Doing Business in Africa

According to the Overseas Private Investment Corporation (OPIC) and the UN trade agency, UNCTAD, Africa offers the highest return on direct foreign investment in the world, far exceeding all other regions.  While petroleum products are the driving force behind those returns, other sectors offer impressive growth.

One of the fastest growth areas is telecommunications.  From 1999 to 2004, cell phone use in Africa grew at an annual rate of 58%, whereas in Asia, the region with the next highest growth, cell phone use grew at a relatively paltry 35%.

Africa is of increasing strategic interest to the global economy.  The continent is expected to soon provide the US with more petroleum than the Middle East.  The top supplier of oil to China is Angola.  China and India are rapidly increasing their business dealings with Africa.  These new power-houses are often beating out American and European firms.

Africa offers a consumer base of more than 900 million people.  While more than half of Africa is estimated to live on a dollar or less a day, the other half does not, and they are hungry for products and services.  Even among the poor, there are surprising opportunities.  The rapid expansion of telecommunications is a prime example of the premise of C. K. Prahalad’s groundbreaking book, The Fortune at the Bottom of the Pyramid. Incremental profits may be low, but vast numbers of potential consumers can result in high overall profits.

The risks of investing in Africa remain high, just as they are for most emerging markets, but as noted by Kim Jaycox, CEO of Emerging Markets Partnership’s Africa Fund, the largest fund investing in Africa, the perceived risk is much greater than the real risk.  And once the risk goes down, the returns won’t be as good.

For more information on investing in Africa, contact:

International Trade Administration (ITA)
U.S. Department of Commerce
1401 Constitution Ave NW
Washington, DC 20230

1-800 USA TRAD(E)

The Corporate Council on Africa
1100 17th Street, N.W., Suite 1100
Washington, DC 20036
Tel: (202) 835-1115
Fax: (202) 835-1117

The Whitaker Group
1725 I Street, NW, Suite 300
Washington, DC 20006
Tel. 202-349-3781

AGOA – Africa Growth and Opportunities Act – US Government site with trade information and a very helpful resource page.

Mbendi – online information service on business in Africa.

Databank Financial Services Ltd. - investment house and mutual fund managers in Ghana.

Liquid Africa Holding Ltd. – investment and information service for all African markets. – news service with financial information on African markets.


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© Carol Pineau, 2006