Doing business in African countries is different in innumerable ways, and there is no rule book to execute the perfect strategy. We spoke with many experts in both the private and public sectors to gain a better understanding of the most effective approaches for investing and operating in these diverse markets. We have synthesized insights from interviews with those doing business in Africa to create the PAL Principles, which will help a mid-sized company to develop and implement its best strategy for African markets. This framework can be applied to any business, from the moment management decides to explore an African market as a potential option to after initial investments have been made.
With any expansion, a lot of work needs to be completed up front. The unique opportunities and challenges of each African country make determining where to enter a new market and what strategy to use especially important. A company’s options will vary depending on the industry segment, the sophistication of the business environment, relative levels of risk, the political climate, the cost required, and the amount of control that company management would like to maintain.
The company should gather as much information as possible from a wide variety of sources
and develop a clear plan for expanding to Africa. A lack of resources to collect
information and the prevalence of informal economies in Africa mean that detailed market
data is often unavailable or unreliable. So, identifying alternative sources of
information is vital. To build a basic picture of the operating environment, it is
helpful to speak directly with African business contacts, tap into the African diaspora
in your country, and connect with US government representatives focused on African
projects as well as other experts like lawyers and consultants operating in relevant
African countries.
Africa has reached an inflection point for
investment with enormous potential for a wide range of businesses. Immense challenges of
infrastructure, electrification, and political stability still exist but are balanced by
expansive growth, rapid adoption of technologies, and the diversification of economic
sectors. Middle market firms have much to gain by looking now for opportunities in
Africa. The 54 markets in the region are diverse and offer companies an array of options
in the political, economic, and investment climate they seek and the sector they choose
to operate in.
Given the variances between countries, no overall report on Africa can be a specific
guide, but there are
some core principles for expansion. This report offers three guiding principles for a
successful strategy—Be Prepared, Be Adaptive, and Be Local. In addition, a growing set
of resources—local, national, and international— can be accessed to navigate the complex
landscape. From investment promotion programs of individual African countries and US
government trade missions to industry groups focused on Africa and networking with
members of local African diaspora, market intelligence is becoming richer every day.
Expanding into Africa requires a long-term view of success. Being willing to modify initial plans, maneuvering through unforeseen challenges, and having the right local partners are critical elements for thriving in African markets. This is especially true for midsized companies, where more time and talent will be put forth to establish and maintain the right strategy.
Companies will need to effectively deploy resources to grow and adapt with the market
over time. International expansion is not the right answer for all middle-market
businesses, but the increasingly global economy has changed the playing field.
Ultimately, we hope to stimulate companies to consider a move they may have otherwise
thought to be beyond their scope. Investing in Africa can mean a dramatic growth
opportunity for middle-market firms and for the development of the region as a whole.
Exploring the opportunity is the first and most important step in the process. The
prospective return on a correctly executed approach in Africa is significant and has the
potential of outpacing other markets for decades to come.
