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Execs see Africa opportunities, but risks too

FCPA Blog-sponsor AlixPartners teamed with Dentons to survey multinational companies about their current and future business objectives in Africa.

The survey aimed to better understand whether companies perceived Africa to be an attractive investment destination, given the continent’s legacy of corruption and political instability.

Some key findings:

  • Nearly a quarter of companies said they avoid operating in Africa due to concerns over anti-corruption laws.
  • Approximately a third of companies doing business in Africa perceived the market to be as attractive as or more attractive than both Asia and Latin America.
  • Sixty-three percent believe that doing business in Africa requires more emphasis on managing legal and compliance risks than when operating in their home jurisdiction.

The survey was conducted during the fourth quarter of 2012.

Respondents included senior executives who deal with their companies’ compliance and legal issues. They came from companies with annual revenue of $250 million or more, with 73% from companies with revenues of $ 1 billion and above. Industries represented include financial services, insurance, healthcare and life sciences, information technology, and energy, among others. 

Most of the companies surveyed were from the United States.

Increasing the amount of business they do in Africa’s countries prompted calls for more transparent business cultures, increased stability in regulatory processes, and more effective relationships with local counterparties.

Of those companies currently doing business in Africa, 86% believe they are at risk to corruption. Accordingly, 28% of respondents said they’ve ceased doing business in Africa due to corruption concerns.

Still, the survey found that 59% of multinational companies view Africa as strategically important. South Africa was the most attractive country to do business, followed by Egypt, Nigeria, Kenya, and Ghana.

Tighter enforcement by host governments was perceived as the most effective way to reduce corruption risk, followed by deeper knowledge of local business cultures and regulatory practices, and a better understanding of host markets and participants.

Many respondents indicated that they had a limited understanding of the opportunities present in Africa.  According to the survey, Africa’s reputation and negative news reports were often cited as the chief reasons for concerns related to corruption risk. Only 29% of respondents attributed corruption risks to first-hand knowledge, while 65% based these risks on Africa’s reputation.

The complete survey results can be viewed or downloaded Africa: Now Open for Business


Charles Laurence is a Managing Director at AlixPartners, and is based in New York.

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1 Comment

  1. Citing bad publicity and legalities as the headline reason Western business isn't expanding to Africa is misleading. Anyone who has worked on ground realizes, it's not risk that's keeping Western Nationals from expanding in Africa, most companies are well acquainted with risk… It's infrastructure, especially power grids and water works. Africa has yet been able to capitalize on an industrial revolution because of this simple fact. And because of the lack of infrastructure to support an economy, the brightest and able youth of Africa must work abroad to send money home. Several infrastructure projects are underway in several West African countries, but unfortunately the Global Downturn has given them a bumpy ride. What impressed me when I was on ground, was the fact physical labor contractors were imported from Asian countries in order to finish jobs in a timely manner, because of a lack of indigenous man power. This creates a chain reaction. No infrastructure means no factories, no schools, no hospitals, that can support a growing middle income demographic. I live in NYC, often visit Europe and aware how the markets are saturated with African talent. Most of my African friends dream of the day they can work and live in their homelands. I have no doubt once infrastructure is in place, Africa will begin to thrive and truly be open for business.

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