying a continent that has never been given a fair chance for as long as the developed world has been interacting with it.

I will share some of the considerations I made, with you,  when I started to work in Africa that have helped me  to exceed my expectations.

Africa is big

The first thing one need to realize is that Africa is a continent that consists of 54 countries and I am showing you a picture that will help you understand the size of the continent to put things in perspective.

You can read more on this topic in my post of https://dfafie.wordpress.com/2008/11/30/balance-the-view-and-opinion-on-africa/
Arabic, English, French, Portuguese and Spanish are the imported languages depending on what part of Africa you are at, apart from the thousands of local languages that are spoken by the African people.

Unless the nature of your business is linked to available natural resources, you need to decide on a location or multiple ones where you want to operate from.

Here you will have to strike a balance between business opportunities and cost of operation given that the level of available infrastructure differ from one country to another.

nairobi airport

If the nature of your business requires mobility for instance you have a limited number of airports that will allow you to reasonably connect across a region. You may not have the business volume in the country from where you operate but you have the convenience of a workable infrastructure. The safest bet therefore in this case, is to consider offices to play a regional function rather than a local one, right from the start. You can read more on this topic in my earlier post: Africa is big and flights are short in supply at  https://dfafie.wordpress.com/2008/12/19/africa-is-big-and-flights-are-in-short-supply/

students

Companies that require skilled labor will have to make a decision to bring in the skills from overseas or to invest in local staff or a combination of these. When skills are a determining factor you also need to consider where you want to train your staff, on-site or overseas.
If you have to sent staff overseas for training you may face challenges obtaining visas for your staff based on where staff originate from unfortunately.  This is one of the so many imposed barriers to Africa’s development by the developed world, but one that should not be underestimated. Sometimes visa requests are rejected without even a plausible reason.
A more local consideration is that it can be more difficult in some African countries to obtain work- and residency permits for neighboring nationals because the hosting country wants to protect employment for their local citizens.

See my post on visa related issues at  https://dfafie.wordpress.com/2009/05/

African partners

Some companies work with or via local partners. My recommendation is to look for business partners on equal footing so that the partners can organize themselves similar to meet each other’s expectations in terms of investments, organizational structures and quantitative and qualitative standards.
If you are new to a region, working with a local partner can help you to get the local know how faster incorporated into your company.

The good news for Africa is that more nations have started to invest in Africa. While historically the Europeans were the main overseas players, today US, Chinese and Middle Eastern companies are present and compete for the business opportunities.

I see different approaches to doing business from some of the companies depending on where they originate from.
Knowledge transfer is a common practice for US based companies for instance, where the Chinese companies bring in most, if not all the work force from China thus providing less long-term benefits to the local population.

Not all companies will work with local staff at all levels of the organization and some even have different levels of employee standards for staff that come from overseas versus local staff.
This creates all sorts of human resource problems in the long run. This is not a specific problem in doing business in Africa.
There are plenty examples of companies applying duality everywhere in the world.
The average age of Africa’s population ranks very young and with proper training, skills can be developed. While doing business, we have a great opportunity to invest in Africa’s future at the same time. If there is one way we can make a difference in assisting the development process from within the private sector, it definitely is in the area of capacity building.

The size of a company will determine to some extend the possible investments that can be made. It is the initial cost of exploration that will represent more of a challenge to smaller companies than it will to larger ones. Given the many additional factors companies have to consider when doing business in Africa, it is a conditio sine qua non to have a chance for success. If your company does not have the means to do proper due diligence, you may be better off exploring easier terrain.

There are some conditions that we have to accept for the time being since in most cases companies can do little or nothing about these.
Some countries still have state owned utility companies that hold a monopoly position providing poor service while overcharging the consumer, to mention just one.

Similarly there are government owned cooperations for some of the natural resource related economic activities, that impose price and conditions to the producers. Cotton and cacao are good examples where the farmers work very much under cooperation’s set rules. Since these cooperations are most of the time the only one in its kind in the country, providing fertilizers, pesticides and some other basics to the farmers who have no access to capital,  it is difficult to change the conditions for some of these primary producers. Even with micro financing support, the farmers would still be stuck with price cartels once they want to sell their crop.

It is difficult to break this model as long as these monopolies exist.
If you are part of such a chain the basic conditions will be very much set for you when you approach your suppliers.

If you work regionally and you have to transport goods by trucks, crossing borders requires a skill all by itself, to ensure that your cargo does not lose time dealing with the formalities.
Specially perishable goods require close attention and working with solid partners will proof useful in most cases.

The public opinion on Africa is based on what the media cares to show and more often than not this is a very negative single sided reflection of the reality.
When there is a conflict in one part of one country the news headlines will state that there is a problem in Africa and thus the issue gets amplified by a factor of 54!

body guard

In all the years that I have lived and worked in Africa I have always applied a simple rule. If you are in Rome do as the Romans do!  So if you are in an unfamiliar place, you should pay attention to good advice from your local staff or local partner and you should not go experiment on your own. I have never used bodyguards nor any security personnel and I have worked in over 34 countries in Africa for years and I am enjoying my work and my life. I have come to terms  with the fact that sometimes there are power cuts, water cuts and other inconveniences but the flip side is that if you do, you can enjoy a very hospitable environment where nobody ever complains even if they have all the reason to do so at times.

man in rain

If you are in London, people will complain about the rain or the sun. It is either too wet or too hot but it is never going to be fine..

man smiling

You run into any person anywhere in the streets of Africa and you ask them how they are and they will tell you , I am fine and will do so with a sincere smile.

Of course there are issues. It would be naive to think that there wouldn’t be any issues across 54 countries. More so if we realize that there are so many issues with the rest of the world.
Somehow we have become myopic and we only manage to see what does not work in Africa, while we are stuck up to our eyebrows with issues in the developed world.
Did Africa create the economic crisis most of the western countries are currently struggling with just to pick on a recent one ? When these problems, that the western world created itself,  happen,  overnight billions of dollars can be found to fix the problems and everybody turns back to autopilot.

Those of us who are successfully working in Africa often ask ourselves the question how come “those back home” fail to see what it is that we see…

I have come to the conclusion that often the problems come from a pre-conditioned mindset that forgot to do due diligence before taking up the new challenge, irrespective of the location of the activity.

For you to proof me wrong!

© Desi Lopez Fafié


17
Apr
09

The Next International Trade Event in Africa will take place in…

africa

Over the years I have been dealing with event organizers in Africa, I have often requested events to take place outside the typical locations like
South Africa, Kenya or Nigeria. As such there is nothing wrong with these locations but if we don’t give a chance for events to take place
in the rest of the 51 countries some of the good intentions will become difficult to achieve when trying to promote regional integration to name but just one.

Regional and intraregional trade is high on the agenda of most African countries. Potential investors need to get a chance to explore all options not just a handful.
As the attached graph shows the share of regional trade is still a very small part of the total trade volumes although slightly growing.

061030_chart2

What I have witnessed, during events in Lagos, Johannesburg, Sun City or Cape Town, is that participation from the French speaking countries is very
limited in a best case scenario. To make things worse, if there are a few participants very often the organizers fail to provide simultaneous translation
assuming everybody speaks English. Of course any next invitation to attend will become a harder sell. When you speak to the organizers they will tell you
that the participation rate is “surprisingly” low from French speaking countries and therefore it does not justify the investment while one of
the agenda items clearly states “regional integration”.

I have taken the example of events taking place in English speaking countries posing a risk to lose out on French speaking participants but of course the issue goes both ways.

To be fair to the organizers there are some challenges that have to be considered when organizing events:

waiting

Flight connections between African countries, specially between French and English speaking ones, are often routed via a limited number of airports and can make the journey long and unpleasant.
Daily flights are not always available and a stopover sometimes means being stuck a full day because the connecting flight is only available the next day.

Finishing meetings in Gaborone some time back on a Friday afternoon, I was stuck in Johannesburg on Saturday because my next flight back to Accra was on Sunday.
So one may lose a lot of time in some cases or one should consider a costly trip to Europe to connect via Paris or London to fly back south while the passenger is only trying to fly to a destination that should take him/her 3 to 4 hours had there been a direct connection.

Either way the organizers understand this and fear that by choosing an “odd” location the participation rate will be low.

pasted-graphic-15

Potential sponsors to the event will also raise questions when an event is taking place in an “odd” country and may not provide sponsorship as much as they would if the event would take place in the more usual countries.
What sponsors should take into consideration though, is the fact that sponsorship is still a form of investment, and investing in existing markets yield different returns than investing in new and often unexplored markets with low or non existing competition. The investment therefore may yield much higher returns.
If one considers the cost to explore a new market on ones own, both in time and in money, to reach potential business partners I am convinced that it pays off to sponsor the “odd” countries from time to time.

If potential foreign investors are part of the targeted participants, the organizers again are faced with another challenge:  the perception of the lesser known countries, or worse the biased opinion on some of these countries. Organizers of course try to attract as many participants as possible so the logic is easy to follow when a choice is made for the more typical countries.

visas

Visas are another challenge that organizers face. Most of us who have worked in Africa know that the problem is not limited to Africans trying to fly to Europe or the US to attend events, but the problem also exists for Africans trying to visit another African country.

Some countries do have a serious accommodation challenge as is the case at this point in Angola. To get a hotel room requires in the worse case some months of upfront reservation. This sounds positive to me.
It means that the demand to partner with Angola exceeds the current available supply to host potential foreign investors but of course for the time being it poses logistical hindrance for organizers.
There are however many countries in Africa, outside the aforementioned ones, that can cater for events with auditoria that have simultaneous translation capabilities.

Most of these challenges are not limited of course to event organizers. They affect any company that wishes to expand their activities in the region.

My recommendation to the organizers would be, to discuss their logistical challenges with for instance the chambers of commerce, of countries they would like to consider outside the typical ones and seek ways to overcome some of these and to prepare the events in such a way that participants feel welcome regardless what language they speak.

If events get big enough maybe airlines are willing to provide charter planes to handle the peak passenger demand. If trade starts to increase significantly airlines may also consider to provide a more permanent connection between two trading countries. For the time being there is no direct flight between Ouagadougou and Lagos for passengers. Cargo flights are available however between the two cities. Once enough volumes of cargo moves between these two cities, it follows that at some point passenger flights will start to take off as well.

gb

Globalization does not stop in the US, Europe, Asia or Japan. Years ago, if a Chinese passenger boarded a flight to Bamako, the cabin staff would double check to make sure the passenger was boarding the correct flight.
Today its often difficult to get a seat on a flight because of the increased demand coming from Asia on some of the routes into Africa. Increasing amount of Africans travel via Dubai to Beijing or Shanghai as well.
Dubai has understood this opportunity and has become a major connecting hub between Africa and Asia

china_africa-trade_2006 _44229699_africa_china_invest_map416

Emirates Airlines are expanding their routes across the continent providing daily flights to a growing number of locations after starting their first flights to Cairo in 1986. Their planned flights to Angola, will become their 17th African destination.
Emirates Airlines have grown their African business by 17% recently and provide 4000 Africans with employment. Compare this for instance to South African Airlines who have 24 destinations within Africa after starting in 1934 and you realize the significance of the investment as well as the success Emirate Airlines are enjoying out of Africa and the benefit Africans enjoy from increased employment and from getting connected.

efa

In addressing the sponsors, organizers should expect some initial resistance but if enough success stories are shared about the returns the events have generated for their participants I am confident that this issue is just a matter of time.
Organizers very often have a better overview of companies willing to invest and can play a significant role as an intermediary to bridge demand and supply.
To date many local countries statistical data is inaccurate or at times conflicting if you compare the data of for instance two trading countries.
Potential investors and sponsors get confused as a result and the biased opinion will be reinforced in the worse case.
Target the low hanging fruits, the market makers as your first choice of sponsors.  They realize the benefit of exploring the markets before anybody else has arrived. The laggards will follow in due course and will  face stiff competition like the always do no matter where in the world from those who decided to go first.  The telecom operators are a good example who are fighting to get into the most remote countries because of the growth their businesses are enjoying.

aw3 aluminibanner

content-blog-111808-01-ghana

Here lies in my opinion also a wonderful opportunity for the organizers to become more vocal about the success stories of some of the countries as a result of their events. The more these event related successes are shared, the more participants the organizers should expect going forward, the more investors will consider the new country as a serious place for business. In the end everybody wins.

publicrelations

Some organizers get it right already, like eLearning Africa, http://www.elearning-africa.com which started in Ethiopia than moved to kenya and this year plan their event in Senegal.
Another good example is Africa.com http://africa.comworldseries.com which runs events in Senegal, Nigeria, Kenya and Tunisia, aiming to get their content to more than just Cape Town.
Business Excellence Global Media has taken the step of running their next event in Uganda instead of Johannesburg tapping into the East African market. http://www.be-excellent.com/dynamic.php?button=99&section=22

Please have a look as well at the following site for some more ideas for your next events http://www.africa-ata.org/cities.htm

So will the next World Economic Forum on Africa move again between Cape Town and Durban, or will the organizers be bold enough to try out a different location in Africa ?

© Desi Lopez Fafié





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