Par Fortuné B. Ahoulouma & Fabien Lawson
Africa and especially sub-Saharan countries has a huge economic potential and is considered today as the place to be. Many reasons explain the interest of foreign companies and investors for Africa.
Among these, you have the economic growth, the demographic boom and the digital revolution that enable social, political, economic, energetic transformation.
Despite this interest for Africa, the continent is still terra incognita for most of the international companies, investors or foreign public partners.
Although the principal issues addressed about investments in Africa are appropriate, they always concern:
- Local ownership requirements,
- Regulation,
- Concession and licensing,
- To ensure the existence of international tax agreement between your home country and the country where you invest in
- Enforceability of judgements,
- Warranties,
- Political risk insurance,
- Remittance of profits…
For this reason, in order to help you to secure your investments, we propose you a particular focus, based on our experience, about issues it is essential to handle before and while doing business in sub-Saharan Africa because of their legal impact.
Have a wide approach of risks and challenges
Alongside other emerging countries, challenges and risks faced by investors in Africa are different to those in more developed countries. Several factors contribute to this situation.
First, most of the risks and challenges are due to political instability, corruption, the weakness of institutions (justice, political, administration…) with many consequences on the success of your business (delay, cost…).
Second, access to legal information is not easy in sub-Saharan countries. Therefore, investors and companies face several hurdles to identify and have a clear appreciation of legal risks concerning the business they are looking to invest in.
Third, the informal or unplanned nature of different business activities could be a barrier to the development of successful partnerships.
Therefore, we noticed that legal risks faced by an investor are wider than in other regions of the world, such as in developing markets. So, before investing in Sub-Saharan Africa countries, you need to have a wide definition of risks and challenges because, for instance, those can have an impact on your delay and your business plan.
For all these reasons, it is important to lean on a local partner who will help you to have a good knowledge of the local culture and the local market.
Have a good knowledge of the culture and the market
As developed previously, the legal risks faced by investors and those who want to invest in local businesses are wider and more critical to the progression of deals than is the case on other continents.
When you invest in Africa, you are going to meet people and then you have to deal with their mindset, their way of doing. Indeed, you have to understand the local business landscape from the ground up. By doing this, you could easily set up your legal strategy (terms of contracts, delay, warranties, regulation, partnership, licence agreements…).
Furthermore, an on-the-ground visit is important for a true understanding of the cultural and jurisdictional differences across Africa (Africa is not a country but 54 countries with 54 potential legal systems). Emails, exchanges via Whatsapp or phone calls cannot replace a week meeting people. Doing this can help you, on one hand, to understand the local
business practices and legal nuances and, on another hand to generate a quick success. This could be one of the keys that could help you to deal safely with your local partners, particularly in sub-Saharan Africa.
In addition, the monitoring of emerging trends is important because African markets, alongside other emerging markets, is growing quickly due to the digital revolution and the growing of the Smartphone penetration rate.
As a consequence, a wide range of business opportunities is arising in the tech area: Greentech, Fintech, Healthtech, Edtech, Agro-business… Many activities developed by young entrepreneurs (Tech Start-Ups) arise. These young entrepreneurs target the transformation of the continent by proposing solutions fitting people’s needs and filling the lack of infrastructure. By doing so, they are addressing challenges concerning the entire world particularly: food access, sustainable development, inclusion, energy and health issues.
So, one of the emerging trend investors must keep in mind about Africa is that investing in Africa is a commitment to the transformation of the entire world economic, financial, environmental or energetic models. They need to develop agility and be open-minded, skills necessary to explore new frontiers, not only in term of physical territories but also in terms of perspective and vision.
Finally, investing in Africa means also to change the way you see and imagine the continent. Africa is not only diseases, political and security instability or corruption. Africa is also assets. But before dealing successfully there today, you need to be human-centric, empathic.
