An Indian Entrepreneur’s Starter Guide to the Why? and Where? Of African Investment

Africa – the continent known for its plethora of wildlife, resources, and diverse & colourful culture. Along that line, dance and music aren’t the only talents associated with the African people. They are a conscientious and industrious people with a history riddled with colonial exploitation, civil war and boundary conflicts. As the cradle of human origin, Africa has a long and complex history. The last 400 years witnessed an increased European influence on the continent. Starting in the 16th century, this was driven by trade, including the much-valued ivory, tortoise shells and spice trade, as well as the infamous Trans-Atlantic & Indian Ocean slave trades.?

In the late 19th century, European countries colonized almost all of Africa, extracting resources from the continent and exploiting local communities; most present states in Africa emerged from a process of decolonisation in the 20th century. Africa is the most necessitous continent in the world per capita, and the continent has its share of issues ranging from desertification and epidemics to rebel uprisings and deleterious policies. However, despite this low concentration of wealth, recent economic expansion and the large and young population make Africa an important economic market in the broader global context.

"1.3 billion people already live in Africa – more people than in Europe and North America combined yet less than India."

In our previous article, we briefly discussed the history of Indo-African trade relations, the real-time importance of India’s relations with the continent, and the steps that the government is taking and should further take to improve our African trade policy. Following that train of thought, if you are a conscientious and industrious entrepreneur like our African friends across the ocean, here is a smidgen of information on why and where you should consider applying your entrepreneurial skills on the continent.

The Why?

Small or large, any investment decision has to have answered the “why this?” question before we can go ahead with it. So, “Why Africa? What makes Africa a good investment destination?” Here’s why:

1. Rising stability: If you’ve watched Leonardo DiCaprio’s Blood Diamonds or Bruce Willis’s Tears of the Sun, chances are you picture a considerable portion of Africa as a ravaged battlefield. Although up until a few decades ago, Africa was going through a string of civil wars, dictatorships and rebellions, the continent has more than stabilised over the past few decades. More democratic and responsible governments are forming economic policies that increasingly favour and facilitate international commerce.
2. Ease of Doing Business: The Ease of Doing Business report was introduced in 2003 to provide an assessment of objective measures of business regulations and their enforcement across 190 economies on ten parameters affecting a business through its life cycle. These parameters included, for example, Starting a Business, Dealing with Construction permits, Electricity availability, Property registration, Credit availability etc. According to the Report, African nations have steadily been improving to the level that they are giving countries like India, China, Russia and Brazil a run for their money. Riding on the backs of a new generation of policymakers and corporate leaders, national and regional economies across the continent are continually speeding their growth and attracting foreign investors’ interest. This has lowered foreign investors’ perceived risk and has turned Africa into a destination for FDIs, and good reason.
3. Digital Transformation: 6 of the world’s 10 largest companies by market capitalisation in 2022 are tech giants. The tech industry is the future and Africa is a big juicy market that is ripening by the hour. Africa continues to lead the globe in mobile penetration, providing the most cross-sectoral economic prospects.?For instance, by the end of 2018, there were 456 million mobile subscribers in Sub-Saharan Africa – an increase of 20 million over the previous year. Technological proliferation has had tremendous benefits for the region from economic growth to job creation. By 2025, the region is estimated to have 600 million subscribers. Indian entrepreneurs with a #KnackForTech should consider harnessing the potential of the African continent’s market to create products and services that are both profitable and provide value to the people.
4. Increasing Income: Africa has a rapidly growing middle class of relative wealth with a craving for modern consumer items, and emerging entrepreneurial spirit and a heightened willingness to invest in educating the masses. In terms of consumption, educated urban professionals are young, brand-aware, and sophisticated. Retailers and consumer brands seek to predict and drive buying patterns in fashion, home, and lifestyle products, but they recognise that to meet demand, they need worldwide standard supply chains. Indian entrepreneurs should seek to capitalise on this evolving consumer behaviour pattern.

Africa makes up around 20% of the earth’s landmass, and is home to approximately 16% of the world’s population. Nevertheless, Africa’s economies account for just 3% of the world’s GDP

The Where?

Thus, Africa is a continent with seemingly bottomless natural resources, a young, thriving, techno-savvy population with an entrepreneurial spirit and a rising middle class with a penchant for an increasingly sophisticated standard of living. These are the ingredients for a perfect foreign investment recipe. But Africa is a big continent; 2nd largest in the world, home to 54 countries and some territories. So specifically, where in Africa can a sedulous Indian entrepreneur make their first move to reap first-mover advantages? Let’s consider the top 3 destinations:

1. Kenya: According to the World Bank, Kenya is one of the world's top performers in Starting a Business and Getting Credit. The country ranked 56th globally, has collaborated with American giant IBM to build technological solutions that can help its various agencies solve diverse business issues, including property registration. Kenya's economy has witnessed enormous growth between 5 and 6% in recent years. The country is also one of the major ICT hubs on the continent, home to many big tech startups in several sectors, including fintech and transportation.
2. Rwanda: Since 2000, Rwanda's economy has grown at an average of 6% year over year. With a 76.5 rating, the Sub-Saharan African country ranks 38th on the World Bank's ease of doing business rankings. Rwanda is ranked number two in the world for ease of property registration, second only to New Zealand. In recent years, the East-African nation has implemented the most business reforms in Africa. The country has put in place electronic systems that have helped replace its stifling bureaucracies. Now, taxpayers can issue value-added tax invoices using free software.
3. Ghana: Since 2016, the Nana Akufo-Addo government has encouraged the growth of the private sector to revive the country’s non-agricultural and non-oil sectors. Commodities like cocoa, oil, and gold have featured dominantly in Ghana’s $47 billion GDP. Ever since Ghana started producing oil in 2010, it has enjoyed rapid economic growth. According to the World Bank’s Doing Business Report, Ghana has made further simplifications to the importing process with its paperless system of customs clearance.

This list is non-exhaustible. There are more than a dozen African nations that have performed consistently well on the Ease of Doing Business Index and is resultantly a top destination for foreign investments. Indian cumulative investments in Africa for 2021 itself touched US$ 54 billion. Individuals and groups with entrepreneurial ambitions in Africa have to look no further than Koshambh Multitred Private Limited for success-story inspiration. We started as a simple exports house in 1995 and within 2 decades have expanded into biscuit manufacturing and disposable plastic bags industry, climbing to become the 2nd largest biscuits exporter from India to Africa*. Our humble beginnings have today resulted in becoming a 2-star export house that is en route to becoming a 3-star export house in the coming year.

With their own set of natural, human and technological resources, each African state has something different to offer. It all depends on in what industry or field you want to try your entrepreneurial flair.