Moving from the ‘why’ of investing in Africa toward the ‘how’ of driving private sector growth

Our 2013 Africa attractiveness survey shows some progress in terms of investor perceptions since our inaugural survey in 2011. The majority of respondents are positive about the progress made in and the outlook for Africa. Africa has also gained ground relative to other global regions: whereas in 2011 it was only ranked ahead of two other regions, this year it was ranked ahead of five other regions: the former Soviet states, Eastern Europe, Western Europe, the Middle East and Central America.

However, the big take away for us from this year’s survey is the stark and enduring perception gap between those respondents who are already doing business in Africa versus those that have not yet invested in the continent. Those with an established business, who understand the real rather than perceived risks of operating in Africa, who have experienced the progress made and see the opportunities for growth, are overwhelmingly positive. Some 86% of these business leaders believe that Africa’s attractiveness as a place to do business will continue to improve, and they rank Africa as the second most attractive regional investment destination in the world after Asia.

In contrast, those with no business presence in Africa are far more negative about Africa’s progress and prospects. Only 47% of these respondents believe Africa’s attractiveness will improve over the next three years, and they rank Africa as the least attractiveness investment destination in the world – many of these potential investors continue to base their perceptions on an image of Africa fixed in a time and space 20 or 30 years ago.

The fact that there are a number of companies with an already established presence in Africa that are very positive about the continent’s growth prospects and are getting down to business is crucial. These are believers in the Africa growth story, who do not need convincing; they are growing their investments, creating new jobs and focusing on long term, sustainable growth opportunities across the continent.

The numbers also indicate that these companies, many of which have been doing business on the continent for decades, are expanding their operations in Africa, increasing their investments in greenfield projects, reinvesting their local earnings, strengthening local supply chains and enterprise, developing local skills, and generally focusing on long term growth in Africa. These are the believers in the African growth story, who do not need convincing and are already deeply committed to the future of the continent both financially and emotionally.

We believe it is therefore time for a shift of emphasis and mindset away from trying to persuade the sceptics toward promoting the believers; from trying to sell the “why” of investing in Africa toward the “how” of driving successful growth of private enterprise across the continent; from debating the merits of the African growth story toward simply getting down to business.

African governments should engage in more collaborative and productive partnerships with these companies already doing business across the continent. There also needs to be greater focus on creating an enabling environment for doing business by more actively addressing the priorities highlighted in our research this year, namely, implementing anti-bribery and corruption initiatives, accelerating the execution of critical infrastructure projects, addressing customs and border management inefficiencies, and driving the regional trade and integration agenda.

With a critical mass of us pulling in the same direction, and with committed leadership from government, business and civil society, Africa will continue its rise in the decades to come.

Michael Lalor is director of Ernst & Young’s Africa Business Centre. This article was first published in ‘New Africa: From Growth to Jobs’, a publication by Business Action for Africa.