DOING BUSINESS IN AFRICA: THE EMERGING MARKET.

A PAPER PRESENTED BY AMBASSADOR GEOFFREY I. TENEILABE, CONSUL GENERAL OF NIGERIA, ATLANTA, TO THE AFRICAN AMERICA

CHAMBER OF COMMERCE, ATLANTA.

JUNE 7, 2012

Africa,  a  con+nent  made  up  of  54  sovereign  countries,  consist  of  one  billion  

people,  which  is  expected  to  increase  to  two  billion  over  the  next  40  years,  is  fast  

emerging  as  the  next  fron+er  for  business  and  investment.  Once  referred  to  as  the  

dark  or  hopeless  con+nent,  Africa  is   gradually   becoming  aArac+ve   for   trade  and  

investment,  though  challenges  s+ll  remain.  

  Remarkably,  in  the  past  five  years,  the  Gross  Domes+c  Growth  (GDP)  rate  of  

Africa  has  averaged  over  7%.  Six  out  of  the  ten  fastest  economies  of  the  world  is  

African,   among   which   is   Nigeria.   Despite   the   slowdown   of   the   North   African  

economies   (Algeria,  Tunisia,  Egypt  and   Libya)   as   a   result   of   the   Arab  Spring,  the  

Interna+onal  Monetary  Fund  (IMF)  predicts  a  growth  rate  of  5.7%  for  Sub-­‐Saharan  

Africa  this  year.  Several  African   countries   are  expected   to  grow  as  much  as   10%.  

Indeed,  according  to  the  authorita+ve  Economist  Magazine,  Africa  could  be  on  the  

brink  of  economic  takeoff,  much   like  China  30  years  ago  and   India  20  years  ago-­‐-­‐-­‐

the  African  Renaissance.  

Some  economic  indicators  give  further  hope  for  this  op+mism.  According  to  

the   Standard   Bank,  60  million   African   households   have   annual   incomes   greater  

than  3,  000  US  Dollars.  By  2015,  that  figure  is  expected  to  top  100  million.  Again,  

300  million  Africans  earn  more  than  700  dollars  a  year.  Combined,  this  presents  a  

formidable  middle  class  that  could  influence  demand  push  for  consumer  products  

and  market.    

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  In  Africa   today,  produc+vity   has   been   rising   at   an   average   of  2.7%  a   year,  

while  trade  between  Africa  and  the  rest  of  the  world  has  increased  by  as  much  as  

200%   since  2000  AD-­‐over  $673.4   billion.  Infla+on   also  dropped   from  22%   in   the  

1990s  to  just  8%  average  in  the  current  decade.  Similarly,  foreign  debt  declined  by  

one  quarter  and  the  budget  deficit  by  two  thirds.  

It  should  also  be  noted  that  with  the  end  of  the  Cold  War,  marking  the  end  

of   ideological   wars,   coupled   with   the   influence   of   interna+onal   financial  

ins+tu+ons   such   as   the  World   Bank   and   the   Interna+onal  Monetary   Fund   (IMF),  

African   countries   have   come  to   accept   the   principle  of  market  economy,  with   a  

view  to  transforming  their  economies  into  the  mainstream  of  the  global  economy.  

To   this   end,   African   economies   have   undergone   structural   economic   reforms  

especially  in  the  1980s  and  the  1990s.  LiAle  wonder  then,  that  African  economies  

were  beAer  able  to  withstand  the  shock  of  the  global  economic  crisis   in  2008  than  

the  economies  of  the  United  States  and  Europe.  

  Currently,   Africa   represents   just   10%   of   the   global   economy;   2.7%   of   its  

output   and   1%   of   global   trade  but  poten+als   are   high.  According   to   the  World  

Bank’s  Annual  Ranking  of  Commercial  Prac+ces,  36  out  of  46  Africa  governments  

surveyed  made  things   easier   for   businesses   in   the  past  year.  This   gives   a   strong  

indica+on   of   the   recogni+on   of   the   private   sector   by   African   countries   as   the  

engine  of  economic  drive  and  growth.

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  In   this   wise,   virtually   all   African   countries   have   undertaken   painful  

priva+za+on/commercializa+on   exercises   at   various   +mes   with   a   view   to  

transferring   state   owned   businesses   to   the   private   sector   for   ownership,   more  

efficient   management,   as   well   as   for   higher   produc+vity   and   crea+on   of   more  

employment.  In  this   respect,  in  Nigeria  for  instance,  over  a  hundred   state-­‐owned  

enterprises   have   so   far   been   sold   to   private   businesses,   and   reforms   in   many  

segments   of   the   economy   such   as   banking/finance,   agriculture,   oil   and   gas,  

transporta+on,   power/electricity,   infrastructure,   etc.   have   either   taken   place   or  

s+ll  ongoing.

  Therefore,   with   a   deregulated   and   liberalized   market,   coupled   with   a  

number   of   incen+ves   including   private   ownership   of   businesses,   repara+on   of  

profit,   guarantee   against   expropria+on   of   investment,   among   others,   Africa   is  

hungry  for  investors  and  eager  to  surpass  its  FDI  receipts  standing  at  $80  billion  in  

2011.    

Africa   is   equally   fast  puhng   to   rest  one   of   the  variables   that  drives   away  

investors,  namely,  poli+cal   instability   and   civil   strife.  Africa  is   not   yet  a  haven   in  

poli+cal   stability  but  whereas   only   seven  out  of  more   than  50  countries   used   to  

hold   regular   elec+ons   in   the  past,   today   two  out  of   three  African   countries  hold  

regular  elec+ons.  Last  year   alone,   as  many   as   18  African   countries   had   general  

elec+ons.  This  disposi+on   indicates  a  deepening  of  democracy,  good  governance,  

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Rule  of   Law  and   respect   for  human   rights   in   the  con+nent.  The   situa+on   is   also  

supported   and   encouraged  by  the  con+nental  umbrella  organiza+on,  the  African  

Union  (AU)  in  prac+ce  and  through  its  founding  statute-­‐-­‐-­‐the  Cons+tu+ve  Act.

Areas   of  interest  for  Africa  in  the  quest  for  Foreign  Direct  Investment  (FDI)  

include   but   not   limited   to:   infrastructure,   manufacturing,   industrializa+on,  

healthcare,   tourism,   telecommunica+on,   real   estate,   agriculture,   energy/power,  

transporta+on,  the  Green  economy.  

Mining:  

Africa   is   s+ll   noted   as   one  of   the   richest   con+nents   in  mineral   resources.  

60%  of  the  global  natural  resources  are  in  Africa.  The  con+nent  has  about  half  of  

the  world’s  gold  reserves  and  a  third  of  its  diamonds,  not  to  talk  of  huge  reserves  

of  copper,  coltan,  oil  and  natural  gas,  just  name  but  a  few.  

In  par+cular,  several  African  countries  are  noted  for  their  mineral  resources.  

For   example,  Angola   has   oil/natural   gas,   diamonds.   Guinea   has   more   than   one  

fourth   of   the  world’s   bauxite   reserves.   Namibia   has     huge   deposits   of   copper,  

diamonds,   lead,   silver,   +n,   tungsten   and   zinc.   Zambia   has   large   quan++es   of  

cobalt,   copper,   lead   and   zinc;   South   Africa,   the   richest  African   state   in   terms   of  

mineral  resources  has  huge  quan++es  of  an+mony,  chromium,  copper,  diamonds,  

gold,   manganese,   nickel,   pla+num,   +n   and   uranium.   Ghana   has   gold.   Nigeria,  

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Angola,   Libya,   Algeria,   Egypt,   Equatorial   Guinea,   Gabon,   Cameroon,   Chad   and  

Ghana  have  huge  reserves  of  oil,  natural  gas  and  other  solid  minerals.

Africa   therefore   presents   a   good   investment   environment   for   explora+on  

and   processing   of   as   well   as   value   addi+on   to   the   vast   quan++es   of   mineral  

resources   available   within   the   con+nent.   Also   considered   appropriate   is   the  

development   of   Africa’s   infant   or   non-­‐existent   petrochemical   industries   to  

increase  Africa’s   refining  capaci+es  and  petrochemical  products   in  order  to  break  

down  the  many  by-­‐products  of  petroleum  into  numerous  petrochemical  products  

for  local  consump+on  and  export.

Manufacturing/Industrializa2on:  

Africa  was  a  by-­‐word  for  consump+on  of  industrial  products,  manufactured  

in   the   colonial  metropoles.  Unfortunately,  decades   aker   independence,  much   of  

the  situa+on  has  not  changed.  African  raw  materials  are  s+ll  being  converted  into  

industrial   products   in   which   Africa   expends   much   of   its   foreign   exchange   to  

import,  some+mes  paying  four  +mes   the  price  were  they   to   be  manufactured   in  

the  countries  where  the  raw  materials  are  sourced.  

Thus,   there   is   a   need   for   the   industrializa+on   of   Africa   and   the   ci+ng   of  

these   factories   close   to   the   sources   of   the   raw  materials,   in   order   to   make   the  

product  cheaper  both  for  local  consump+on  and    export.

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Another   good   case   for   the   industrializa+on   of   Africa   is   the   poten+als   for  

employment   crea+on,   import   subs+tu+on,   foreign   exchange   earning   and  

development  of  technology.

Infrastructure:  

There  is  no  gainsaying  the  importance  of  infrastructure  to  the  development  

of   any   na+on   or   con+nent.   The   different   regions   of   the   con+nent;   East,  West,  

North,  Central   and   Southern  Africa  need   to   interlink   for   the  promo+on  of   intra-­‐

African   trade,  commerce,    rela+onship  as  well  as   for  easier  movement  of  goods,  

people  and  services  within  the  con+nent.  

Today,  intra-­‐African   trade  has   increased,  though   standing  only   at  13%  from  

6%.   Nevertheless,   there   is   s+ll   a   lot   to   be   done   in   the   development   of   inter-­‐

regional  infrastructure  such  as  highways,  bridges,  air  routes,  waterways,  railways,  

shipping  routes,  telecommunica+on,  among  others.  

There   is   also   an   urgent  need   for   infrastructural  development  in   individual  

sovereign   states   in   like  manner   in   order   to   boost   socio-­‐economic   development  

and   enhance   interac+on.   The   interna+onal   financial   ins+tu+ons   such   as   the  

African  Development  Bank  (AfDB),  the  World  Bank,  the  European  Union  Fund,  the  

IMF,  etc.,  have  done  quite  a   lot  to  close  the   infrastructural   gap  but   interna+onal  

investors   can   s+ll   do   a   lot   more   to   complement   these   efforts   on   government/

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private   partnership   basis.   They   are   likely   to   have   their   returns   on   their  

investments  through  tolling  or  other  means  of  payment.

Agriculture:  

Many  African  economies  prac+ce  subsistence  agriculture.  Agriculture  is  not  

only  a  major  employer  of   labor  but   in  many  countries   such  as   Burundi,  Rwanda,  

Malawi,  Zimbabwe,  Ghana,  Cote   D'Ivoire,  etc.,   is   also   a  major   foreign   exchange  

earner  as  well  as  plamorm  for  food  security.  Fortunately,  Africa  s+ll  boosts  60%  of  

the  uncul+vated   arable  land   of   the  world.   In   other  words,  large   scale  planta+on  

agriculture  is  s+ll  very  much  a  possibility  in  Africa,  capable  of  turning  round  many  

mono-­‐economies  such  as   those  of  Nigeria,  Angola,  Equatorial  Guinea,  Gabon,  etc,  

if  agriculture  is  taken  as  a  business  beyond  the  subsistence  level.  

Africa  is   also   blessed  with  huge  expanse  of  water  bodies  such  as   lakes  and  

rivers   which   can   be   used   for   irriga+on.   And   the   combina+on   of   appropriate  

fer+lizers,   hybrid-­‐high   yielding   seedlings   and   good   irriga+on   can   transform   the  

agricultural  landscape  of  Africa  to  a  highly  profitable  enterprise.

Investors  are  therefore  encouraged  to  take  due  advantage  of   the  incen+ve  

climate  within  individual  sovereign  states  for  a  meaningful  agricultural  produc+on.  

Real  Estate:    

With   a   fast   growing   popula+on   and   rapid   urbaniza+on,   from   30%   a  

genera+on  ago  to  40%  currently,  the  need  for  the  provision  of  houses  for  the  large  

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popula+on   cannot   be   overemphasized.   From   Nigeria   to   Angola;   Egypt   to  

Equatorial   Guinea;   Algeria   to   South   Africa,   etc.,   the   need   for   the   provision   of  

modern   houses   with   the   appropriate   facili+es   can   hardly   be   underscored.   The  

margin   of  profit  in   the  housing  sector  is   highly  aArac+ve.  Rather  than  keep   their  

money  in  the  banks-­‐-­‐-­‐not  knowing  exactly  what  to  do  with  such  funds  in  the  face  

of  the  challenging  real  estate  sector  in  the  United  States,  investors  can  be  wise  to  

look  at  the  African  real  estate  market.

Healthcare:  

A   healthy   na+on   makes   a   wealthy   na+on   and   a   sick   popula+on   would  

reflect  on   the  produc+vity  of   the   country.  The  World   Bank   es+mates   that  Africa  

loses   as  much   as   $12   billion   to   the  malaria  scourge   on   the  con+nent.  HIV/AIDS,  

polio,  tuberculosis,  stroke  and  other  ailments   are  also  prevalent  in   the  con+nent.  

Amidst   this   scenario,   infant   and   maternal   mortali+es   are   high,   while   life  

expectancy  is  low.  

There   is   a   crying   need   for   the   provision   of   quality   health   care   from   the  

primary  but  par+cularly  at  the  ter+ary   level   in  several  parts  of  Africa  through  the  

provision   of   state-­‐of-­‐the-­‐art   facili+es   such   as   hospitals,   equipment,   skilled  

personnel,   original   good   quality   pharmaceu+cal   products,     among   others.  

Investors  who  therefore  direct  their  aAen+on  to  this  end  of  the  African  con+nent  

would  likely  reap  huge  profits  from  such  decisions.

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Transporta2on:  

Transporta+on   appears   to   have   been   par+cularly   treated   under   general  

infrastructure   provision   but   the  need   for   the  availability   of   waterways,   railways  

and  airways  -­‐  linking  the  various  parts  of  Africa  cannot  be  over  emphasized.  

Power/Energy:  

Currently,  African  development  is   blighted  by   inadequate  power/electricity  

supply-­‐  telling  nega+vely  on  GDP  growth  rate,  industrializa+on  and  other  areas  of  

growth.   Fortunately,   Africa   has   enormous   poten+als   for   the   development   of  

electricity  from  the  majes+c  rivers  such  as  the  Congo,  Limpopo,  Zambezi,  the  Nile,  

Niger,  Senegal,  and  falls  such  as  Victoria  Falls  and  numerous  other  water  resources  

could  be  tapped  for  hydro-­‐electricity.  

Africa   also   has   a   lot   of   oil   and   natural   gas   for   use   as   raw   materials   for  

thermal  plants,  not  to  talk  of  coal  that  can  also  be  used  for  electricity  genera+on.  

From   countries   harboring   the   Sahara   and   Kalahari   deserts   too,   a   lot   of   solar  

energy  could  be  tapped;  so  also  could  be  wind  energy   from  the   liAoral  countries  

bordering  the  seas  and  oceans.  

Doubtless,   the   solu+on   to   Africa’s   power   problem   will   contribute   to   the  

accelerated   growth   of   the   con+nent   as   it   will   form   a   new   plamorm   for   socio-­‐

economic  development  of  the  con+nent.  

Tourism:  

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One  of  the  best  known  industries   in  Africa  is   tourism.  From  South  Africa  to  

Tanzania   to   Kenya,   Egypt,   The   Gambia,   tourism   plays   a   major   part   in   the  

economies  of  these  countries  and  earns  for  Africa  $44  billion  in  2010  alone.  

From  the  flora  and  fauna,  safari  and  animal  and  bird  watching  to  sailing,  the  

features  of  tourism  are  abundant  on  the  African  con+nent.  Africa,  being  the  cradle  

of   man,   also   boasts   some   of   the   oldest   relics   of   ancient   civiliza+on   including  

ancient  ci+es   like  Timbuktu,  pyramids,  carvings,  ar+facts,  ancient  poAery,  among  

others.  Also  of   tourism  value   are   stretches  of   silvery   sand  beaches,  the  sun   and  

the  sea,  unspoiled  and  pris+ne  forests  as  well  as  slave  relics  depic+ng  some  of  the  

darkest  periods  in  human  history  and  of  man’s  inhumanity  to  man.  

Most  of  these  tourism  sites   s+ll  remain  much  underdeveloped  and  cries  for  

modern   day   infrastructure   so   as   to   create   access   to   them   and   to   provide  

hospitality  to  visitors  and  tourists  alike.  

Also   to   be   considered   are   majes+c   waterfalls,   which   can   be   explored   by  

developing  appropriate   spots   around   them  with   a  view   to  making   them   tourist  

aArac+ons.  

Investors  can  therefore  conduct  their  market  surveys   to   iden+fy  areas   they  

can   invest   in.   In   Nigeria,   for   example,   aArac+ve   incen+ves   include   ease   in   the  

provision  of   land  by  state  governments,  tax  holidays,  rebates,  sok  loans  with   long  

grace  periods,  tax  exemp+on  on  tourism  equipment,  provision  of  security.  

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It   has   been   es+mated   that   tourism   is   one   of   the   industries   capable   of  

crea+ng   very   quick   employment   in   huge   numbers   from   the   tour   guard   to   the  

driver   of   the   safari,   to   the   tour   operator,   to   sellers   of   souvenirs,   the   hotel  

proprietors   and  workers,  entertainers-­‐-­‐-­‐among  the  many  mul+-­‐faceted  mul+plier  

jobs  tourism  is  capable  of  crea+ng.  

Telecommunica2on:  

Perhaps,   one   of   the   fastest   growth   industries   in   Africa   is  

telecommunica+ons,  par+cularly  mobile  telephone  and   internet  services.  Mobile  

phone   is  revolu+onizing  communica+on  and  produc+vity  on  the  con+nent-­‐-­‐-­‐from  

urban  centers  to  rural  hinterlands.

Currently,  more  than  600  million  Africans  have  mobile  hand  sets  and  about  

10%   has   access   to   the   internet.   In   Nigeria,   the   number   of   telephone   owners    

jumped   from   a   mere   400,000   (mainly   landlines)   in   2000   to   84   million   people  

today.  Importantly,  mobile  telephone  is  used  not  only  for  communica+on  but  also  

for   other   produc+ve  purposes   such   as   business   tool,  crop   pricing,  alert  on   bank  

accounts,  etc.  It   is  equally   used  for  fer+lizer  distribu+on   to    farmers   through   the  

Input  Voucher  and  Electronic  Wallet  Fer+lizer  Programme  in  Nigeria

There  are  s+ll   vast  opportuni+es   for   investors   in   this   field  especially   in   the  

provision   of   cheap   but   quality   internet   services   as   well   as   the   provision   of  

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hardwares   such   as   mobile   phone   accessories-­‐-­‐-­‐recharge   cards,   and   mobile  

networks.  

On   this   note,   I  wish   the  mee+ng  a  successful  outcome   and   thank   you   for  

your  kind  aAen+on.  

Consulate-­‐General  ofNigeria,  Atlanta,June  7,  2012

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