Currently, Asian and European domestic markets are not enough for their industrial expansion.
They are looking for space and new business opportunities. This situation is also influenced by the global economic crisis and the higher competition between developed countries and emerging countries. However, African countries current situation is very promising for foreign investment. We also found that many foreign businesses in Africa at their startup stage encounter difficulties or fail because they ignore African context. That brings bad words of mouth for doing business in Africa and may discourage future investors. To avoid such loss of development opportunities for Africa, and be able to help foreign investors at the same time we have identified here a great business opportunity to build our company. It doesn’t aim to build lucrative company, but to take an active part to Africa economic and social development and to help foreign investors to make better investment decisions. At the early stage we’ll be doing personal contact services and later on, we’ll provide online platform services.
The first part of the present master’s thesis explains our business concept, the second section describes our business scenario and the systems we will implement; the third part covers our operations.
We conclude that our business is feasible and very good to invest in since the benefits go to several people located into different continents.
1.1. African Continent Overview
Africa is the world’s second largest continent with about 30.2 million km² and the second most populous with more than 1.0 billion people and more than thousand languages. It bounded on the east by Indian Ocean and Red Sea, on the north by Mediterranean Sea, the west by Atlantic Ocean. Africa is separated from Asia by Suez Canal and from Europe by the Strait of Gibraltar. From its northernmost point, Cape Blanc to its southern tip, Cap Agulhas it extends on 8050 km. Its maximum width is about 7560 km from Cape Verde to Ras Hafoun.
Africa’s natural environment is characterized by large rivers which flow to the sea by spectacular waterfalls. Africa straddles the equator and encompasses numerous climate areas;
its northern half is desert, while its central and southern areas contain many vegetation
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patterns. Its highest peak is located at Mount Kilimanjaro area (5895 m Mount Kibo) in Tanzania. Its lowest hollow is located to Lake Assal (153 m below the sea level) in Djibouti.
From the early 7th century’s Africa has been victim of slavery practice; Arab slave trade took about 18 million slaves and the Atlantic slave trade took about 12 million slaves to the New World. Africa has 54 fully recognized sovereign countries, 9 territories and three states with limited recognition, andvarious archipelagoes across five geographic regions.
Figure 1: Map of Africa Source World atlas
Africa holds 90% of World cobalt, 90% of platinum, 50% of gold, 98% of chromium, 70% of tantalite, 64% of manganese and one-third of uranium and more than 30% of World diamond reserves with bauxite and petroleum. In 1884-85 at Berlin Conference, European powers set up the political divisions of Africa by spheres of economic interest that still exist now in Africa, only Ethiopia and Liberia remained independent.
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Figure 2: African Areas under the Colonial Powers in 1913 Source: Wikipedia
By the end of World War II, the colonial territories gradually obtained their freedom. African countries have been frequently hampered by instability, corruption, violence, and authoritarianism. However, nowadays many of them have been able to sustain democratic government and there is an increase of collaboration all over the continent.
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Figure 3: Relationships between African Organizations Source: Wikipedia
1.2. Africa in the World Economy
Although Africa has abundant natural resources, it remains the World’s poorest and the less developed continent. Many causes that may include the spread of deadly diseases, corrupted governments, human rights violations, social instability, high illiteracy, lack of access to foreign capital, tribal and military conflicts, unsuccessful economic liberalization programs spearheaded by foreign institutions, bad domestic government policy, lack of manufacturing and agriculture development can explain that situation. In 2011 World gross domestic product (GDP) grew by an average of 2.4 per cent, against 3.8 per cent in 2010. In the emerging and developing countries, instead, the expansion continued in 2011, slowing only late in the year and into the first six months of 2012. However, rising food and fuel prices caused Africa’s median inflation rate to increase from 5.8% in 2010 to 7.9% in 2011. Africa economic growth fells back from 5% in 2010 to 3.4% in 2011. With the recovery of North African economies and sustained improvement in other regions, growth across the continent is expected to accelerate to 4.5% in 2012 and 4.8% in 2013. If Europe’s economic crisis worsens, it could
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affect Africa through reduce of demand for African exports of goods, services, banks and tourism, reduce of official development assistance, foreign direct investment and a low external resource inflows including remittances from migrant workers. The forecasts for 2012 indicate considerable differences in economic growth among the developed countries. While fairly rapid growth is expected for Australia (3%), the United States (2.4%, up from 1.7% in 2011) and Japan (2%), a contraction is projected for the euro zone (0.3%), with pronounced disparities among the member countries. The other BRICs (Brazil, Russia, India and China) economic growth expanded by around 8% in 2011, are expected to slow down (5.7%) in 2012.
According to the International Money Funds (IMF), Chinese’s economy could become the world’s largest in 2016. 5.4% rate of expansion is forecast for the economies of sub-Saharan Africa, but with considerable disparities across the countries. However, 33% of the top 30 economies that improved the regulatory environment for business the most over the past five years were in sub-Saharan Africa and that Africa’s political progress, which had steadily improved over the past 20 years, mirrors economic growth. Nevertheless, both external and domestic risks are looming and foreign companies often consider investing in these underdeveloped regions as too risky, which is verified in many cases.
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There is an untapped potential for foreign investors especially Asians to invest in profitable projects in Africa and for African countries to derive benefits from Asian foreign direct investment, which offers also a great potential for furthering cooperation between the two regions. But, when it comes for foreigners, especially Asians to do business in Africa, most of time they encounter many difficulties because the environment is totally different from their ones. In Africa economic environment, foreign businesses face the pressure from the culture gap, the even-changed economic environment and high competition.
Most of time there is no dedicated organization which can take care of their specific problems and they have to spend time and resources to try to correct and adjust their business model in vain. The external environment makes running business in Africa more difficult for the foreseen future. They need to reinvent their business model or to work hard to adapt their business strategy to the local environment; they need also to find the right partners for implementing well their business. Foreign investors by reviewing their strategy or reinventing their business model to Africa context can reduce their operation cost and bring back to their company higher profit and Africa development. We found here a great opportunity to serve this demand from foreign businesses and Africa economic sector by building up a company to dedicate our energy and resources with advanced educational background, knowledge of European and Asian culture and way of doing business, and hand-on African market experience. However, we don’t claim to have hand-on the solution at all their problems, we envision with the growth of Asian economy and the new reinvestment of European to create Africa economic growth.