While on a trip to Africa recently, I visited my 84-year-old grandmother in the countryside. On arrival, I met her answering a call on her mobile phone while gardening.  I was pleasantly surprised to see that mobile phone network has finally reached her in a rural village in West Africa.

It is on record that western investors came late to Africa telecommunication transformation because analysts and bookmakers failed to predict the mobile phone revolution when it started.  For a continent with a population of over one billion and slightly over two million mobile phone subscribers a decade ago, having more than half a billion subscribers today is a remarkable economic achievement.

New approach:

The success story of telecommunication in Africa is mostly driven by large-scale private investments.  According to Public-Private Infrastructure Advisory Facility (PPIAF), Sub Saharan Africa ICT sector has attracted over $60 billion in investment, which translates to 97 projects in 37 countries. To make return on investment quicker, telecom networks in Africa introduced pre-paid services, which resulted in astronomical growth of subscribers across the continent.

The governments of African countries also contributed enormously to the success of the telecommunication investors in their countries. The governments not only deregulated the sector, some provided market entry incentives to lure private investors that have successfully transformed the communication ability of an entire continent.

Regulating the market:

Telecom regulatory bodies across Africa are gradually evolving a stable regulatory system that guarantees sustainable growth and increased foreign direct investment. According to Secretary General of International Telecommunication Union (ITU), Mr Hamadoun Toure, over 45 African countries have good regulatory authorities with stable and predictable policies.

The McKinsey Institute in their 2010 report suggested that telecom regulators and African governments could further drive the growth of the sector by making lower-spectrum bands available, encourage infrastructure sharing, provide rollout incentives and potentially reduce rural telephony license fees.

How to get involved:

Investors that arrived earlier and recent acquisitions dominate telecom markets in Africa.

Nevertheless, there are still growing opportunities for both big and small businesses in rural telephony, recharge card solutions among others.  Companies that are aspiring to explore opportunities in the African telecom market should consider collaborating with a local player in their target market.  There are several opportunities to meet African telecom experts in industry events in Africa or outside the continent.

The opportunities below are spread across countries in the continent.

• SIM Card Accreditation (software and hardware providers)
• Repair and maintenance of telecommunications facilities
• Collocation and co-sharing of infrastructure
• Power management systems
• Alternative energy for cellular sites/services (solar, wind, etc.)
• Vehicle tracking systems
• Satellite navigation systems
• Infrastructure companies – (building/Towers and Masts co-location)
• Call logging solutions
• Recharge card solutions and other value-added services
• ICT/telecoms solutions for telematics and healthcare
• Consultancy and business development services
• Sales and installation of terminal equipment
• Provision and operation of public pay phones among others.

While you are here:

The inaugural Africa Australia Infrastructure Conference will take place on September 3^rd and 4^th 2012 at the Sydney Exhibition and Convention Centre. The Conference will feature ICT & Telecom, Oil & Gas, Transport and Energy. Private sector decision-makers, Government Ministers, Business community and experts from both Australia and Africa are expected at the Conference.

You can register your interest now or get more information here.

To a newcomer to the Africa oil & gas sector, the figures above could be daunting, but in real terms, 19 African countries are currently among significant contributors to the global oil and gas market. New African oil producers such as Ghana are on their way to join the global league of oil & gas exporters.

False Start:

Some past African leaders signed 50 years exploration contracts with international oil companies not considering the long-term economic implications for their countries. These self-styled African leaders favourably preferred getting kickbacks of a few cents per barrel of oil sold by international oil companies; more rewarding than developing infrastructures with the oil proceeds. That is why some oil-producing African countries are still struggling with infrastructure deficit in the very sector that generated most revenue for their economies.

New Direction

According to the McKinsey Global Institute 2010 report, African oil and gas have become important components of the world’s hydrocarbon supply-demand balance. By 2015, 13 percent of global oil production will take place in Africa, compared with nine percent in 1998 — a five percent compound annual growth rate (CAGR). African oil projects have attracted substantial investment thanks to their cost competitiveness compared to those in other regions.

In recent years, new kinds of competitors have entered and grown in Africa, once the domain of the large international oil companies. Smaller independent oil companies (such as Addax, Heritage Oil, and Tullow Oil) have made successful finds in emerging basins. National oil companies from outside Africa, including China (CNPC, CNOOC, Sinopec), Malaysia (Petronas), and Russia (Gazprom) have also aggressively invested in the continent, linking broader infrastructure investments and government-to-government relationships with access to resources.

Business/Investment opportunities:

In the last few decades, Africa’s hydrocarbon industry witnessed a renaissance with major new producing countries. These developments have thrown up tremendous opportunities for investment in the areas of exploration, production, refining and infrastructure in the oil and gas sector

Opportunities in the gas sector include:

• Engineering design and related services
• Fabrication and construction
• Pipe mills, pipe laying and support activities
• Equipment leasing; civil works
• Logistics and haulage
• Financial services
• Hospitality services and legal services

Opportunities in the oil Sector include:

• Petroleum engineering services
• Upstream, midstream, downstream and ancillary projects
• Greenfield projects
• Multilateral & bilateral financing
• Co-funding of studies and research projects
• Equity positions in oil projects
• Strategic stocking facilities
• Joint-ownership participation in oil projects among others

Challenges:

One key challenge ahead of new entrants in Africa’s hydrocarbon industry is to build sustainable enterprises and local capabilities beyond the scope of an individual project or investment.

According to the McKinsey Global Institute, Africa’s oil producers face the same challenges confronting other petroleum rich countries in the world. One of them is maintaining political momentum for the economic reforms necessary to spur more private business development in the sector.

“As well as providing sanctuary to refugees from South Sudan during the many years of conflict, Australia is assisting the fledgling state to deliver basic services such as education, maternal health and sanitation.”

There is a community of 20,000 South Sudanese people in Australia. Rudd said there was considerable potential to develop a commercial relationship between the two countries. South Sudan has vast oil reserves, agricultural and mineral resources and will look to countries with expertise in these areas to help develop the infrastructure required to kickstart global trade.

However, Rudd flagged that continuing violence in the region poses serious challenges to the future of the new nation. “The Australian Government remains deeply concerned at the ongoing serious violence in the border states of Southern Kordofan, including in the Nuba Mountains and Blue Nile. Sudan and South Sudan must redouble their efforts to resolve outstanding matters peacefully by negotiation, not unilateral action.”

Western Australian Federal Minister Gary Gray announced the initiative on behalf of Foreign Affairs Minister Kevin Rudd at the Africa Downunder conference in Perth.

“Australia has more than 100 years of experience in attracting overseas investment to harness our resource potential and promote economic growth. We are committed to sharing this experience with our African friends,” he said. “Sharing our experience can help the countries of Africa harness their natural resource wealth and attract investment for the benefit of all their peoples.”

More than 40 percent of Australian overseas mining projects are in Africa. Worth US$20 billion, the 650 projects represent more than 230 Australian companies across 43 countries and territories in Africa. The announced visits will include study tours, organised in partnership with the Australian mining industry and over 60 Australia Award scholarships focussed on mining governance.

“Australia’s relationship with African countries is being transformed by investment by Australian resources companies,” Gray said. “This investment is building strong people-to-people links, bringing our governments and private sectors closer together, creating new opportunities for trade in goods and services, and making unprecedented contributions to economic growth and development.”

It is, however, important to recognise that Africa is not a single homogenous entity, but rather a collection of 53 countries at different levels of economic, social and political development. This increases the complexity of investing across the region but, at the same time, creates substantial opportunity for those who are willing to make the effort to understand this exciting and dynamic continent.

Africa, in short, is a compelling investment story with a substantial growth trajectory. While there is much one could say in this regard, there are at least 10 compelling reasons to invest in Africa.

1. Improved Macroeconomic Stability
Africa has achieved significantly improved macroeconomic stability over the past 20 years, illustrated by the continent’s collective inflation rate reducing from 22 percent in the 1990s to eight percent in the 2000s, budget deficits reducing from 4.6 percent of GDP to 1.6 percent (the envy of many developed market economies), and government debt as a percentage of GDP reaching 59 percent from 82 percent over the period. External debt, in particular, has declined significantly over the past 10 years to a level that is lower than that of Central and Eastern Europe, and is approaching the levels found in developing Asia. This is allowing African investors to take a longer-term view of the future, illustrated by the recent launch of a 30-year local currency bond in Kenya which was oversubscribed by local institutions – something previously unheard of.

2. Robust Growth in GDP Per Capita and Productivity
Despite strong growth in Africa’s population, and even during the height of the recent financial crisis, Sub-Saharan Africa’s GDP per capita continued to grow, with forecasts for sustainable five percent growth going forward. Indeed, Africa’s real GDP increased by 1.8 percent in 2009, at a time when global GDP declined by -0.5 percent. Importantly, an analysis of the components of GDP growth indicate significantly improved growth in labour force productivity, rising from -0.5 percent in the period 1980-1990 to +2.7 percent during 2000-2008. This is leading to a more dynamic business environment across the continent, illustrated by 1,400 publicly listed companies, more than 100 companies with revenues greater than US$1 billion, and 316 million new mobile phone subscribers since 2000.

3. Favourable Demographics
Africa has the world’s most favourable demographics with a fast expanding labour force, in contrast to the problems faced in many emerging and developed markets. With 500 million people currently in the 15 – 64 age bracket, Africa’s working age population is projected to reach 1.1 billion by 2040 – exceeding that of both China and India.

4. Increasingly Diversified Growth
It is a common misconception, but Africa is not primarily a resources play. While over the last decade economic growth has accelerated in 27 of the continent’s 30 largest economies, this is only partly explained by the commodities boom. During the period 2000-2008 natural resources accounted for just 24 percent of Africa’s growth, followed by wholesale and retail (13 percent), agriculture (12 percent), transport and telecommunications (10 percent) and manufacturing (nine percent). Financial intermediation and tourism, while coming off a low base, continue to grow in excess of eight percent per annum.

[Continued]

Africa’s labour force is a key source of this new generation of consumers. Productivity is expanding, in contrast to what is happening in much of the rest of the world. The continent has more than 500 million people of working age. By 2040, their number is projected to exceed 1.1 billion—more than in China or India—lifting GDP growth. Over the last 20 years, three-quarters of the continent’s increase in GDP per capita came from an expanding workforce, the rest from higher labour productivity. According to a Mckinsey report, Africa’s consumer-facing sectors are growing two to three times faster than those in the OECD countries.

What are the factors empowering African Consumers?

The key factors that have contributed to the growth of new army of consumers in the continent include the African Government’s deliberate strategy to adopt policies designed to energise and open business space across markets. Many African countries have started privatising state-owned utilities, reduced restrictions on international trade, and strengthened regulatory and legal systems.

The paradigm shift across the continent opened the door for foreign investors to enter business sectors previously crippled by decades of Government monopoly. In the last decade, many African countries privatised their telecommunication/ICT sectors. Since the privatisation, teledensity in Africa has experienced exponential growth delivering over half a billion mobile phone subscribers and thousands of new jobs in less than a decade.

How to connect with consumers

• Arrive early and take a long-term view: If a company is to succeed in Africa, it must discard short-term approach and create a sustainable long-term plan critical to business success in Africa.

• Build relationships with stakeholders: Establishing relationships with key stakeholders is a reality to starting business in Africa. Many Africans are hospitable and receptive to foreigners. Having a good business relationship with key stakeholders is essential to build confidence and mutual understanding

• Find the right local partner:  Finding a local partner is very important in Africa. Both small and multi-national companies aspiring to enter Africa need a reliable local partner to succeed. The local partner brings immediate access to excellent political and business relationships, as well as expertise in managing local labour and regulations

• Market entry research: It is very essential for new entrants into Africa market to get true picture of the destination. Market research is not desktop Google- research but in-depth market intelligence done by experts in the local market. Such market research gives new entrants a clear road map of the business sector indicating opportunities in the sector, business culture, competitive analysis, preferred location and government regulations among others.

• Market risks analysis: New businesses above all must consider market risks as a key factor. The information is expected to define immediate and on-going risks in the nominated business venture. African economies have risks unique to each country, as such, one-shoe fits all approach does not work in the continent. OctoberFirst Consulting can assist you with all of the above.

Africa Austral-Asia Infrastructure Conference 2012

While you are here, we will appreciate if you could view the website of our upcoming international event, Africa Austral-Asia Infrastructure Conference 2012:

The Conference is a 2-day event designed for Austral-Asian investors and developers aspiring to invest in growing infrastructure opportunities in Sub-Saharan Africa.

The Conference will be held in Sydney (venue TBA) on Thursday September 6 and 7^th 2012. Your views and comments on the Conference would be most appreciated.

Image Credit: Hector Conesa / Shutterstock.com

There’s never been a better time. The flow of foreign direct investment into Africa has risen from just $9 billion in 2000 to $62 billion in 2008 (McKinsey), and it is projected to reach $150 billion by 2015 (Ernst & Young). The return on foreign investment is higher in Africa than anywhere else in the developing world. The emergence of a 300 million-strong middle class is a huge opportunity for Australian exporters, according to Amadou Diallo, CEO of Africa and South Asia Pacific for DHL Global Forwarding. The spending power of the consumer class is growing at more than double the rate of annual GDP growth. Africa already has more middle class households than India, and by 2030, Africa’s top 18 cities will have a combined spending power of $1.3 trillion. “You’re starting to see more educated people conscious of the new Africa, conscious of the awakening, conscious that the economies are on the move and therefore creating that consumer demand,” Hull says.

A big opportunity…

Due to the relatively low competition Australian companies face in Africa (compared to Europe or Asia), there is a first-to-market advantage on the continent, and significant partnership opportunities. But significantly, Hull warns businesses should not look to Africa as their primary market. It’s also not a place for new players to test their offerings. “It’s an extension market. A significant extension market.”

Diallo is less measured in his assessment of the opportunity. “Africa’s 300 million middle income earners all need basic goods, healthcare (Australia seems to be very well organised in that area), cars, any appliances people need in their houses, they need to have telecommunication tools.” Beyond that, there are countless opportunities for Australian expertise to assist African countries to develop better governance, health and education policies and facilities, he says.

Most countries are still looking for energy providers, Diallo explains. “We have roughly 700 million people using mobile phones, most of the households in Southern Africa now have TVs, which use a lot of energy.” There is significant unmet demand for renewable energy. While Hull says you can forget entering the fast moving consumer goods (FMCG) or telecommunications markets in Africa (“the mobile telecommunications market as a model is probably one of the most fiercely competitive in the world”), there are plenty of areas in which Australian companies have expertise or products that Africa needs.

Firstly, as Africa develops, governments are catching up in terms of infrastructure development. Therefore, Australian expertise in terms of railways, ports and roads infrastructure and supporting services could be valuable. Secondly, Australia could play a major role in the development of Africa’s agribusiness. All facets of agriculture that improve productivity, efficiency and the dimensions of production are areas where Australia excels and Africa needs assistance, Hull says.

Australian companies are already working in the education services sector, with Monash and Curtin present in Africa and other universities coming through seeking full-fee paying students and longer-term partnership development, Hull says. “It’s a good time to look at universities in Ghana, Nigeria or Tanzania, not just in South Africa.” There are a range of opportunities in the financial services sector for fund management, infrastructure funds and small boutique investment funding. “We’re not talking big banks so much as those smaller professional Australian companies that are in the financial services sector, may have already gone to Hong Kong and should now look to Africa.”

Africa’s wealth of resources is well known and a ripe opportunity for Australians who specialise in mining and resources trading, Diallo says. “We have 88 percent of the world’s platinum, 40 percent of the gold, and to date 10 percent of the oil consumed around the globe comes from Africa.” Australians have proven themselves good at exploiting resources through mining and offering opportunities to local people, he adds. Australia is already well represented in the mining sphere, with 200 companies operating 600 projects across 42 African countries, as of January 2011.

Having said that, starting business in Africa is the same as any other part of the globe. There are surmountable challenges one must overcome to become successful in international business. One of the key challenges new entrants face in Africa include limited supply of reliable market data and the stress of finding a reliable business partner. This article will cover strategic steps that could help businesses find credible business partners in Africa.

Seek expert advice

To get meaningful and strategic advice on how to start business in Africa, new entrants should consider employing the services of an expert with experiential African knowledge. The Africa expert should have the capacity to educate and inform new entrants about potential risks to avoid, understand the regulations that must be complied with and, most importantly, create networking and meeting opportunities with credible business partnership prospects in the local market. It is not hard to find and view information on Africa online, but nothing compares to having the services and guidance of a local expert.

Research

Every business sector has unique challenges when starting out. To make a successful entry into any of the emerging African markets, there is great need for research. The research findings should cover opportunities, operational risks, competitive analysis, and feasibility studies among others. Considering that many African economies do not update market data as quick as obtainable in developed economies, it is important for market research on nominated African market to be conducted by a local research firm operating in the environment. The choice of a local research firm is informed by their capacity to unearth related opportunities, local challenges, business culture, un-written regulations guiding the nominated business sector among others.

Attend international exhibitions and industry events

On getting required research information and advice from an expert, it is very important that new entrants consider making a trip to the desired market. It is not enough to gather desktop research intelligence and start making plans to make the first shipment or sign a business contract by email.

There are annual international exhibitions and industry events for most business sectors in Africa. With the help of a local expert, new entrants should consider an event that will maximise opportunity for networking and meetings with local players and potential partners.

Below are the benefits of industry events:

• Hear firsthand of new opportunities and challenges in a nominated African market from distinguished speakers and panellists.
• Gain insight into the latest internationalisation strategies from other foreign investors and local captains of industry.
• Network with key decision makers and government officials in the country.
• Take away practical tips on your business international growth and local market entry strategies.

In association with Euromonitor International, WTM last year foresaw a boost to African tourism due to the 2010 FIFA World Cup and the ‘Obama Effect’, where a surge in interest in ‘roots tourism’ or visits from Africans living abroad followed the election Barack Obama, the first US president with African heritage.

Other trends the report correctly predicted was the rise of the pop-up hotel, the advent of female-only accommodation and increased demand for pet facilities on airlines and destinations.

The 2010 WTM Global Trends Report will be launched at World Travel Market on November 8.

World Travel Market chairperson Fiona Jeffery said: “The launch of the 2010 World Travel Trends Report will provide the latest insight into the big trends for the year to come making it a must-attend event for the travel and tourism media.”

Concentrating on rural and remote areas, Solar-Gem delivers solar solutions to schools, homes, churches, community centres, factories and hospitals. The technology can be installed without technicians, and has multiple applications. Most importantly, a close-to-market manufacturing strategy makes solar technology affordable for governments, energy providers and aid organisations working in the developing world.

After only 12 months in operation, Solar-Gem is turning heads in Australia and beyond, winning trade awards and running extensive trials on the Indian subcontinent. Vaghjiani is an Indian-born, Australian-raised entrepreneur, whose previous work in the Innovation Department at Westpac prepared him well for a venture into innovative technology.

“I wouldn’t give it back for working in a bank,” Vaghjiani says. “I’ve always had a dream of taking a small Aussie company to the world, and that’s what I’m doing, I’m living my dream.”

The dream began “as all good business ideas do”, in a coffee shop with a piece of paper. Vaghjiani and a friend realised that for the 1.6 billion people in the world that live without access to electricity after dark, there was an aching need for energy. The earning potential of a wide open, desperate market wasn’t lost on the entrepreneur, either.

As Vaghjiani explains, once the sun goes down, communities without electricity burn wood or kerosene for light. But both options are costly, release noxious fumes and damage the environment. The World Bank estimates that the developing world burns almost $50 billion worth of kerosene for lighting alone.

“If rural communities have light, they can work a couple of hours later or they can study in the evenings. There’s a social benefit, there’s an education benefit, and these things lead to prosperity over the long term,” Vaghjiani says.

While most new businesses struggle to develop an export market, Solar-Gem has units in more than 10 countries around the world. It has been enormously successful for its short time in business, selling units across Africa, the Pacific and the Middle East.

Vaghjiani attributes this to a strong pull from market. “It’s just about commercialisation. It’s about taking technology to the market. We’ve matched my own contacts in a lot of these regions to the enormous need for the product,” he says. “We’ve aggressively sold something that has enormous potential.”

Finding a new niche

While the need for energy solutions in the developing world is not new, Solar-Gem has found a niche for their durable, affordable solar panels. The systems require no expertise to install, have a range of uses, and can be deployed very quickly, and each panel has a charging and billing system on board.

Vaghjiani explains: “You can actually deploy it and charge people a few dollars at a time for usage. That’s something a whole lot our competitors don’t have.”

Transportable and impact resistant, some of Solar-Gem’s customers have found innovative uses for the products that Vaghjiani himself had not considered. The panels can be used to power water pumps; they could also power mobile charging stations in regions where mobiles are taking off, despite users having nowhere to charge them. Solar-Gem is in early talks with some international relief organisations about using the panels during disaster management.

“Light is a really important aspect of the kind of relief effort you see after the Haiti earthquake or the Chinese earthquake,” Vaghjiani says. “You can take our units, put them up and provide lighting for relief workers and communities during the night.” Solar-Gem has attracted interest from eco-resorts in the Pacific and from overseas armies for use in remote military locations.