Africa: A continent of opportunities for Mauritian Enterprises

Over the years, Mauritian businessmen are becoming more and more aware of the vast business opportunities available in Africa. With an impressive economic growth of more than 6%, rising middle-class consumer, huge deposits of mineral resources and vast expanse of arable land, Africa’s potential cannot be ignored. No doubt, the rate of return on investment in Africa is higher than in any other developing countries. But business in Africa is not for the fainthearted and investment on the continent cannot be planned in the same way as business in the Western world; it really demands a completely new mindset.

Since the start of this millennium, African countries have been among the fastest-growing economies in the world and this can be partly explained by the progressive macroeconomic reforms undertaken by countries. These reforms have brought in much Foreign Direct Investment (FDI) from developed countries as well as from emerging Asian countries such as China and India.

Although Africa faces lots of challenges, I believe that its long-term economic prospect is still overwhelmingly strong and that the continent will have a comfortable broad-based growth rate. With this trend, there is no doubt that Africa will become an important player on the global eco-nomy and Mauritius is well placed to capitalise on this growth as there are concrete business benefits.

The rise of the African consumer

Africa has the highest growing population in the world and also has the youngest population (McKinsey Report, 2012). Africa is also experiencing a highly unprecedented level of urbanization which is causing major social and demographic changes leading to a boost in domestic demand for consumer goods and this may offer tremendous commercial opportunities to our enterprises.

Mauritian export companies planning to enter or expand their presence on the continent need to concentrate their efforts only on a few selected countries which appear as promising market for their products. Secondly, they need to develop business strategies which will focus on the needs of the customers.

Agriculture with abundant arable land

Agriculture is still Africa’s biggest economic sector, and according to the World Bank report 2013, Growing Africa: Unlocking the Potential of Agribusiness, by 2030, Africa’s agribusinesses will create a trillion-dollar food market. About 60% of the world’s unused arable land is found in Africa (McKinsey Global Institute) and this represents a golden opportunity for our corporate businesses to develop large scale agri-business projects and enjoy the benefits of economies of scale.

Most African countries offer big investment prospects in agriculture; however, it would be advisable for our investors to concentrate on land utilization instead of land ownership which in itself is a very delicate political issue across Africa. Companies may appraise agricultural projects based on leasehold land or engage in joint ventures with local enterprises. For instance, there are still many opportunities in sugar cane and maize plantation where investors can incorporate smallholder farmers in their business model. Africa can also become the food basket for Mauritius, especially for our national household consumption of potatoes and onion. Some of the business opportunities in the agriculture sector include fisheries and aquaculture, sugar, tea, maize and sunflower plantation and processing; organic vegetable and fruits; cotton and jute.

Manufacturing: building on success

The manufacturing sector in Africa is at its growing stage and with a market of about one billion people, the continent has the potential to become a manufacturing success.

Some of the areas where our investors may explore business opportunities include:

       Agribusiness such as processing of maize, sunflower and soybean; fish and sea product process; fruit juices and beverages, special tea manufacture; fertilizer manufacturing.

       Textile and garment; footwear, bags and leather; electronic equipment assembly and other light industry which may qualify for free access to the US market under AGOA.

       Energy and power generation such as joint ventures and consortiums in the field of solar panel and solar water heaters; bioethanol and biofuel.

Service sectors: the promising shores

The business opportunity in the service sector has not been fully explored. In fact, Africa offers a lot of business opportunities in the tourism, ICT, finance & legal services, healthcare and insurance.

Africa has a large untapped potential in the tourism sector, especially with its vast landscape with natural attractions and wildlife ideal for ecotourism destination. Places like Victoria Falls (Zimbabwe), Livingstone (Zambia), the Zanzibar coast, Kenya Natural Park and Swakopmund (Namibia) have huge potential for tourist attractions, and Mauritian hotel groups may explore these possibilities.

With the rapid development happening in Africa, the ICT sector is booming and this represents a huge potential for our enterprises seeking for new business deals in technology related activities (BPO, corporate services and enterprise solution).

Mauritius can also serve as a gateway to Africa as it is ideally situated on the route to Africa where many big vessels pass nearby. This may enable us to develop robust local bunkering service, transhipment and port operation where our companies may invest.

Challenges: dealing with the known unknowns

While writing this article about African opportunities, I took care not to become just a blind optimist advocating for the continent. The ‘Africa Rising’ story may sometimes prove to be just too simplistic, and the African Eldorado adventure may become a nightmare especially for those unprepared investors who may face many disappointment and serious challenges on the continent. I will make no claim that Africa’s challenges are completely behind us. Challenges remain, and some of these difficulties investors may encounter are:

(i)      Volatility of currencies and hyperinflation;

(ii)     High cost of transportation and bad road network;

(iii)    Exorbitant electricity bills and frequent power outages;

(iv)    Poor communication and slow internet connectivity

(v)     Unfriendly business taxation regimes;

(vi)    Lack of business support;

(vii)   Bureaucracy, red tapes and corruption;

(viii)  Controversial business ownership regulations.

Despite these imperfections, companies can still make good profit if they can identify the challenges and resolve them.

Investment incentives for entering the African market

Mauritius has signed Investment Promotion and Protection Agreements (IPPAs) and non-double taxation agreements (DTAs) with many African states which will help enterprises to better manage their risk. Mauritius has also signed bilateral business agreements where we be-nefit from special economic zone in terms of commercial spaces, tax holidays, and single clearance approach. Furthermore, our membership to SADC and COMESA offers further incentives for businesses to invest in these regions.

It would also be advisable for potential investors to get acquainted with the Africa strategies put in place by the government, especially regarding various schemes such as Freight Rebate Scheme, refund of cost of participation in regional trade fairs, etc. Mauritian government has placed the African enthusiasm at the highest levels of its policymaking and as part of its financial support, Mauritius Africa Fund has been recently set up.

Some tips on doing business in Africa

Doing business in Africa can be very tricky and these tips may prove helpful:

       Do proper due diligence, market research and PESTEL analysis;

       Always follow all the regulatory procedures of the host country;

       Find local business partnersas they know the local markets;

       Contract local consultants;

       Attend seminars and cross-border networking groups;

       Understand host country cultural environment;

       Learn and understand the market and do networking;

       Understand local rules and regulations, especially company laws, tax regime and trademark laws;

       Put in place strong governance and internal control system.

We are witnessing a historic flow of FDI toward Africa and taking into consideration the vast business opportunities on the continent, it seems to me that it is the right time for Mauritian enterprises to consider moving to the continent. An early entry into these emerging economies will enable us to take advantage of the local markets and build up our brands which meet the customer preferences.

The vast investment happening in Africa will eventually become one of the most captivating stories of our time. For Mauritian companies who are looking for long-term growth, there is no doubt that it is the right time to invest and build sustainable business in Africa. Mauritius is geographically well located to form part of this growth story and investment in the region will eventually change the business landscape in Mauritius. I believe that the future of Mauritius is right on the shores of the African continent.