Africa is attracting increasing investment from international companies thanks to the continent’s growing middle class, mineral resource discoveries, a rapidly growing population and improving governance. However, doing business in the continent still presents many risks and challenges to investors. Getting it right in Africa’s diverse market of 54 countries with different business cultures is a concern for foreign companies expanding into Africa.
“The most important thing to do when you come to Africa to do business is the same thing you would do if you went to do business in France; you learn French,” says Luis Murguia, senior vice president of ecosystem and channels for SAP in Europe, Middle East and Africa.
SAP is a technology company that builds applications which help companies operate better. SAP is active in 46 countries in Africa.
According to Murguia, international companies expanding into Africa need to understand how business is conducted on the continent.
“Make sure that you recruit local talent [and] bring foreign talent only to do knowledge transfer. Africa needs to be run by Africans the same way that the French like to be run by the French.”
Murguia says companies should also focus on innovation and bring the world’s best technologies and ideas to Africa.
“The beauty of fast growth markets like Africa and Brazil is that they skip the innovation cycle. Make sure you bring here the best of the best because you have a higher chance of adoption here in Africa than you have in Western Europe, for example.”
Despite growing criticism about the Africa rising narrative, Murguia told How we made it in Africa he has “no doubt” that Africa is truly taking off.
According to Murguia, there are three major transformation forces that are making African countries critical economies in the world.
“First is the demand for commodities. With the rise of the middle class there has been increased demand for devices, food and other products and services,” he says, adding that Africa is a “great source of commodities”.
“The second force is the surge of family conglomerates. These local economic groups that started in trading are suddenly diversifying at a time when the second generation of family owners are getting training in the US and Europe and coming back with new ideas on innovation and taking these business across the continent.”
Murguia says e-government initiatives which are being adopted in most African countries will also “have massive impact on the economy”.
“For instances, what happens with a single process like getting a birth certificate. Imagine if in Africa we had 40m people working four extra hours [in a year] because they don’t have to queue to get a birth certificate. That is economic growth happening.”
The opportunities notwithstanding, Murguia says there are certain risks foreign investors are likely to face in Africa.
“The number one risk they will find is Africa’s lack of strong credit system… but what I am seeing now is many financial institutions are adopting the latest technologies in terms of techniques to manage fraud management,” says Murguia. “As financial institutions adopt mobile and other smart technologies, we will see a strengthening of the financial system which will then be the oil that will lubricate the transformation happening in Africa.”