Thoughts on Ernst & Young’s 2nd Africa Attractiveness Survey – part III

Despite the generally upbeat tone of the study E & Y recognizes that there are issues that impede FDI in Africa and prevent the continent from reaching its full economic potential. These issues—these challenges to be overcome represent not only potential stumbling blocks, but also a way forward for companies, investors, policymakers, and development institutions.

 

CHALLENGES STILL TO BE OVERCOME

REGIONAL INTEGRATION

INFERIOR INFRASTRUCTURE

NEGATIVE PERCEPTIONS

 

Regional integration is critical, not only for companies and projects to achieve sufficient scale to make viable investments, but to also eliminate inefficiencies in trade, transport, communications and finance that make it more difficult to do business. If done correctly, regional integration can spread the benefits of FDI to the smaller countries, and the landlocked countries that have not received the attention that has been rightly concentrated on a dozen or so countries.

Infrastructure and regional integration should be seen as goals that feed off each other. Cross-border telecommunications enabling mbanking and capital market harmonization in the East African Community, road and rail projects connecting Kenya, South Sudan and Ethiopia would encourage companies to approach these regions as a single market as attractive as other large emerging markets around the world. At the same time, harmonization of regulations, standards and measurements makes it much easier and less expensive to plan cross-border infrastructure projects.

As discussed in the previous post, improving perceptions of Africa is about businesspeople in Africa telling the story. It’s about focusing on the facts about economic growth, investment returns across a number of industries, the improved political and security environment, and the growth of the African middle class.

SOME FINAL THOUGHTS

The findings in this latest Ernst & Young survey represent Africa moving into the mainstream of global commerce. The sense of mystery is fading and executives are prepared to evaluate African countries alongside other regions of the world. It is a departure from earlier days when Africa was seen as some strange exception whose markets and economies were not even on the map of potential FDI destinations.

Furthermore we should understand that Ernst & Young and the corporations in the survey are very much of the establishment, representative of mainstream corporate thinking. Those that maintain the old view risk losing an important round of global competition. There are advisors with country specific, industry specific, or function specific expertise who can assist with market entry, cultivating relationships and evaluating risk. We should take advantage of these resources and move decisively before the window closes.

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