Benjamin Birney Law and Nerdonomics

31May/150

Africa, the Business Partner

Doing business in Africa represents an extraordinary opportunity for many North American companies, include small and medium businesses. Although the continent has significant challenges, they are not insurmountable and in many cases present correspondingly impressive business opportunities. Small to medium businesses in the U.S. should wake up to those opportunities and find themselves new markets and new strategic partners.

Africa: Not just a charity case.

Not just a charity case.

Nigeria's recent peaceful transition of power from one civilian party to another presents an opportunity to reflect on what Africa can and should mean for America. President Goodluck Jonathan, who had been in power as President since 2010, conceded defeat to Muhammadu Buhari, formally handing over the office of the Presidency this past Friday, May 29th. What would have been a relatively pedestrian affair in the United States has been widely and rightly lauded as a revolutionary moment for Nigeria, and should stand as an inspiration for other African democracies. Although vast challenges remain for President Buhari – endemic corruption in the public sector, low oil prices, a murky national fuel shortage, and a persistent armed insurgency in the northeast corner of the country – Nigerians have high hopes and high expectations that their nation will improve.

Nigeria, Africa's largest economy and most populous nation, stands for better and for worse as an example for and of its neighborhood. Its status as an exemplar is particularly vivid in the sharp disconnect between its current image in America and its potential value to us as a business environment. Nigeria, in short, has the same brand problem to U.S. businesses that all of Africa has.

Ask other Africans about doing business in Nigeria, and you're likely to get a consistent response: Don't. Nigeria, its neighbors will tell you, is full of wily businessmen and corrupt officials who will cheat and steal from an unsophisticated foreign business partner at every opportunity. Americans in particular will risk violating our country's Federal Foreign Corrupt Practices Act, a strict anti-corruption law that makes a criminal of any person who engages in a variety of corrupt acts overseas (most obviously bribery) to gain any kind of business advantage.

When I talk to Americans about doing business in Africa generally, I hear this narrative echoed with respect to the whole continent. It goes hand in hand with another narrative: that Africa is poor, miserable, uneducated, starving, and backward. This image suggests a response of charity and post-colonial guilt, but not of investment. Who would want to do business in a place where, it is imagined, poverty and corruption are so endemic that the people cannot pay for what they need, and even if they could a foreign business could not hack its way through the jungle of red tape and bribery to deliver it?

This perception grossly misunderstands the nature of today's emerging African economies. There are two counter-factors that should make us view the continent's perceived problems as business opportunities: the size of the potential market and the entrepreneurial spirit that motivates so many African people to achieve wealth and stability.

The African Development Bank (AfDB) estimates that the population of Africa will grow from 1 billion in 2010 to 1.6 billion in 2030. This would account for approximately 19% of the world's population. AfDB also estimates that the region's emerging middle class will grow from 350 million today to 1.1 billion by 2060. The continent's collective GDP was USD $2.5 trillion in 2014 (compare with USD $17.710 for the United States), but is projected to grow at a pace between 4.6% and 5.1% in 2016 and 2017 (compare with 2.4% to 3.2% for the U.S.). Although falling commodity prices have presented serious short-term headwinds in major African commodity exporters, the World Bank notes that permitting currencies to depreciate in response the commodity price shock represents an opportunity to boost trade goods in other sectors. Not only that, overall the continent has a critical shortage of skilled workers in all sectors. Naturally, this represents an opportunity for countries who can export knowledge, expertise, and training.

Qualitatively, the reality on the ground is that there are millions of home-grown entrepreneurs working out ways to solve the problems around them and make money doing it. For instance, as the BBC recently reported, Nigeria boasts a “five to nine” work ethic, a phrase that captures the small businesses that many Nigerians operate after their regular work finishes for the day. And the rapidly increasing accessibility of the internet magnifies this instinct for self-betterment. As it becomes ever easier to see and discuss the positive living conditions in developed nations and compare those to their own conditions, Africans have more incentive and power to lift themselves up to those levels in their home countries. I see this in young Nigerians, disgusted with the corrupt old guard, who are thirsty for change, good governance, and stability. They call themselves “Naija,” and they are legion.

In my own personal experience, every person I have met and talked to from central Africa, virtually without exception, has a plan to make it big in his own business. Some of them have ideas that will make them – and their investors – very wealthy indeed. My favorite example is a central African expatriate in his 60s I met recently who has lived and worked in the public sector in the United States for nearly twenty years. He is a kind and agreeable old gentleman who has earned his doctorate and has a comfortable life in the U.S. – but still dreams of going back to his home country to start a business that will meet a perceived market need and make him wealthy. His dream of private sector glory was so real and important to him that he told me, with great sincerity, that if I could find him some business partners he'd retire from his comfortable public sector job, go back to his country of birth, and run the business himself. Few native-born Americans who have spent twenty years in the public sector have such admirable ambitions or taste for adventure.

This is the Africa that is obscured by our post-colonial view of the continent that Europeans ruined. If we only see a charity case, we miss the opportunity to make everyone wealthier through trade in goods and services. American strategic investors have extraordinary skills, knowledge, and experience that we can bring to the table in deals with Africa, and Africa is ready and eager to receive us. As Nigerian businessman Tony Elumelu recently wrote:

Speaking as an African who is grateful for the lifesaving anti-retrovirals that have saved so many of our people, the vaccines, the emergency food assistance and the debt relief provided to my fellow African citizens, I believe that it is the economic opportunity side of the development coin that will have more catalytic impact in driving development on the African continent.

While American businesses are dozing on the opportunity to make money in partnership with Africans, the rest of the world is seizing it. Africa is awash with Chinese, and to a lesser extent Arabs and Europeans, who are there to do business. One of my favorite Nigerian small business partners is actually owned by a very ethical Dutch woman living in Lagos. There, she helps foreign companies connect with the right sort of Nigerian business partners. In contrast, a number of highly educated (and patriotic) African businesspeople I've spoken to don't think much of the Chinese. They see them as opportunistic investors, eager to build where it suits their interests without investing in training, capacity building, or long term relationships. This presents yet another opportunity for Americans to distinguish themselves by doing just what the Chinese are not: be long term, strategic, private sector partners. There is money to be made in those relationships if we do the job right and treat our business partners fairly and respectfully. Information technology, communications infrastructure, sustainable energy, health care – Africa needs it all, and we know how to do it. You don't have to be a giant multinational corporation to make money in these fields; you just need the courage to try your hand at a new market with new partners.

I am a great believer in transparent self-interest, so here is where I put in a pitch for my own company. We are a boutique international law and business consulting firm in Portland, Maine, and our mission is to help American businesses find and work with worthy counterparts in developing economies. We are in the business of business, not the business of charity – and we are working hard to develop good connections with businesspeople in the most promising African countries. We are a small business, and we love to work with other small and medium businesses. We think that Americans who invest carefully but boldly in Africa will be well rewarded by their efforts.

This is not to sugar-coat the challenges of Africa. The public sectors tend to be corrupt, and the regulatory environment is usually difficult. (Though, frankly, the regulatory environment also tends to be less formally rigorous than in more developed nations, which can be an advantage.) My point, though, is that with the right advice and assistance, we can do business in Africa without sacrificing ethical standards or breaking U.S. law. The old saw that every challenge is an opportunity is nowhere more true, or more magnificent in its breadth, than in Africa.

African Development Bank Group, Briefing Notes for AfDB's Long-Term Strategy (March 2012), available at http://www.afdb.org/fileadmin/uploads/afdb/Documents/Policy-Documents/FINAL%20Briefing%20Note%204%20Africas%20Demographic%20Trends.pdf.

African Development Bank Group, Tracking Africa's Progress in Figures (2014), available at http://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/Tracking_Africa%E2%80%99s_Progress_in_Figures.pdf.

World Bank, Global Economic Prospects (Jan. 2015), available at http://www.worldbank.org/content/dam/Worldbank/GEP/GEP2015a/pdfs/GEP15a_web_full.pdf.

World Bank, Country and region specific forecasts and data (last visited May 31, 2015), http://www.worldbank.org/en/publication/global-economic-prospects/data.

Tony Elumelu, Entrepreneur-Led Development As Model (May 20, 2015), http://tonyelumelufoundation.org/articles/entrepreneur-led-development-model-guest-column-thisday/.

Nkem Ifejika, Nigeria's enterprising five-to-nine work ethic (Feb. 20, 2015), http://www.bbc.com/news/business-31536706.

Bilkisu Labaran, Nigeria at 50: What does Naija mean? (Oct. 1, 2010), http://www.bbc.com/news/world-africa-11447252.