The Opportunities & Challenges of Exporting to Africa
When sitting down and planning which areas of the world to target for exports, the continent of Africa doesn’t always come top of the list. In fact, rarely.
Part of that is down to preconceived opinions about the continent. Constant images of war and starvation don’t always make a business believe there are riches to be earned from business dealings on the continent.
However the truth is that the economic situation in Africa is changing:
- Africa hosts the majority of the top ten fastest growing countries in the world.
- The IMF estimates that economic growth in sub-Saharan Africa will be 6.1% in 2014.
- The World Bank believes that most African countries will reach “middle income” (at least US$1000 per person a year) by 2025 if current growth rates continue.
- Nearly half of the labour force in Africa is expected to have some secondary-level education by 2020.
- Africa has around 90m people with household incomes exceeding $5,000 meaning they can direct more than half of their income towards discretionary spending. It’s expected that this figure will reach 128m by 2020.
All of a sudden exporting to Africa looks a much rosier prospects than in the past and already countries such as the US, Brazil, China and India have increased their business dealings with the continent. In 2011 the UK and South African Governments set targets to double bilateral trade by 2015.
How easy is it though to export your goods to Africa?
In many ways it’s pretty much the same as making plans to start exporting goods to any country in the world. You need to start off by doing some research to find out if your product compares to what is currently being supplied in the target market. Find out who your competitors are and what services they offer as well as their pricing schedules. Look at duty structures, freight rates, currency fluctuations and then you will have a better idea of whether you have a marketable product.
There are enormous opportunities in Africa but you have to thoroughly research the market. If your business produces machinery and equipment, chemicals, petroleum products, scientific instruments or foodstuffs then exporting to Africa is a great idea.
It’s important to have an agent who can travel to your target market on a regular basis and has established a network of customers there. This allows you to concentrate on supply and production. At some point though it’s important for you to get on that plane and travel to Africa. It’s important to meet people face-to-face and build proper relationships but make sure that you learn about their culture to avoid any potential embarrassing mistakes.
Some countries such a Nigeria offer both complimentary and fee-based market research tools to help possible exporters from other countries to analyze the market and gain insight into specific sectors.
Other advantages with Africa are lower salaries and rents than in the UK, improving infrastructures and growth in those who have broadband.
There are risks though as in any emerging market. These include crime and corruption. Also in a country such as South Africa you have to respect laws that demand a certain percentage of employees, directors and shareholders are black.
In Gabon there are strict rules that have to be adhered to. These protect the health, safety and environment of Gabon’s citizens from sub standard imported goods. Exporters need to provide a Certificate of Conformity for Customs clearance. Since October 2013 this has been compulsory and certificates can only be obtained from Intertek.
A breaking situation is that of Uganda and its laws against homosexuality. Already Sir Richard Branson has called on businesses to think twice about dealing with the country.
It’s important to break into a growing market as early as possible. Make sure you do your research, employ agents to keep a close eye on your investments and make sure you comply with all the relevant laws in the country you are exporting to and exporting to Africa really can pay dividends.