Out of Africa, always lessons for SA

The many challenges and opportunities that come from doing business in Africa have been studied and documented by international and local stakeholders interested in benefiting from the region’s significant growth opportunities.

I am often puzzled by how some South Africans react when this topic of doing business in Africa comes up. Typically, two groups emerge.

One becomes completely engaged as its members are expanding into the rest of Africa or plan to.

The second group becomes completely disengaged as its members have no plans to “go into Africa” and are often surprised that I give talks to South African business audiences on doing business in Africa, as this apparently would alienate executives and entrepreneurs not interested in expanding into the region.

Both groups are fundamentally flawed in their mindset. All insights on doing business in Africa are based on having reviewed the African region as a whole, South Africa included. So the insights are as relevant to businesses in South Africa as they are to those anywhere else in Africa.

Until the data on Africa excludes South Africa, we cannot afford to discard the insights on the challenges and opportunities of doing business in Africa.

It is no secret that South Africans do not typically see themselves as part of Africa. In everyday conversation, Africa is taken to mean the rest of Africa.

The danger of bringing this mentality into the business context is that it prevents us from proactively learning about challenges and opportunities that come with doing business in a region that we are also a part of.

Indeed, South Africa’s is a far more advanced economy than those in the rest of Africa, and each African country has different merits. But if we start accepting some of the common factors as relevant to us we will soon realise there is much to learn.

For example, one key enabler for doing business successfully in Africa is the ability of your business to become entrenched in local communities. This is true for many emerging markets – the regional differences come out only in terms of the way a business becomes locally entrenched.

In Africa, for example, this means investing in building a local team or finding a local partner. Time and again, multinational companies have failed in Africa because they did not localise their business models.

If South African business leaders realised that this insight was also applicable to their success they would be focusing on localisation, instead of trying to succeed without being entrenched in local communities. We tend to understand the importance of this when we do business in parts of South Africa far from the cities.

 Business leaders understand that they need to collaborate with local leaders and involve members of the community in the running of their businesses.

For some reason, we discard this insight in the cities, choosing to lead them in a completely different manner as if our cities are exempt from the way the rest of South Africa or Africa operates.

Another example is the regulatory environment. Regulatory complexity is one of the main challenges in doing business in Africa. This is consistently a barrier for local and foreign businesses and investors. Many African economies are investing in making their regulatory environments less complicated.

Regions such as West and East Africa have made notable strides in the past couple of years, positioning themselves as gateways into Africa, instead of that privilege being held solely by South Africa previously.

According to the World Bank’s Doing Business Report for 2016, South Africa ranked 73 globally, down five places since last year.

In sub-Saharan Africa, this set South Africa back by one spot to fourth place. Other African countries made significant rankings gains, with five of them being in the top 10 improvers globally.

If we do not invest in improving the ease of doing business in South Africa, we face the threat of continuing to deteriorate in global rankings.

It is true that each African economy is unique, but that is no reason not to learn from the insights of doing business in Africa.

Last week, South Africa regained its position as Africa’s biggest economy, a boost for currently low national business confidence.

But we South Africans must set aside our pride and focus on what we can learn about doing business in Africa, South Africa included.

This article was first published in the Business Times on 21 August 2016

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