The Future of Business in Africa

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As many economies struggle with their recoveries from the recent recession, the countries of Africa are proving to be mini success stories with promising futures of not only providing growth within their own continental economies but expanding to become major trade partners with international ties and benefits.

The Obama Administration’s “Doing Business in Africa Campaign” has encouraged many U.S. businesses to expand their presence internationally into the African markets. Specifically, 2012 witnessed President Obama touring the Sub-Saharan region and, in turn, promoting the region to American businesses as an untapped source for business growth (The White House, 2012). The last decade has seen trade between U.S. small- and medium-sized businesses and Africa triple, with exports now in excess of $21 billion. Continuing their success, and in no small part a benefit of U.S. involvement, six of Africa’s countries are counted among the ten fastest-growing economies of the world, with expectations by the International Monetary Fund of annual growth to continue between five and six percent (Int'l Trade Admin, 2013).

In part because of American involvement, international attention has begun to grow toward African economies, and current praises highlight Africa as providing one of the highest returns on investment in the world (Hayes, 2013). The telecommunications industry, alone, has seen unmatched growth of an annual rate of around 58 percent—significantly higher than the next highest growth of 35% percent in Asia. Continued expectations are that Africa will soon expand its oil production capabilities, becoming the dominant supplier to the United States over the Middle East.

With over 900 million people, Africa’s consumer baseline is a significant attraction to multinational and international firms. Although half of those numbers subsist on a paltry $1.00 or less per day, the remaining 450 million are an untapped market for established firms and, particularly, small, growing firms seeking to tap new markets or expand their current offerings (Pinneau, 2006).

Their growing capabilities are attracting attention from China and India as well, placing Africa in a dominant position over American and European firms even with the remaining 450 million who exist in poverty conditions. One such opportunity is in micro-lending, wherein established or entrepreneurial endeavors loan funds to communities or individuals to start small businesses within their communities. The emerging markets then supply goods and services to neighboring communities, launching small but growing businesses in untapped territories. While the risks of Chinese investment remain high, particularly given the lack of resources in some areas and the heightened animosities in others, the payoff for success is quite significant.

The primary benefit for Africa’s emerging markets, however, is the health at which the African economies survived during the fiscal crises in which many of the other world markets floundered and failed. Diversified financial interest from other world markets, coupled with improved macroeconomic policies, have resulted in higher levels of investor confidence in turn leading to increased investment and greater international trade expansion opportunities. The increased attention will naturally lead to greater investment in African infrastructure, providing even greater confidence in the emerging markets and continued increases in foreign investment. This presumption has already shown promise as the trade between just China and Africa has continued the rapid expansion of over 30 percent per year during the 2000-2010 decade alone (Ladd, 2011).

The bleak past of Africa’s financial and economic conditions are quickly being replaced as world economies recognize the benefits of the increasing opportunities of their emerging markets. Trade among the world powers and Africa’s market base is likely to continue on its growth path as more outside investors recognize the power of early entry.

References

Hayes, S. (2013). Regional Partnership to Promote Trade and Investment. The Corp. Council on Africa.

Int'l Trade Admin. (2013). Doing Business in Africa. Washington, D.C.: Export.gov.

Ladd, S. (2011, January 12). Emerging Africa Expected to See Rise in Investment. Retrieved from International Monetary Fund: http://www.imf.org/external/pubs/ft/survey/so/2011/CAR011211A.htm

Pinneau, C. (2006). Doing Business in Africa. Retrieved from Africa: Open for Business: http://www.africaopenforbusiness.com/business.htm

The White House. (2012). U.S. Strategy Toward Sub-Saharan Africa. Washington, D.C.: The White House.