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Africa is the place to be for cross-border business opportunities, but it can be costly

This post was written by Bra Willy, our founder and CEO.

 

Prelude

With this post, I am hoping that I shall add a voice to the growing optimism about my beloved continent, and also to the urgency with which a positive cross-border business environment must be enabled by policy makers – at least by the top 10 African economies in the achievement of the aspirations espoused in the African Union’s Agenda 20163, if Africa is to be firmly on a path to sustainable success.

I want to declare upfront that I am an Afro-optimist, and the bias clearly comes through in the chosen approach used in writing this post. I am also not an expert on the topic of African cross-border trade relations. As a result, I quote and cite sources, and use my personal experience where relevant.

 

Opportunities for business in Africa abound

Africa is undoubtedly the place to be for business, now more than ever. 4 stats speak for themselves about this beautiful continent:

in the world. What the stats above simply point to is that there is a sustainable market, with increasing purchasing power, and these (prospective) consumers are accessible through mobile technology.

 

Africa’s stigma continues, regardless

The gloomy perception (sometime based on reality) that Africa has come to be known for – that of famine, disunity, political instability and corruption, continues despite the undisputable stats above.

Kingsley Chiedu Moghalu asks a searching question whether the oft-quoted Economist’s phrase – Africa is Rising – is indeed true, yet. Read more about his views Read more about his views here.

 

Silicon Savannah has not escaped the ire of the doomsayers either

To make the point, I am publishing this post while in Kenya, and not far from the Westgate Mall. Does this all add up, depending on your predisposition?

When I Google “Kenya” right this minute (8 July 2015 | 5:45, GMT+1), I get these results:

<img src="eNitiate_Kenya_Google_Search_Results_9_July_2015_5_44_GMT+1.png" alt="eNitiate | Kenya Google Search Results | 9 July 2015, 5:44 GMT+1”>
Why am I in Kenya at this seemingly volatile time? Well, anyone who pays attention to business opportunities and trends in Africa will tell you that this country of 41 million citizens – the hub of East African trade – is going places economically, and fast. The country’s current GDP growth averages 5%, and you can compare that to the global growth that hovers around 3.5%.

By the way, Kenya is not called Silicon Savannah by mistake. Read this CNBC Africa article for proof that she earned it, and continues to build on that solid foundation.

You can also read Victor Kgomoeswana’s book “Africa is open for business

 

Africa needs to make it easier to do cross-border business and tap into her own talent

While I dislike “the Africa is a dark continent” stigma intensely, I worry that we – as Africans – are fueling it in one respect.

Despite the glowing stats that I shared above, Africa needs to get her act together by way of inter-national trade policies and practices that will reduce cost of doing business within the continent. This has to happen urgently to allow entrepreneurs – and passionate Africans – like myself to do more business within the wider continent, thereby contribute in the creation of job opportunities for many other Africans who are typically younger and are currently battling with high unemployment.

Here are 2 personal examples. As a South African, My travels to Kenya have thus far been less painful, because I only need a valid passport and a yellow fever certificate for my 12-hour round trips. But I feel for my fellow Kenyans who need a South African visa to travel in the opposite direction. I felt the pain of applying for a Nigerian visa and the accompanying ever-changing rules each of the numerous times I visited Africa’s most populous nation’s High Commission in Johannesburg during the application process in 2013. Given that my visa was granted for only 3 months, the thought of another painful application process in 2016 for my next trip to Lagos is daunting, and my lead to cancellation of that trip. It is worth mentioning that I have a 10-year American visa that is only expiring in early 2016.

On the issue of African talent. Young Kenyans leave the country – and the continent – every year to study and seek job opportunities abroad.  This cohort has been accorded a special name – the Summer Bunnies. Why does this talent – a word not loosely used – not move freely and find opportunity within the continent? Why is it easier for them to seek the same opportunities in other continents?

 

Something can be done to minimise the cost of doing cross-border business within Africa

My current trip to Kenya, the umpteenth since 2011, highlights the cost burden of cross-border business within Africa.

As a start, the published rate of exchange between ZAR and KSh at the time of publishing this post is:

<img src="eNitiate_Google_ZAR_KSh_Exchange_Rate_9_July_2015_19_08_GMT+1.png" alt="eNitiate | Google | ZAR/KSh | Exchange Rate| 9 July 2015 | 19:08, GMT+1”>

When I arrived in Nairobi a few days ago I used Uber to get to my hotel – and experienced the same efficiency as in Johannesburg – I cannot wait an African invention of this scale. This trip cost me KHs 3,150. With the ZAR rate of exchange conversion, the amount should have come to R391.30. However, my business bank notified me that the charge was R403.95.

I had a business meeting at one of the popular restaurants around Nairobi, and paid KSh 2,310 for meals and drinks. Given the published rate of exchange above,  I was expecting the conversion to ZAR to equal R286.96. However, the actual total amount charged against my business bank account was R297.90.

For both these transactions, the finance charges were close to 4%. This premium may appear low in percentage terms, but it will be close to R1,000 by the time this trip ends! In this era where digital technology is making the world flatter and smaller by breaking geographic and business boundaries; surely inter-national trade policy should be encouraging financial institutions to lower finance costs related to doing cross-border business?

Notice that I am using a simple example above to illustrate the high cost of doing business within the continent, and I am not complicating this by considering many other costs, including cross-border travel, business registrations, and different tax regimes.

The Chairman of the AU, Dr Nkosazana Dlamini-Zuma, decried the lack of open skies for air transport within the continent, which has a huge negative impact on business. To demonstrate how bad some the African nations’ policies are, she made an example that you have to fly out of Africa – mainly to Europe – in order reach other parts of the continent. This is really unfortunate, as it leads to unnecessary costs of travel that businesses may not be able to afford.

 

Africa remains the place to be

Despite challenges pointed out in this post, I am gung-ho about doing business within the broader African continent, and have big intentions in that regard. Kenya is only the beginning.

Do you have thoughts to share in this regard? Please leave your comment in the relevant section below.

 

 

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