There is no one way to do business in Africa. But through exploring both the opportunities and the challenges experienced by companies operating successfully in Africa, a number of key lessons can be unearthed.
Clearly it would be wrong to generalize about a continent of 55 recognized states and over one billion people, and many contributions to this debate, such as ideas of ‘tenacity’ or ‘patience’, could be deemed intangible when devising and implementing a business strategy. However, one prerequisite for success that emerged loud and clear from the roundtable and one that applies across the continent was the critical need to adopt a long term mindset and place sustainability at the core of your investment.
What does it mean to invest sustainably? Sustainable, or ‘social’, investment has moved on from old notions of ‘corporate social responsibility (CSR)’ in which projects outside the core business of the company were undertaken to generate good will amongst host communities. In this regard, it is no wonder that CSR came to be viewed by some as an ‘add-on’ to an investment decision, and something that detracted from the overall profitability of that venture.
Where sustainable investment differs is that it makes good business sense. It encompasses ideas of local employment and local procurement, meaning it must be at the forefront of any investment decision because in many cases it will define, rather than detract from, long term profitability.
It’s not a nice to do, but a need to do. The way to sell it to shareholders is to show that if these things are not done and done effectively, it can impact the business and affect the bottom line. So it’s not simply an additional cost, or a case of philanthropy as CSR might have been viewed in the past, but a necessity, and in fact critical, in order to ensure the required return on investment and profit.”
An increasing number of African countries, it is becoming a matter of compliance to regulation rather than simply a matter of reputation.
More and more, both governments and citizens are demanding that international companies employ local people at all levels, including at the highly technical and most senior management levels. In countries where the required skills are not immediately available to fill such positions, companies will need to invest in relevant education and training programmes – both as an investment into the pipeline for future employees but also to increase capability and capacity generally to support economic diversification.
Since the economic downturn in 2008, the level of local content legislation has risen dramatically on the continent, across all industries. There are 18 different countries in Africa currently reassessing their local content legislation, making it more prescriptive and more detailed.
What was clear from the roundtable, however, was that it is the savvy investor that is not only compliant but proactive when investing sustainably; they understand that developing local skills, advancing infrastructure and increasing the capacity of local suppliers improves the working environment for all, creating a win-win situation.
Making provisions for issues such as providing training to meet skills shortages or infrastructure development are practical requirements to achieve a successful and sustainable project. Make it a cornerstone of your investment approach and embrace it because you need it, not only because you are obliged to do it. In doing so, you align your interests with those of the government and the community, which can be used to your benefit as part of your competitive advantage.
So when devising an investment strategy, you should look at national and local development plans, at which part of the plan suits your business and where you can contribute: converse with the government about how you can leverage core parts of your business that have a development impact.
Evidently there is no magic formula for commercial success in Africa. But listening to the experts assembled at the Invest in Africa roundtable – those who have seen it all and done it all – it is undeniable that if you are planning for long term profitability you must have sustainability at the heart.
By Kehinde Olesin