Challenges Facing African Businesses

Africa has the potential to compete in business just as any other nation does in the world. Were a few things taken a bit more seriously, change might easily be foreseeable. I believe that with proper planning and attitude to socio-economic engagements, progress can be attained. It is up to each and every policy maker across the continent to be bold enough to step out of traditions of corruption and lead with a sense of direction.

For any business to start or operate smoothly, there has to be proper infrastructure in place. It is within established frameworks that activities are easily coordinated. Africa lags behinds in infrastructural development on many fronts. Just to mention a few, roads are often not conducive for effective transportation, a primal necessity for any working economy. Noticeably, South African roads being the much more developed in Africa translate to a better business environment as compared to the rest of Africa. Now that we mention South Africa another point of discussion comes forth. Insecurity. Crime and political instability discourage even local entrepreneurs let alone foreign investment. Electricity supply is simply unreliable in most countries and power generators just don't answer this big question. Railway systems are just sometimes inadequate or underutilized. Countries that might have the rails in place then have few or under serviced cars to run on these tracks. Given that the South African railway network has seen a major revamp due to its hosting of the World Cup hosting of 2010, I am keen to see if the region sees the evident development queue and takes the advantage of developing infrastructure even further. Investment in IT has certainly seen its brighter side in most African countries but more needs to be done. In order for Africa to establish its place in the world map of markets, efficiency has to be guaranteed in the IT sector since this is becoming the backbone of any developing market. Services industries, which Africa has a very huge potential of developing, depends heavily on how good IT infrastructure is so investment here should be a given.

I believe skilled labour exists in most countries in Africa but it is also worth noting that the most skilled would rather seek opportunities abroad rather than sticking it out where they got it all. Ways should be devised to keep talent interested.

Corruption I can not emphasise enough. Corrupt politics often means that before a business holds ground, there has to be some form of collusion that has to be made with the responsible bureaucrats. Maybe the tradition will die down with time and as leadership is passed on over the years but for the two decades I have observed history, corruption never diluted in Kenya. It may have changed form and disguise to become more evolved as a malaria parasite does.   

 

Unlike most developed countries where banks play a huge role in advancing credit facilities to the business community, banks tend to be very wary of lending out in Africa even despite minimum lending requirements that often exist. Banks would rather pay fines for withholding credit than risk lending to what they consider highly risky ventures. Without access to funds, business growth and development is therefore very much constrained and this, is said to be the number one of the hindrances to new business start ups. A study conducted amongst entrepreneurs in Nigeria found that 72% of entrepreneurs studied considered lack of funds as the number one constraint in developing their business (Mambula 2002). According to Honohan and Beck 2007, about 68 percent African firms finance a significant percentage of their investment with internal funds.

There is very limited government support for businesses in Africa than is the case in developed countries. Most developed countries support local industries actively. Amongst these include research development, export protection and promotion, subsidies, training and education, well coordinated patent protection policies and direct funding. African leadership should borrow a leaf or even two from developed countries because there clearly lacks policy coherence in most African governments. There should be a sense of nationalism and if it would serve to improve Africa's place in the world markets, why not be aggressive about promoting your own? Bretton Woods institutions might not support individual efforts to find a place in world markets but how has the idea of 'free trade' helped Africa? Regions struggle to integrate even when only a border separates them.  

African companies are very gradual in effecting change in the way they operate and are therefore very easily phased out by the more adaptable and well-established multi-nationals when they join these markets. Local companies tend to be outdone in their technical know how, quality of production and international marketing but I believe this can be changed if the necessary investment is set aside to develop local industry.