How to make money in Africa in 10 easy steps
Many Western businesspeople are looking towards the shores of Africa with an intention to invest or build a company there, or, to put it shortly, to make money. Despite their sincere efforts, not all of them succeed. Be it for the vast size of the continent which can make logistics a nightmare, or just for the unfamiliarity of the society and lack of reliable partners, most companies need help before their first real African venture. Therefore, we have simplified the process for you. If you follow these ten simple steps, you can find your goldmine too.
Step 1: Decide why is Africa vital to you. Is it because of the number of people and potential buyers in the continent? Or because you want to export something missing on some of the underdeveloped local markets? Or do you want to participate in government tenders and get your share of the pie? It is essential that you understand what you want, as this will shape your strategy.
Step 2: Decide on the region. Where do you want to be active? Is it East Africa? West? South? And why this region? Or do you have a specific country in mind? If in doubt, look at the list of fastest growing economies in Africa. Also take into account the security, political and logistic issues. Will you have to transport your inventory anywhere? Can you move your goods easily? What about the general safety levels and political stability? These are all factors that can contribute to your success or ruin it.
Step 3: Do your research. Is there a proven demand for your services or products in the country or region of your interest? There are many ways you could find out. You can contact the local Chamber of commerce or your embassy in the chosen country. You can contact your acquaintances who are already active in the region to help you. You should read the news. And you should always do a thorough Internet search and read all the advice you can.
Step 4: Decide on your approach. Who will your point of sale be? Do you need to start with local companies? Or big internationals? Or do you dare to work with the government directly? All of these ways are entirely possible. However, they require different strategies. If your eventual contact is a local salesperson, you can do with a short, informal presentation of an attractive product, however, if you want to work with the government, be prepared for lengthy bureaucratic negotiations and lots of formalities and expensive legal agreements.
Step 5: Contact the local partners. Once you have established who your partner will be, try to find their contact information online or through the chambers of commerce or embassies. Be patient, as you often can’t reach many African businesspeople easily and it will usually require some effort on your part to find the right contacts.
Step 6: Visit. There is no point discussing this one. If you want to do business in Africa, you have to spend a lot of time there. In more conservative societies, business is still done face to face. You will also have to earn the local people’s trust before you can participate in an exchange. You will also have to be sure that people you are dealing with are reliable and with proper credit, and this is hard to recognize through emails. Be safe.
Step 7: Find a reliable local partner or relocate one of your people. Things can get tricky in Africa, and you always should keep your eye on the money. This often requires having a full-time agent in your country of choice to control your business, if you don’t have the time to do it in person. Just don’t expect things to run smoothly without you or people you trust are physically in the place. There are too many stories of businesspeople risking their money because of untrustworthy partners. Read more about the challenges.
Step 8: Do a small project to test the waters. Most of the time you will only find out about the problems in your business plan while on the course. Money exchange problems, unreliability, logistic issues, the list goes on and on. Therefore, if you are in a new territory, it always pays off to do a small project first, fixing the bugs and only then move on to a new and bigger one. It’s better to be safe than sorry.
Step 9: Establish an office and run more projects. Once you can be sure that your services run smoothly or your products are safely present on the market, you can establish a permanent office in the country you are working in. That will not only give you more presence and a more straightforward way how to facilitate new business but also having a locally registered company often gives you advantages over being a foreign subject, such as easier administration, more methods of employing people or tax advantages.
Step 10: Expand to other countries. Congratulations, you have survived the high waters of establishing your business in Africa! Only the sky is the limit now. Feel free to look for opportunities in neighboring countries, especially if they share the culture or have significant business ties with your first country of choice.
Do you have any experiences in this field on your own? Please share them below!