Despite all the excitement about the Africa Leaders Summit hosted by President Obama last summer, 2014 ended in a smattering of negative headlines for Africa.
Plummeting commodity prices, increasing insecurity in regional hubs (Nigeria and Kenya) and a popular uprising in Burkina Faso all significantly dampened the exuberance of the “Africa rising” narrative. In addition, the humanitarian crisis of the Ebola outbreak also affected investors’ confidence.
The fall in the perceived attractiveness of Africa in 2015, reported in EY’s Africa attractiveness survey, reflects these setbacks, in addition to concerns about political uncertainty, given the elections this year in 10 African countries.
Companies already working in the continent, as well as those looking to explore African opportunities for the first time, should resist the swing of the pundit’s pendulum between “Afro-optimism” and “Afro-apocalypse”. Instead they should take a realistic, medium-term view. Rapid economic growth is neither linear nor smooth, and there will be many detours and bumps on the continent’s road to prosperity.
In making business decisions in African markets, it is best to gain a deep understanding of the broad trends — demographic, socioeconomic, technological and political — shaping specific sub-regions, and combine that with access to the best real time, on-the-ground data available. Thankfully, there are now far more resources available for companies looking to do smart business in the region than there were a decade ago.
Also critical for success is an appreciation of the “soft” along with the more traditional “hard” skills required for doing deals in Africa. Complex financial models will rarely come close to assessing the real cost of regulatory uncertainty and underdeveloped governance systems.
Companies will gain competitive advantage in Africa by integrating directly into commercial and deal teams, people with the ability to manage stakeholders, engage government officials, develop partnerships, and navigate emerging market realities.
This article was first published in EY’s 2015 Africa attractiveness survey. Aubrey Hruby is a long-time advisor to companies and funds investing in African markets, co-author of the forthcoming The Next Africa, and visiting fellow at the Africa Center at the Atlantic Council.