Daily Archives: May 20, 2013

Are You Ready for Africa?

Probably not. Should you be?

Probably not yet. But it should be on your radar.

A recent article over on Inbound Logistics declared Africa an attractive target for foreign exploration, especially in Europe and Asia, due to abundant natural resources, a growing labor force, and its proximity to the European and Asian consumer markets. And while I agree that it looks attractive from an exploration perspective, I don’t think its ready from an expansion perspective. For starters, there’s the social unrest, the need for more government collaboration, and the (utter) lack of logistics infrastructure (in many places), as pointed out in the article. In addition, there’s the rampant piracy (which appears to be a sanctioned activity and standard operating practice in the Somali government who jailed a US pilot for bringing money into the country to secure the release of foreign vessels held by Somali pirates), the child and slave labour along the Ivory Coast (especially in the chocolate supply chain), and the constant (civil) conflicts in many of the African nations.

Simply put, Africa just isn’t ready to join the global economy on the main stage, and won’t be for at least a decade (or two). Unless you have a large bank account and are willing to build your own infrastructure, hire your own private security army (of soldiers to hire), and set up your headquarters somewhere where there is no Foreign Corrupt Practices Act (FCPA) or Bribery Act because you will have to grease the hands of the local (underpaid) civil servants to get anything done, you’re probably not going to succeed.

In other words, if you’re not a Global 500 multi-national that has already conquered China and India to the extent possible and needs to start preparing now for the 2025 African conquest, it’s too early. The only exception SI can see is if you’re a Chinese or Indian Company and believe that you need to outsource to lower costs. Then, since the rest of Asia is in the same cost bracket, Africa is the only place left that potentially has lower labour and overhead costs. The article states you should also be looking at Africa if you need gold, diamonds, precious metals, timber, oil, coffee, cotton, and cocoa — but all of this you can get elsewhere. There are big Diamond mines in the North (with Russia being the largest producer and Canada finding new deposits in the arctic as well). Australia is the second largest Gold producer in the world (as well as the third largest diamond producer). Everyone knows that Canada has rocks and trees, so you can get your timber in the North too. China controls the precious metals market. And nine countries produce more oil than Nigeria, the biggest oil producer in Africa. (They may tap out some day, but there are lots of oil sands and tar pits in the North that can be tapped.) Get your coffee from Brazil or Venezuela or even Vietnam. China and India are the world’s biggest cotton producers. Cocoa? Africa, and the Ivory Coast, leads here but the Republic of Indonesia is the second largest producer and Brazil is the sixth. Ramp up production in those countries. Grow a few less soybeans if you have to. 😉

Obviously you’ll need to be in Africa someday if you’re big, but not in the next decade. Let the wealthy global multinationals pave the way and make the mistakes and expand when the economy is ready for it. For now, you still have to get Asia under control.