Ten ways that companies can mitigate risk in Africa

6. Invest in workforce development and training

Finding the right workers amid a general skills shortage is a key challenge for companies in Africa. In the majority of sub-Saharan Africa, education levels are relatively low, but they are improving. African universities do not generally produce job-ready employees. The responsibility for skills development lies largely with the firms themselves. Companies therefore have to make substantial investments in their workforce development and training. Many companies in Africa also run the risk of overdependence on expatriate staff. Strategic sourcing of people, the management of a diverse talent pool spread across a large area and the ability to move talent efficiently across the continent, will therefore be critical contributors to success. The selection of new markets will be strongly influenced by the location of workforces with the necessary skills.

7. Contribute to socioeconomic development

There is an increasing demand for businesses in Africa to make a sustainable contribution to socioeconomic development. This is fundamentally about doing “good” business: creating jobs, paying taxes, developing people, making a positive social impact, operating ethically and minimising environmental impact. Those organisations that can manage the increasing public pressure, and can embed an environmental or ethical focus in their culture, value proposition and competitiveness, will be well positioned.

8. Monitor local and global market risks

Many African economies are increasingly integrated into global markets and will be negatively impacted by general malaise in the global economy, as well as more specific incidents, such as commodity price shocks, refinancing of country debt or volatility in financial services. Organisations operating in Africa are going to need to develop very effective control environments that can actively monitor the market risk in the countries and regions where they operate, as well as in other influential economies around the world – including the Eurozone, the US and the increasingly important rapid-growth markets. In addition, the continued access to effective funding for growth will affect the cost of doing business and ease of market entry.

9. Increase the use of technology to spur growth

As Africa steps up its commitment to changing its destiny, technology and innovation will play a key role in assisting the continent to make the leap. The recent success of the telecommunications sector in Africa is a good illustration of how technology will become the touchstone of Africa’s development.

Africa has witnessed a dramatic rise in mobile telephone and internet subscriptions in recent years and there is also increasingly wide access to financial services. Companies should actively use technology in enabling innovation, enhancing business information systems and risk management. Africa’s huge agricultural potential can also be exploited by using innovative tools and technologies that substantially increase productivity. The development of mechanised agriculture in Ethiopia is already playing a critical role in creating jobs in the country.

10. Set and strictly follow moral and ethical principles

Corruption is another factor that is cited as a key risk to doing business in Africa. This is clearly a critical concern. For example, companies subject to stringent anti-corruption legislation in their home countries may find it difficult to operate in countries with a poor reputation for managing corruption. Organisations need to establish their moral or ethical principles early when entering African markets. These principles can guide leadership teams as they make decisions. Leaving decision-making to chance increases the risk of becoming entwined in corrupt practices. A strong control environment will enable businesses to monitor processes and decisions to identify potentially corrupt practices.