Weighing up Africa’s investment potential

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Once seen as the ‘risky’ continent, despite being a viable investment destination for natural resources, Africa’s respectable growth rate and improvements within business environments have made it an attractive destination for foreign direct investment for several key industries.

Boasting a growing fast-consumer goods sector that has attracted attention from various international brands, Africa is also quickly becoming an important import hub for a variety of other industries.

Multinational organisations have managed to gain strong footholds and as a result, increased the number of partnerships with local players to assist them in securing in-depth market knowledge, allowing them to leverage this information for the expansion of operations.

Despite the progress being made across the continent, Africa still poses a number of challenges for current and future investors, especially those trying to enter the marketplace.

One must always keep in mind that a ‘one-size-fits-all’ blanket approach is not the way to go when approaching the African marketplace. By acknowledging that Africa is made up of a collection of diverse countries, each with its own business challenges, rooted in unique cultural, geographical, and sociological thought-processes and differences that should be used to guide and informal business engagements.

Opportunities

Africa is emerging as an investment destination of choice, with burgeoning industries ready for further development.

A recent study by Adams.Africa Advisory details the key sectors that are poised for take-off, helping clients navigate challenges to secure opportunities across the continent.

Africa’s economy has traditionally been rooted in the primary sectors due to its favourable climate conditions and abundance of natural resources. However, the success of its economic development is not restricted to the extractive industries. Other sectors that are showing immense potential include construction, financial services, food, Agri-processing, healthcare, manufacturing, retails and whole – all of which are emerging as important industries, helping to drive development on the continent.

Key sectors that present attractive investment opportunities for investors include agriculture, energy resources, healthcare, telecommunications, and transport infrastructure.

Development priorities vary in scale and by industry across regions and countries. Investors require targeted research, market entry strategies, and feasibility studies in identifying regional and country-specific gaps and opportunities in being better informed on potential investment costs and risks before making in-roads on the continent.

Challenges

The Adams.Africa Advisory unit identified and unpacked the challenges facing clients doing business in Africa, with the most prominent being the ease of doing business and the rigid regulatory environments that are prone to corruption.

Businesses need to familiarise themselves with the legalities of a country to minimise risk and potential susceptibility to corruption, whilst avoiding a ‘one-size-fits-all’ blanket approach.

Other challenges include establishing trustworthy local partnerships, limited market size, lack of access to capital and funding, as well as ineffective IP rights that are not fully compliant or aligned with international protocols.

Inadequate infrastructure continues to be a major obstacle in Africa achieving its true economic potential. In Sub-Saharan Africa, areas of concern include transportation, communication, power, and water infrastructure. Additionally, only 26.5% of Africans have access to the internet, with connectivity further hindered by recurrent power outages and high data costs.

Treating Africa as a single entity continues to be a major setback for many multinationals. To counteract this, businesses need to understand the supply chain movement, market, consumer trends and competitive landscape.

Africa is seen as one of the globe’s fastest growing hubs, presenting opportunities for investors who need to look past the traditional Western view of the continent as a homogenous block.

For investors, detailed research on infrastructure and resources can help in the understanding of the nuances and opportunities each region presents.

To assist investors entering the African marketplace, Adams & Adams through its Adams.Africa Advisory unit offers a comprehensive range of business, economic, political, and legal research services, coupled with up-to-date information and a precise framework for investment, brand expansion and IP protection across Africa’s jurisdictions.

Drawing on Adams.Africa Advisory unit’s professional team, made up of industry experts and market specialists with decades of on-the-ground experience, clients are provided with a diverse range of service offerings, from customised reports to landscape assessments, opportunity assessments, risk assessments, partnership identification and facilitation, and due diligence investigations.


Please email advisory@adams.africa for more information or go to 
https://www.adams.africa/value-added-services/advisory/ to find out more about what services are on offer.

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