After decades of being shunned as a risky environment, Africa is now viewed as a hot investment destination. International technology companies such as Google, IBM, Ericsson, Huawei and Samsung have invested in the continent, said to be one of the most rapidly expanding technology markets in the world.
Africa’s technology revolution, expanding middle class, increasing literacy and improving governance is undoubtedly attractive to investors. However, doing business in the continent still comes with “many risks”.
IBM general manager for East Africa Nicholas Nesbitt told How we made it in Africa that investors face security risks, currency risks and political risks that are “outside their control”.
Internally, business executives have to battle decision making at the top of their organisations to ensure they get full backing from their headquarters in the form of time, resources and talent.
“If it is a company that is not Africa focused or doesn’t have Africa friendly or Africa knowledgeable people at the top, they will have a very tough time coming into Africa and being successful [when] the rest of the people in their headquarters do not believe in or understand this Africa thing.”
Nesbitt oversees 10 markets in the East Africa region.
According to Nesbitt, investors should appreciate local customs, adding that “there is a lot of opportunity to be had” if investors understand how each market works. The notion “that the whole of Africa is the same” should not be entertained.
“Another risk is thinking that if it worked in Brazil or India or China, therefore it will work in Africa,” says Nesbitt. “A big one they forget is that in each country in Africa, the citizens tend to think theirs is the best country and they are better than other African countries; they just have a problem with a war or a dictator or a diseases but other than they are better than the rest of Africa.”
Nesbitt explains that technology, a thriving industry in Africa, is an enabler which, when combined with intellect, will help provide solutions to many of Africa’s troubles including education, healthcare and governance.
Sourcing skilled talent
However, human resource shortages need to be fixed through skills exchanges by bringing in more “expatriates who have the right experience and sending more local people abroad”.
Nesbitt notes that technology is changing fast with the half-life of a graduate engineer being just five to seven years, meaning that after five years, 50% of what they have learnt is no longer relevant. Therefore, he says, African countries should rethink stringent rules that make it difficult for multinationals to bring in talent.
“The more we try to run this geography like it’s only ours, the less involved we are with the rest of the world. If people knew they could come [here] and bring their resources, their technology, their investment [and] their people and… create enormous amounts of productivity they would all come.
“The biggest challenge a lot of multinationals have is excessive regulation that makes one environment not as attractive as an investment destination as another. We respect the different regulations but the net result is it makes it more challenging for people to extract profits in a way that they would be able to extract elsewhere.”
The IBM boss explains that despite the challenges and risks, there is “tremendous opportunity” in Africa, adding that it all comes down to how operationally successful people are to be able to generate as much profit as possible.
“I think many of the large companies that come to Africa are led by people who have a great interest in Africa. Their challenges are to make sure they get the right people, the right relationships, the right products, the right solutions on to the continent [and] the right support infrastructure, all to ensure that they can manage the risks that are here.”