Sunday, March 8, 2009

Business in Africa - the bright spot

Here's something that I'll bet a lot of folks don't know about Africa: taken as a whole it's one of the fastest growing (and still growing) economies in the world. Up until recently economic growth in sub-saharan Africa (including the three countries I'll be visiting on my trip) was expected to grow by between 6% and 7% in 2009 (compared to economic shrinkage in most western countries, including the US). And even though those estimates recently got revised downwards, growth still continues despite historically low prices for many of Africa's mineral and petroleum exports.

The problem with business in Africa has essentially boiled down to three things: Culture, Violence, and Infrastructure.

While each African country is unique and stereotyping is very unfair, generally speaking Africa is still a land of hunters, gatherers, and farmers. There is a lot of history here - Ethiopia has some of the oldest churches in the world, Egypt is considered the birthplace of civilisation, and Morocco has Casablanca, my favorite old movie - but by and large almost all African villages and most of the population is agriculturally based. Business, in the modern sense of commerce, is a relatively new thing, but is really booming in many ways.

Violence is still an unfortunate part of life in too much of Africa. Last year's violence in Kenya, which was (and still is) considered a highly progressive and strong African country, showed just how deep tribal conflicts can go. There are numerous signs of ongoing problems - the arrest warrant for the President of Sudan, the suspicion of foul play in the wreck that took the life of Kenya's prime minister's wife, and the coup in Madagascar (all of which happened just this weekend). But one thing that can really help reduce violence is commerce: as people's standard of living improves they either care less about the divisions of the past or find new ways to deal with them. Plus they don't support things that can reduce that newly found standard of living - which often means their support of any causes that may lead to violence is greatly reduced. We're seeing this in Kenya and Rwanda today, where the tensions between groups of people is still present, but all sides realize that if they don't find a peaceful way to resolve their differences it can cause long-term harm to the standard of living for everyone. This is part of why Kenyans hope their truce-government holds together, and much of why DR Congo allowed Rwandan and Ugandan troops into their country to help extinguish some of the militias that have plagued eastern Congo and hampered their ability to benefit from their rich mineral reserves for decades.

Infrastructure in some countries is advancing rapidly. Here in Kenya the big news is that their first major internet backbone, between Nairobi and Dubai, will be completed this year. Right now almost all internet traffic in the country is handled via satellite connection, which is slow and expensive. Right now I'm downloading a 60MB file. Back home it would take a couple of minutes, tops. Here it's about an hour, and sometimes just stops for no reason. And it's costing me $20/day for that. And only a few hotels even offer internet. Starting this June that should all change - as Kenyan internet gets exponentially faster and exponentially cheaper, we should see an explosion in IT services (and Computer Troubleshooters will be ready!), which should lead to even more business opportunities. Rwanda and Kenya are two countries that have realized the importance of IT infrastructure, and are investing heavily in it.

So despite the economic downturn you can expect business development in certain African countries to grow much faster than the rest of the world for years to come. And I'm happy to say that Computer Troubleshooters is here riding that wave, thanks to some smart Master Franchises in South Africa, Egypt, Kenya, Nigeria, Ghana, Botswana, and Cote d'Ivoire. And interest is increasing - we expect to open in Democratic Republic of Congo, Rwanda, Zambia, Morocco, Uganda, and Tanzania over the next few years.

Today I had dinner at Galito's, a popular chicken franchise. Two interesting things about Galito's - it's not US-based like so many other food franchises, it's a South African company. And it's biggest competitor is Nando's, another South African franchise. While the KFC's Colonel has nothing to be worried about anytime soon, if they're smart they'll do what a lot of smart businesses are doing today - invest in Africa.

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