WEST AFRICA: A large market for Spanish companies.
Opportunities and risks. (Part 2/3).
With more than 110 million of inhabitants, a unique currency linked to the euro, a common language and a continuous economic growth in the last years forecasted to be of 7,2% in 2015 according to BCEAO (Central Bank of West African States), UEMOA countries offer endless business opportunities in sectors where Spanish companies are leaders.
However and despite the many arguments in its favour, this African region remains largely unknown in Spain, except for the Canary Islands, which can be an interesting trading and logistic platform to approach these markets. Is no coincidence that “Casa Africa” headquarters is there located, a state public and economic diplomatic instrument that promotes Spanish-African relations in order to strengthen international and economic position of Spain in the so-called black continent (www.casafrica.es).
Africa is now building its future, literally, and UEMOA countries are no exception. Everything is still to be done and governments are launching major development plans at all levels, bringing up excellent opportunities in sectors such as:
- infrastructure: roads, ports, airports, railway and telecommunications,
- energy: hydroelectric plants, dams, renewable energy, power lines,
- agriculture and livestock farming: irrigation, mechanization and modernization,
- processing of raw materials: agricultural, livestock and mining,
- construction: residential areas, commercial, hospitals, schools, etc.,
- services: health, education, banking, distribution, waste management,
- extractive industry: oil and mining (gold, diamonds, bauxite, uranium, etc.),
- fishing: extraction, processing,
- tourism: construction, equipment, hotel management,
- governance: ensuring peace, security and stability in the region.
Among all the big development plans PER II 2012-2016 stands out. The UEMOA Economic Regional Program aims to reduce poverty through projects of economic development that strengthen the effective integration of the eight countries members of the Union (www.uemoa.int).
Management of this and other development programs reveals two major trends to be considered:
- Africa is increasingly getting away from “assisted economy“: what it now needs and actively looks for is, not the help of NGOs that much, but partners with whom to implement the investment projects needed for its growth, strongly encouraging public-private partnerships.
- Africa is actively diversifying its funding sources and its business partners. Besides traditional partners such as the IMF, WB, ADB, EU (11th EDF for ACP Countries 2014-2020), USA, and France in the case of francophone countries, UEMOA is attracting funds and investments from other regions, with China leading the way. Spanish companies should definitely take advantage of this climate of openness and diversification to penetrate those markets.
There´s no doubt that Africa is on the rise and offers great opportunities, but there are also risks.
- Poverty index remains very high and security problems still persist. In fact, four UEMOA countries are among the twenty poorest countries in the world according to the IMF and Sahel countries are lately suffering the ravages of terrorism and religious extremism. However, overall sociopolitical instability has fallen sharply and continued GDP growth in recent years has reduced poverty almost down to the level of other emerging regions. Growth potential is enormous indeed.
- UEMOA countries are not well positioned in terms of ease of doing business, but are immersed in a strong improvement process in order to attract more foreign investment. The World Bank´s Doing Business 2015 report reveals that four of the ten countries that have the most improved its business climate belong to the UEMOA. The trend is, therefore, positive and promising.
- Regarding corruption, even though governments and institutions reject it publicly, tolerance towards it still persists. It is recommended to spend the time needed to understand the culture of the country, so as to be able to distinguish the real nature of certain customs that borders on corruption but rather respond to the “obligation” to redistribute wealth and exchange favors with the members of the entourage. The thin red line is invisible sometimes. In any case, it is recommended to avoid taking any shortcuts; finding reliable partners and customers takes time and slows the results down, but it certainly strengthens business in the long-term.
- Finally, it is important to stress the massive weight of informal sector in these economies. The absence of official data makes the analysis and appraisal of African markets difficult, however, this sector should not be dismissed: in fact, it is not only formed by street vendors, but also by companies not paying taxes but quite structured and with up to a dozen employees. As will be seen later, one of the essential guidelines to enter African markets is going there to take the pulse and understand how they really work and access the information and opportunities that do not appear in any generic study.
And now, which are the guidelines to successfully enter those markets? … Very soon Part 3/3. Keep posted!by