Starting a Business in Africa – What You Should Know

Seeking to start a business in Africa? Below are some things you should consider.

Africa is largely considered virgin territory by the west. This is due to its huge resources which are largely untapped.

Start a business in Africa offers immense possibilities. However, you need an understanding of what it takes to set up such a business. With over 50 countries on the continent, each has its set of regulations guiding business.

Despite this fact, starting a business in Africa follows a much similar pattern as you’d see.

Having a Demand for your Product or Service

While your business idea may be exciting, there should be a clear demand or market for such products or services.

This is a very important part of doing business in Africa.

But how do you know? By conducting studying your target market. This can be done faster by networking with national and local governments.

Here, you get first-hand information on what to expect. It’s also necessary to identify potential and existing competition during this period.

Doing Business in Africa – Things to Consider

Before setting up a business, there are certain things you need to consider. These are vital to smooth operations for most businesses.

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Hence, this section will highlight such areas that require your attention. We’re confident that by the end, you’d have all take to launch a successful business.

  • Infrastructure

Infrastructure is a vital part of doing business.

Consequently, you’ll need to find out the best location for establishing such a business. For most types of businesses, infrastructure offers a lifeline for smooth business operations.

Without these, business activities can hardly be sustained.

A few of such infrastructure include;

i. Good Road Network

This is necessary for business activities to thrive. Here, products and services are easily accessed by consumers. The type of business you plan on starting will also influence your location.

In other words, a business such as a fast-food restaurant will need to be sited in the heart of the city. The same thing applies to retail and wholesale businesses.

However, heavy industries, such are usually located on the outskirts of cities. Whatever the type of business you choose to operate, good road networks are essential to its smooth running.

ii. Energy

Energy is an indispensable part of doing business in Africa. In several areas across the continent, businesses spend heavily on electricity. This is more so when a country’s electricity generation is poor.

Therefore, to set up, you need to find locations with a reliable electricity grid network.

iii. Reliable Water Supply

Efficient water supply is necessary for starting a business in Africa. Such utility isn’t common across all areas of the continent.

As such, this is one of the considerations you need to make before choosing a preferred location.

  • Obtaining a Business Visa

As a foreigner, starting a business in Africa comes with its regulations. First, you need to find your preferred destination.

After this, the visa application process commences. A business visa is recommended for any foreigner seeking to do business on the continent. Each country has a unique visa application procedure.

To that end, you need to find out what your destination requirements for a visa are.

  • Minimum Shareholding

This is a very important piece of information. The minimum shareholding requirement for a business may differ from country to country. However, most African countries require a foreigner to own a minimum shareholding over 25% of such business.

Nevertheless, further due diligence is necessary.

  • Buying into an Existing Business

Several types of businesses offer investors an opportunity to become part owners. These may be through the sale of shares, franchise and several others.

To do so, you’d need to find out what conditions apply.

  • Minimum Investment Requirements

Before doing business in Africa, foreigners are required to have a minimum investment amount. Even so, it depends on the type of visa you applied for.

Given this, a little digging up of information regarding this aspect of doing business is necessary.

  • Loan Facilities

Bank loans are a lifeline to businesses. At the same time, there’s the problem of high-interest loans. This has become a problem for many entrepreneurs. This needs to be fully reviewed before launching out. However, not all bank loans come with high digit interest rates. Thus, these should attract much of your attention.

Doing Business Rankings

The world bank ground has created an annual doing business index ranking. This is an important resource for persons interested in starting a business in Africa. For 2020, The top 10 countries for doing business include the following;

  1. Mauritius
  2. Rwanda
  3. Morocco
  4. Kenya
  5. Tunisia
  6. South Africa
  7. Botswana
  8. Zambia
  9. Seychelles
  10. Djibouti

Before these countries qualified to be among the top 10, certain criteria were used. These criteria constituted the ease of doing business.

So, what are they? They include;

  • Starting a business
  • Obtaining a permit
  • Connecting to electricity
  • Transferring ownership
  • Getting credits
  • Protecting minority investors
  • Payment of taxes
  • Cross border trading
  • Enforcing contracts
  • Resolving insolvency

These key indices are crucial to doing business. Consequently, these were used in determining the rankings of countries.

Most importantly, there has been a marked improvement since this ranking started.

Today, countries are formulating and implementing policies that help streamline the processes of doing business.

So, if you plan on investing in Africa, the above information should be taken seriously. A lot of work needs to be done by finding out what the requirements are in your preferred location.

By putting in the right effort as well as proper planning, setting up thriving businesses in Africa will only be a matter of time.

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