Around the world, many countries have reached a point where development has slowed down. Businesses and investors often look for new opportunities when growth is stagnant. A decade ago, Brazil, Russia, India and China (also known as the BRIC countries) were thought to be the next El Dorado. However, over the years, many investors were disappointed by either the slow growth of their economy or the significant hurdles to entry.
On the other hand, the African continent is blooming. Often acclaimed as having a growth rate among the highest in the world, the second largest continent on the planet comes offers a number of investment opportunities. The drastic increase in the number of middle class families and acres of unused fertile land has been attracting investors from around the world. Giants like Heineken and Coca Cola have already set their mark on the continent and have enjoyed (very) positive ROI.
There are a few shortcuts to get started in Africa the easy way.
The World Bank forecasts Africa’s agribusiness to be worth $1 trillion by 2030. 60% of the world’s uncultivated land is in Africa and the agro-processing sector is set to overtake mining and metals in a near future. Technology has revolutionized the agricultural industry in Africa, which has enabled the few market players to produce on a massive scale at reduced cost.
Investors in Africa often consider Uganda’s agricultural potential to be the best on the continent. With two rainy seasons per year and the temperature almost always constant, Uganda benefits from multiple crop harvest per year. According to the Food and Agriculture Organization of the United Nations, the extremely fertile agricultural land of Uganda can feed 200 million people. Coffee, tea, sugar, livestock, edible oils, cotton, tobacco, plantains, corn, beans, cassava, sweet potatoes, millet, sorghum and groundnuts are among the wide country’s top sellers.
2. Power and Renewable Energy
As the world looks for more climate friendly energy solutions, Africa has become the global test pole. Many companies and investors have started heavily testing green energy models on the continent. An academy to train professionals in the renewable power sector has even been launched in Nigeria, making it the first Sub-Saharan country to possess such a facility. This already tells the story: green energy providers already see Africa as a land of promise for renewable power.
Currently, the demand for energy far exceeds the supply of the African continent, hence, the rush of investors towards this golden mine. A recent study from the World Bank points out that up to 80 percent of households in Africa still use charcoal and firewood as primary energy source for cooking. Furthermore, in Sub-Saharan Africa, only one out of three people have access to electricity.
Investing in the power industry in Africa can prove highly profitable on the long run. The continent allows for various renewable energy sources to choose from, such as solar and hydro power. M-Kopa Solar, Powerhive and StemaCo are among the major players in the solar industry, while Yam Pro Energy produces electricity from crashing waves along the coasts of Ghana.
Africa HR Solutions facilitates the employment process for a number of major companies in the Power-Industry.
African cities are growing fast. A publication by the African Development Bank reveals that from 1950 to today, urban residents have increased from 14 percent to 40 percent. This number is set to reach 50 percent by mid-2030. This migration towards urban areas has seen the transportation systems overwhelmed by demand, with growing frustration due to low availability.
Doing business in Africa, especially in the transportation sector, currently sees hundreds of entrepreneurs earning recurring income. With the arrival of Uber to the African continent, fast thinking investors have grown a loyal customer base by putting cars at the disposal of urban commuters. The convenience, affordability and comfort proposed by the ride hailing company has opened doors for business opportunities in African countries.
Another startup inspired from the success story of Uber’s African expansion is Magic Bus. This startup, founded by four students of the Indiana’s Earlham College, raised $1 million from the Hult Foundation. It’s innovative SMS-based system allows commuters (in Nairobi) to pre-book their bus tickets simply using their mobile phones. With the integration of mobile payment through M-PESA, riders can find out how far a bus is and the exact fare. Currently, Magic Bus is seeking to standardize bus fares for peak and off-peak hours, before attempting an expansion on the continent.
4. Low-Cost Education
Governments owe to their citizens one of the basic human rights: Proper Education. Being one of the fastest growing populations, Africa has an estimated growth rate of 2.5 percent per annum (as of 2017). Due to this, the demand for quality education is booming and African governments can no longer meet the growing demand. With poor funding of government-sponsored schools, the African educational system needs to heavily rely on private business as a support.
There are four major reasons to this explosive demand for quality education on the African continent:
- Good education is the quickest way to escape poverty
In Sub Saharan Africa, school fees consume up to a quarter of a poor family’s income. Africans understand the value of education and more and more parents are making sacrifices in pursuit of a brighter future for their children.
- Better Education is the way towards better job opportunities
With the high unemployment rate on the African continent, good job opportunities get even scarcer. Hence, more and more young Africans seek professional education and vocational training to stand a chance. On the other hand, those already employed are investing in private courses to advance their careers.
- Businesses desperately want to increase their productivity
Many businesses are ready invest in their staff training in an attempt to increase efficiency and maximize productivity. The main problem they face is the lack of proper institutions to deliver the appropriate training.
Year after year, the retail sector is experiencing rapid growth on the African continent, with no signs of slowing down. The rush towards urbanization and the development of payment solutions, such as M-PESA partnering with Paypal, has strongly contributed to this sector’s growth. Consumer differences may vary according to their purchase power and growth rate. Therefore, it is very important to choose the right offer and to right target market. Below is a graph showing the African retail value stages, segmented by country.
Auditing firms KPMG and Deloitte studied countries on the continent known for their strong retail and identified main characteristics to consider when investing in the retail market:
- Ghana: popular shopping centers and highly accommodating business environment
- Nigeria: high urbanization, high growth rate, young population, large market size
- Algeria: high wealth per person, high urbanization, concentrated wealth in urban regions
- Kenya: growth in the middle class, dynamic private sector, strong population
- Morocco: high growth rate, growth in middle class, rise in urbanization
How to Get Started the Smart Way
Let’s face it: taking a step towards a new business venture may be easy for some, while being complicated for others. After choosing where to invest in Africa, you will also need to address key governing laws pertaining to Employment, Payroll, Expat Immigration, Medical Insurance, Tax Compliance and possibly Offshore Services and payments.
Typically, to employ people in a new country, one would require a registered entity to process the employment, payroll and taxes to ensure full compliance. The current alternative which can save you a huge amount of time and money by making your project easier is using a reliable Professional Employer Organization (PEO) service provider such as Africa HR Solutions.
This PEO or employment outsourcing service (also known as Umbrella service) will allow you to get into operations in a minimal amount of time, while ensuring you are fully tax compliant. This is ideal for companies looking to test new markets, or who need a temporary solution while they set themselves up in a new territory. It’s also great for companies who are running a short-term project and need people on the ground.
At Africa HR Solutions, we know that running a business is not an easy task. Hence, we provide you with comprehensive services to choose from (Employment, Payroll, Expat Immigration, Medical Insurance, Tax Compliance and Offshore Services), which are customizable according to your business model. Our network has expanded to over 40 countries across Africa and we are trusted by leading international and local organizations.