The SACCI business confidence index has reached its bottom level in 14 years in July this year. As a result, the South African Institute of Professional Accountants (SAIPA) recommends that South African companies look beyond our boundaries for opportunities that could provide a sustainable improvement to the local economy.
“With Sub-Saharan African economies outstripping the local and many global economies in terms of growth, the result is that many promising opportunities are opening up for doing business in Sub-Saharan Africa in a variety of sectors,” said Dr Thomas Höppli, Economic Research Analyst for SAIPA.
“All we need to do is look beyond our backyard.”
According to Höppli’s report entitled Doing Business in Sub-Saharan Africa, there are challenges to doing business in Sub-Saharan African countries, but the opportunities are also abundant and well worth investigating by companies wishing to grow on the continent.
According to Höppli’s report, many of the challenges to doing business – like bureaucratic red tape, corruption and infrastructure issues such as poor roads and unstable power supplies – are far more apparent to those physically establishing businesses in-country.
“However, another way of tapping into the growth markets in Sub-Saharan Africa – instead of physically establishing a business in-country – is through trade.”
“The high growth in many of these countries, spurred by export activities and related investment, suggests that demand for imported products as well as purchasing power is increasing rapidly and that they could thus be interesting export markets and foreign direct investment destinations.”
“Exporting to begin with may be the wisest entry option for SMEs as setting up a branch in any other country may be beyond their reach,” Höppli added.
However, he takes care to emphasise the fact that trading across borders in Sub-Saharan Africa is not as easy as in other parts of the world.
In the “Trading Across Borders” sub-index of the Ease of Doing Business Index, only five Sub-Saharan countries feature in the top 100 of the 189 economies analysed by the World Bank / IFC (2014). South Africa is ranked 106th.
Also, as he cautions, without a physical presence in a market, marketing becomes even more important in order to make potential clients outside aware of the offerings of the SME.
“To this end, social media may be very useful as well as other digital marketing opportunities, which tend to be comparatively cheaper,” said Höppli. “Also, collaboration with a marketing agency in the identified export markets may help to create demand.”
For SMEs that wish to establish a physical presence in-country, Höppli says it’s vital to study the market thoroughly before venturing into it.
“Businesses should take great care to identify the best markets, considering factors such as market potential, competitor activities and feasibility of doing business.”
To this end, he recommends referring to the World Bank / IFC’s Doing Business reports, which rank almost 200 economies on their ease of doing business and highlight specific challenges in the individual countries. Of the 47 Sub-Saharan countries included in the 2014 index, just eight are ranked among the top 100, while the remaining 39 countries are ranked between 121 and 189.