Africa: a playground for entrepreneurs


by York Zucchi (edited by Pete Guest)

I live and invest in sub-Saharan Africa and I am passionate about its potential, but I am not unrealistic.

African countries are, in many ways, inefficient markets. They often lack transparency and accountability in their institutions. However, they present many opportunities that are simply not as easily available in the saturated and sophisticated markets of Europe.

One of my companies, for example, was in the process of building Africa’s leading healthcare group which allows us to offer much more affordable healthcare – at a fraction of the cost of what it would take to build such a company in the US or Europe.

This is not to say that investments in Africa are not risky: there are a lot of risks that need to be taken into account that perhaps one does not normally think about in a more developed markets.

What is considered “known” about sub-Saharan Africa is usually based on assumptions and headlines. There is substantial confusion between real and the perceived risks – many of the latter are down to cultural differences that can be managed by being aware and sensitive.

Some of these “risks” are also opportunities. I live in South Africa, where the strong need for services and products in a market that is far from saturated creates accessible markets. Unlike the US or the EU, SA does not require fine tuning – a generalisation of course – but rather major steps to cover the needs of the majority.

As for the business climate? In some ways, nothing has really changed in just over a century. Johannesburg, for example, still has a mining town mentality with plenty of cowboy capitalists, scam artists, “Tender-preneur” business proposals and those that abuse positions of power. But the truth, as is often the case, is more complicated and – in my view – far more positive.

While it is true that a lot of scandals, nepotism, corruption and peculiar tender processes happen each day, it is not something that worries me particularly, insofar as it is something I would expect from a young economy where everyone is trying to “grab the gold” and stake their flag while it lasts. Already we are seeing signs that the gold rush is nearing the end. The empowerment initiatives, which were badly implemented but a good idea in theory, are now being tweaked to become fairer and more representative.

There are still a lot of issues, of course, among them poverty, crime and unemployment; as well as a sophisticated infrastructure that is becoming more superficial than real, showing a penchant for grandiose projects of the political elite. The billions spent on a train line to link Johannesburg and Pretoria to the airport could have been far more usefully deployed to build a second rail line to link the ports with the main industrial cities. But there are also good signs: The creation of a special tax haven in SA for international companies wanting to invest across Africa; very efficient and relatively simple tax system; and a rule of law that is far from perfect but on the whole still works.

 

In my experience the risk in SA is no greater than in other countries, provided the sectors and markets are carefully chosen and one has a trusted partner on the ground who knows their way around – but the opportunities and returns are far more substantial than, for example, in Europe and the US. Africa is waking up and is looking for investors who want to make money together with the local people under the umbrella of mutual respect.

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