South Africa is a country full of opportunity. Vast and incredibly diverse, the country is undoubtedly still scarred by the legacy of apartheid, and social mobility is still highly restricted. The 2013 World Bank Doing Business Report indicates little progress in the ease of starting a business in South Africa over the past year – but it also highlights a sharp increase in international trade in raw materials, perhaps due to investors and entrepreneurs finally cottoning on to the extraordinary abundance of natural resources buried in the Horn of Africa. The increased mobile connectivity of the urban population is starting to oil the wheels of entrepreneurship and trade, too.
In the past, South Africa has produced entrepreneurs in fields as wide-ranging as oil, diamonds, gold, cigarettes, software, hotel chains, the World Wide Web and fashion. Few people know that Paypal, and the world’s first Internet Service Provider, are both South African. Even so, physical and online retailing, and real estate in particular, remain relatively under-explored. So yes, opportunities are everywhere – but they won’t be there for much longer. Now is the time to enter the market. You can begin preparing yourself now by developing a range of location independent digital skill sets.
Southern Africa is endowed with huge amounts of natural and mineral resources, including vast deposits of the nuclear fuel source, uranium, and traditional fossil fuels like coal and natural gas. Mining has taken place in South Africa for centuries – and exporting the results has long formed a substantial chunk of its economy.
And yet – both private and government-funded extraction contracts are up for grabs. The government’s recent promotion of the solar power industry as a means of diversifying its energy sources is a sign that it is open to ideas and new investment. Currently, South Africa as a whole is not quite grasping the extent to which opportunities are available in the energy sector – but someone will, and soon.
The beginning of the urban modernisation process, says Mark Bradford, MD of Jones Lang LaSalle in South Africa, lies in retail and commercial investment in properties. Any increase in such investment prompts better real estate development, which in turn prompts more retail investment, and so on.
South Africa is seen by UK retailers as an excellent market to invest in – 25% see it as the next big growth market, and for 50%, it is already their largest market. This commercial fertility is bolstered even further by the rapid growth of the middle class and the explosion in the use of mobile telecoms. But for many retailers, expansion plans remain just that – plans – and there’s a gap in the market for those wishing to provide 21st century goods and services.
Property prices, particularly in urban areas, have previously exhibited a high level of volatility and seemingly erratic pricing mechanisms, due in part to South Africa’s troubled past and the legacy of apartheid. These days, however, big cities and towns are increasingly open to market restructuring. Often labelled as Africa’s only transparent real estate market, it is ranked as 21st most transparent worldwide, and enjoyed investment of $4.5 billion in 2011-12 – half of which was focused on retailers.
Over the past decade, South African cities have seen an explosion in the quantity (and quality) of guest-houses and boutique hotels, many of which have been set up or refurbished using investment funds from foreign firms. Mainly servicing European tourists and corporate travellers, they have been aided by a 10% surge in foreign visitors and the weakening of the Rand – it is now 20% cheaper than it was to visit South Africa from abroad.
The installation of mobile infrastructure across the country has been absolutely central to South Africa’s economy over the past few years. More often than not, schoolchildren living in one room with their families and with barely enough to eat have a mobile phone, or even a smartphone. The mobile market is now so crucial to the daily operation of small businesses and street markets that ‘airtime’ (mobile credit) is fast becoming an alternative currency.
And what’s the best news? The market is still in its infancy, and still growing. There are few providers in the market and prices are high – what better opportunity to undercut the competition?
South Africa’s state education sector is facing enormous challenges. Whether simply a legacy of geographic racial divisions or not, segregation in schools is still very much present in cities like Johannesburg, and the government education program as a whole is mired in crisis, desperately in need of consistency and a more objective approach.
What is needed? A means of giving the masses of disillusioned youth in the townships opportunities to be proactive. A way of finding positive solutions for those in the difficult, frustrating, demoralising position of being unemployed. An opening up of the business world to a generation of learners ready to prove themselves. Solutions to such a socially embedded problem are not easy to find – but if you’ve got an idea of how to begin, the opportunities are endless.
‘Africa’. ‘Generation Y’. Two phrases that conjure up a host of entirely different images. The first: poverty, famine, dictatorships, corruption, failed states, drought, pirates, poor infrastructure and illiteracy: the favourite ‘problem child’ of mainstream media. The second: the digital age, smartphones, iEverything, virtual workspaces, super-connectivity, entrepreneurialism and the triumph of the young, passionate and smart. Two concepts that apparently have very little to do with each other. How could the perceived thorn in the side of the West, the supposed bottomless pit into which aid is endlessly poured to no avail, be the right destination for the business leaders of the coming decades?
Africa isn’t just one country: it’s 55.
The continent is often treated as an indivisible whole, and subject to absurd generalisations.
Africa is one of the most diverse and culturally differentiated regions on the planet. What many choose to ignore is that the same is true economically speaking. At the World Economic Forum in Cape Town, General Electric Africa CEO Jay Ireland highlighted firms’ and investors’ treatment of Africa as a single country – and the automatic generalisation of highly localised political risks – as the largest factor limiting its potential. This is not to deny the existence of unstable areas and regimes, but to recognise that large swathes of the continent exhibit enormous potential for investors and entrepreneurs alike.
Connectivity is easy
The UN’s Economic Commission for Africa (UNECA) is quick to point out that Africa’s GDP is twice that of India, and it boasts a significantly higher cellphone and internet presence.
The infrastructural spending required to expand and improve telecommunication networks to functioning levels is relatively low, particularly considering the enormous benefits of instantaneous communication and data sharing for business efficiency and quality of service.
Real-time communication allows networks to flourish and facilitates collaboration. Many urbanised areas are awash with smartphones, and social media, particularly Facebook, has a strong following among young people. The 21st century Africa is wired up – and most of the rewards are yet to be reaped.
Networking doesn’t get better than this.
By the year 2020, Africa’s workforce will be larger than Asia’s – in itself a huge business opportunity. What helps Africa to stand out, however, is the connections it has with the rest of the world. Millions upon millions of people living in the developed world are African emigrants with roots in the continent. African-Americans, Franco-Algerians and Hispano-Moroccans number just a few. First- or second-generation emigrants in particular are uniquely placed to take advantage of their increasingly connected networks at home, fostering a strong business environment and increasing the flow of communication between the developed and developing worlds. If you’re in such a position: great. If not: find someone who is.
If we don’t do it, someone else will.
The world is slowly starting to see Africa as an opportunity rather than a problem. Amid shifting perceptions, the big players are homing in on the continent, increasingly willing to support entrepreneurs and investors. In recent years, US exports to Africa have tripled to $21 billion annually, with the US Department of Commerce actively (and belatedly) advancing plans to aid American businesses in establishing themselves in African countries. Chinese state backed investment in African infrastructure and raw materials is extensive, often with ‘no strings attached’, frequently linked to environmental abuses and questionable ethics, and associated with poor regulation in the recipient country.
Existing market leaders across Africa often deliberately reinforce negative perceptions of the countries in which they operate in order to preserve their competitive advantage. At the same time, over half of African governments have passed pro-business regulatory reforms in the past year alone, aiming to distance commerce from the inefficiencies and incompetencies of the state. This is good news – the barriers to entry in African markets may be weaker than they seem, and Generation Y investors or entrepreneurs can increasingly count on institutional support and stronger regulation.
It’s The Forgotten Continent.
At least, that’s how musician-turned-investor Bob Geldof describes it. The untapped potential of sub-saharan Africa in particular is enormous. Perceptions that Africa as a whole has less capacity to innovate than the West is almost certainly misplaced. Innovative products can begin as easily in Africa as anywhere else, and too often ‘escape’ to be patented elsewhere. Under such circumstances, people tend to forget where products originate. Yet the underlying principle of innovation is resourcefulness, the catalyst for which is scarcity, not plenty.
The logic is simple: people in need can usually do more with less. In the fast-paced Generation Y markets of today and tomorrow, constant innovation is critical in staying ahead of the game.
This all adds up to one thing: the time to act is now. Doing business with Africa is a no-brainer, but a more focused approach to the continent as a collection of remarkable countries, not a ‘lost continent’, is a prerequisite. Brazil, Russia, India, China – all have their merits, but when treated independently, dozens of African states have even more.