4 Untold Steps How To Make More Successful Investments In Africa

4 Untold Steps How To Make More Successful Investments In Africa

So how exactly can one make more successful investment in Africa? Is there a way? Oh yes, absolutely, I believe there is – specially for first timers.

I am glad that more of us are interested in doing business in Africa or investing on the continent. But I am still worried about how many of us (especially those of us in the Diaspora) are making largely emotional or uninformed decisions. As a result, we increase time, risk, and cost to implement our undertaking.  

Today, I want to share 4 steps how to make more successful investments in Africa. Or in other words: let me share with you very simple but rarely discussed insights into how you can very strategically cut down risk and increase your investment success in Africa – especially when you are investing for the first time or you are based abroad.

Here is what to do.

1.  Choose a low risk / high opportunity market

Those of you who have attended my boot camp training or are respected members of our Africa Business Academy know exactly what I am talking about. And my message here is tailored to the Diaspora who are investing in Africa for the first time (or who had bad experiences in risky markets).

You should choose the location for your Africa business model based on assessing the risk-opportunity ratio of that market. Africa has 54 countries to choose from. When basing your choices on personal preferences or perceptions however, you tend to overlook risk and overestimate opportunity. Therefore an objective assessment of several markets in Africa is vital. The most favourable business environment exists in markets that belong to a low risk/high opportunity category: Rwanda, Botswana, and Ghana for example.  

When you decide however to go into a high risk/high opportunity market your expenditure and risk may significantly increase, in particular for higher risk industries: Take Nigeria, Angola, the DRC, or South Sudan for example. These are extremely intriguing markets with huge opportunity, but risk for investment is generally significantly higher, too. So be aware of that when you make a decision.

….One category you better stay away from all together when thinking about investing is the high risk/low opportunity category. Why choose the worst markets when you have 54 to choose from?

Risk awareness and management need to be integrated factors in your investment strategy, and when you invest in a African market where you have a significant smaller risk of corruption, conflict, currency fluctuations, personal security etc, but high opportunity you will increase the success potential for your investment.

2.  Invest into a small local company that has clients and customers already queuing 

I want to share a story with you, which I read in the Rwandan newspaper New Times: There was a pig farmer in Rwanda who started with a very small budget. He bought a hand full of pigs for pork production with the money he had and because pigs have many babies he was able to increase their numbers quite significantly.

Now, after about 4 years he has become the biggest pork producer in Rwanda!

Recently he received an offer from one of Kigali’s major hotels to deliver 200 kg of pork meat to them every week. This would be an excellent client for him.

But because of his commitments to other clients and his limited capacities, he had to turn the offer down – he simply was unable to produce that much at this point.

Wow, invest in a business like his for expansion and you will be in business straight away with your investment, because his clients are already queuing! These are the stories to look out for when you want to invest and they do exist across the continent !

So here is an important lesson. Do not settle down with a promise how great a company will be when you just put the money in ( I get that far too often), but instead, consciously look out for those that already have customers queuing or that meet a very clear local demand in the country that is currently simply not being met. Then do your own market assessment and due diligence.

3. Go for consumer-based high scalability

One huge success contributor in Africa’s emerging markets is ‘scalability’.  How easily can the product or service in which you are investing be spread within the country and across borders within Africa? Let’s take an extreme example to explain what I mean: If you are investing into the import of specialist medical equipment then scalability is low, because there are only so many private hospitals in a given market who could afford that equipment. You quickly hit your ceiling. But if you invest into a company that farms fish the scalability is enormous both within the country and across borders, because everyone has to eat, everyone understand the value of fish across borders, and you can simply expand production capacity.

4. Contribute your own skills

Here is an important factor that can increase the success of your very own investment and that is the level of contribution you can and are able to make towards the company you are investing in. You see, a lot of the investments in Africa are entrepreneurial investments. So basically, you don’t just put your money in and wait what will happen, but you contribute with your own skills, resources, or connection to increase the success rate.

In fact, many African entrepreneurs and SMEs that are looking for investors who have more to offer than just their money – and in return you don’t just get a share of the company, but you enter a personal and professional partnership. This can become rewarding to you both in terms of the impact you will be able to make and the financial returns you will reap.

If you are investing in Africa for the first time, be aware of those four steps. Apply them consciously to cut down risk and increase your success potential when investing in Africa. We want to see you succeed!

[Cover photo credit: technoserve]

Dr. Harnet
Dr. Harnet Bokrezion is the Founder of africajumpstart.com and co-author of the book '101 Ways to Make Money in Africa'. She coaches individuals and consults existing companies assisting them to make smart and strategic business decisions in Africa’s new emerging markets faster and more confidently. Dr. Harnet also regularly writes for the renowned DHL powered publication howwemadeitinafrica.com. Get in touch to inquire how she can be of assistance to your own Africa business endeavors: harnet@africajumpstart.com

User Comments ( 10 )

  • Chanchal ahuja

    The article is really worth.
    Please suggest if I can start my export business to Africa.

    • Wanaka Taranhike

      chanchal, do you mind sharing the product you intend to export? Some of us are based here in Africa and may possibly help or offer distributorship if the products are in the same industry as ours.

      • Dr. Harnet

        Thank you for your suggestion, Wanaka.

      • Mr, Wanaka, we are interested in exports to Africa, we have our set up in Pakistan and Dubai,
        can you please let us know what type of products you can work as distributor and we shall revert.

    • Dr. Harnet

      Dear Chanchal

      Thank you for your question. If you are thinking of building and African business I would suggest you look into exporting goods from
      Africa rather than importing into Africa.
      African governments at large are very keen to increase exports and they work hard on the cutting down of imports. For that reason you will
      find a lot of support from local stakeholders and an increasingly enabling business environment for export, while imports are being made more difficult and expensive.
      I am not sure where you are based, but I would look at products your market / country absolutely loves and that could be exported from Africa into your market. I hope this helps!

  • Tembo

    i always look forward to anything from Dr Bokrezion, and all the time, I am impressed and inspired!

    • Dr. Harnet

      Thank you very much, Tembo, very kind and I am glad you feel inspired.
      A warm welcome to our Africa Business Jumpstart Community!

  • Kent

    What were the women doing on the picture? What kind of business is that? And where was that?

  • Lucy Lui

    Hello Dr. Harnet. Could you reccomend any small investment options. If there is even such a thing. I’m looking to invest 10,000 to 15,000 usd into to something , havent really decided yet. But is that to small of an investment or should I wait to save for a couple of more years

    • Dr. Harnet

      Dear Lucy
      Thank you for your question.
      The investment amount you stated is absolutely possible. There are many SMEs in Africa who have clients queuing and who for example simply need more automatisation or additional resources to expand. I have met with the management of several of such local companies myself.
      In fact, in our Africa Business Academy we are inviting them to pitch to our members, as we have several people interested in such opportunities. This is coming up now in September/October and many more personal introductions will follow thereafter. I will need to do that within a smaller group of people who are really invested in making progress, but I invite you to join our Academy membership program if you would benefit from that continuous guidance and the connections to make the right investment. We are re-opening for another batch of enrolment mid September >> http://www.africabusinessacademy.com

      I hope this helps and please feel free to e-mail me (harnet@africajumpstart.com)if you wish to ask questions or follow up on my suggestion.

      I wish you all the best and a warm welcome to our Africa Business Jumpstart Community online!

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