Starting business in Sub-Saharan Africa
June 9, 2021
Five things you need to know before starting your business in Sub-Saharan Africa
Five things you need to know before starting your business in Sub-Saharan Africa
Black Africa seldom leaves foreigners indifferent, either you love it or you hate it, it goes from apprehension to attractiveness, from refrain to call for action and investment, with sometimes mixed feelings of fear and fascination and trust is a long way to build.
This huge continent with its high potential in natural resources and fast growing population is now facing important human, economic and political challenges. Potential investors targeting countries such as : Congo, Nigeria, Kenya, Ethiopia or South-Africa may be refrained from investing in reason of social unrest, political or economic instability and the sharp slow down of the global economy (namely the drop of the oil price) also directly impacts these emerging economies (all of them not developing at the same pace).
Tanzania enjoying more local stability is becoming the third economy of black Africa and the most important economy in East Africa, namely thanks to its new logistical facilities and International Container Terminal Services in Dar Es Salaam (China funded).
Many multinationals and some medium-sized companies have been exploiting natural resources for decades for profitability and have been contributing in many rural development projects. Although the continent is offering important business opportunities and sees the taking off of Islamic finance south of the Sahara and some other development banks, the African markets still need better regulation and secured transactions.
As the conduct of international business closely intermingles with cultural awareness, a lack of awareness of African cultural diversity and local identities will deteriorate the quality of the business relationships, make the negotiation processes still longer and eventually more costly. Cultural clash can compromise future discussions or even lead to a failure if we, as foreign investors are not acquainted with African mentality and local customs.
Here are five global cultural aspects, commonly shared in all black Africa, which need to be considered before entering the business arena on the continent:
1) The desire to reclaim their resources, empower national companies and employ local staff to develop their economy.
Massive numbers of diaspora Africans want to go back to work in Africa and employers are more looking within the region for home grown talents, partly explained by the improvement of tertiary education.
Some countries also seek to reduce their trade balance and their energy dependance such as Nigeria, for instance, which is building a new oil refinery with the aim, in the medium term, to reduce its re-imports of its own oil production once refined.
These elements combined with more senior roles being replaced with locals in part because expats are a big cost for the companies lead to some "Africa is no.1" mentality, self-sufficient attitude with amazing corporate success stories as fast as dizzy.
The desire to develop rapidly and grow more independent from external know-how influences their attitude towards foreigners, which is also still linked to the colonial history of each country. The today's African elite has either been highly educated in the best universities out of Africa or is tremendously rich and powerful, or both.
African economy is closely interconnected with foreign companies leveraging funds, bringing their expertise and experience that these countries still lack in many sectors of the economy. Unfortunately, rampant corruption, the absence of functioning public institutions, the need of more modern infrastructures, internal conflicts of all sorts and the still low enrollment rate of the lower social classes (and poverty of the major population) undermine if not compromise the efforts made to develop their country.
Different business routes are opening up in emerging economies in Africa and Brexit will also redefine business maps on the continent. A few African countries are opening new paths to negotiation with their foreign partners with the desire to free themselves from the very long lasting Western domination.
2) Time management: time is plentiful, "time is money" in the African way. How their vision of time to the present conditions discussions in business.
Famous Anglo-Saxon slogan "time is money", synonym of need to be efficient and make the most of your time which is regarded as scarce. Losing time may let you lose money or miss a business opportunity. The focus is to reach your target in the most possible direct way by focussing on an action plan and not diverting from it too much.
Time is plentiful
"Time is money" in the African way can be understood the other way round: time is plentiful and is part of the negotiation process, rushing through it is most probably a source of failure. They have time on their side, time to discuss and build relationship. Most of the time they are less in a hurry to sign a contract than their foreign suppliers.
Their natural resources are not stored in a cost effective warehouse but well to be extracted from their soil, which they own.
Tomorrow is another issue and they globally prefer stick to present time which inevitably slows down the negotiation process. Although African top executives are well aware of the needs and want to plan for the future, the urgent and the important are confused in our mutual calendars: urgent for whom and important for whom?
Commissioned people who are expected to speed up the negotiation process through their entry to influential people often cost a lot and do not necessarily speed up the process. Executives in charge of the operations may also lack, if not technical skills, management experience.
Time as a strategic advantage
For some contractors, arriving very late, delaying negotiations in final phase or postponing the signature of the contract are common attitudes which can be regarded as a sign of power from the Chief Executive Officer (often the case in Nigeria).
Time is used as a strategic advantage and priorities on the agenda are not the same on each side of the table.
3) Socialising to build trust, mutual respect to weave long lasting business relationships, fixing the right boundaries on the workplace.
Negotiation is based on the quality of relationships, so take time to build relationship before, during and after the meetings and create trust.
Showing a sincere interest in the social and economic life of the African partner ' s country as well as for one's traditions are appreciated. Far from being regarded as a waste of time it is a preliminary to establish a business relationship in respect for their business customs. Enquiring globally about the family is usually well admitted when discussing face to face. Some business meetings can take place late in the evening, even at night, for more discretion.
4) The notion of tribes, the belonging to a clan, the extended family or the group culture and individualism versus collectivism in today's Africa.
Today the African territory is shared between hundreds of tribes, many live in peaceful agreement with other tribes, others are in constant rebellion or maintain fragile stability over the land.
Some big tribes supersede the notion of nation because they settled much earlier on territories (over different countries) before the maps setting the current boundaries between countries were drawn. Nowadays, most tribes still share a common language, local customs and traditions which have been transmitted orally from one generation to another by families, but also through the arts or commerce.
They globally concentrate in particular geographical areas and they also share common values but not obligatory a common religion. They offer as much diversity as contrasts.
The members of a same tribe will share a strong sense of the community, they will recognise each other and the belonging to a clan or a village affects their relationships with people from other clans.
The advantage given to the members of the clan also influences their business relationships. Past events and the reputation that a particular tribe built over time are so deeply rooted in the common memory that it can still nowadays influence positively or negatively their relationships with members of other clans, often no matter their educational background.
Group culture remains predominant in the majority of the African population with the loss of face and shame as penalty. However high ranked civil servants, members of the governments or successful business people, “the happy few”, are developing individualistic behaviours. Their concerns go for their immediate profit and close family circle and they do no longer care for their community of peers and the common good.
5) The submission to the boss and the chief figure
Inherited from the archetypal figure of the "chief", the clan leader, the boss traditionally represents power and authority. His appointment to this function usually implies respect and submission from his subordinates.
As a matter of fact, he/she is the one referred to take a decision, to find a compromise or settle a dispute because he/she is supposed to know all about the business and the life in the office.
Delegation is not common and relationships usually come before tasks.
Foreign executives may struggle when managing local staff usually which are not acquainted with delegation, talents acquisition, taking on responsibilities, sharing of knowledge, the development of expertise, collaboration and team building.
Still too many local executives lead their teams deeply convinced that their power holds in their knowledge which cannot be questioned by fear of losing face. Over time, as everywhere, education is one key factor for the evolution of mentalities and the development for their economy.
Starting business in Sub-Saharan Africa is complex, it requires global awareness of African cultures and preferably some understanding of the local customs of the target country. Adopt more laid back, respectful, open but cautious attitudes will be necessary to build in time a trustworthy business relationship. Don't miss out the opportunities!
This interactive workshop’s primary goal is to raise your cultural and self-awareness. It is also a space to share your experience of living in Luxembourg.