Doing business in Africa
According to the World Economic Forum (WEF), the outlook for growth in Africa is mixed and expected to be lower than the 5% average of the past decade, due to the dip in commodity prices and the economic slowdown in China.
However, some African countries are growing by more than 6% per year and foreign direct investment inflow still increases. Tommy Strydom, acting CEO of Inyatsi Construction, explained how this affects doing business on the continent.
“I agree with the WEF that the different African economies call for all of us to address the accompanying challenges, such as a growing unemployed young population and climate change.
Zambia and Mozambique, two African countries that used to be a backstop for the continent, were hit especially hard by the dip in commodity prices,” he said.
According to him, foreign investors have left and many people in these countries are left with nothing. “People in Mozambique were upskilled, but there is no work for them. The upside is that African needs infrastructure worth at least US$94 billion and if this is handled correctly, 70% of the people who are jobless can be helped, but there are some challenges that must be overcome. Legislation is a problem. In many cases withholding of work permits prevents skilled people from foreign countries working in African countries, which blocks skills transfer,” he added.
Strydom said, another problem is that not all projects tendered are awarded, which means that construction companies spend resources to prepare tenders which never come to fruition.
“Our tender processes are outdated and corruption also makes it difficult for the construction industry to work in Africa. We realise that governments do not have money for all necessary projects, but we have to look at public private partnerships (PPPs) to take Africa forward in developing infrastructure. The private sector has the bulk of the money and the expertise, but African countries do not have the necessary legislation in place,” he said.
According to him, the construction industry can be a major employer in Africa and that is why the WEF Africa meeting that is being held in Durban is so important.
“There we will have all the right people in the world in one place, where we can explain the problems we have in Africa and find proper solutions. If we can agree on how to tackle issues, such as a one-stop border for the SADC countries, we can integrate services in various countries across the continent. I do not know if this can happen, but we can work towards it,” he added.
Strydom said with the Fourth Industrial Revolution building on the Third, evolving at an exponential rather than a linear pace, doing business in Africa will have to change, but the question is whether it will in fact change.
“Africa is far behind the rest of the world in connectivity and this is the most important aspect we need to work on if we want to be part of the Fourth Industrial Revolution. In Africa, technology will advance, but only if the governments and unions allow it to. However, it remains important to look after people even if technology can take over jobs from people. We also need to change the education system to ensure we are ready for technology and overcome the challenges,” he added.
“The Fourth Industrial Revolution will disrupt almost every industry in every country, transforming entire systems of production, management and governance. Doing business in Africa will inevitably also change and we must be ready for it. We can only weather the current economic storm caused by the dip in commodity prices by focusing on economic diversification, revitalised manufacturing and harnessing human innovation,” he said.