2016 will be an interesting year for Africa, the region faces threats from changes in government (or none at all), unstable oil prices, lukewarm economic growth, the increasing hand of government in information, communication and technology (ICT), and an increasingly unstable South Africa. Nonetheless, opportunities in business and start-up technology are encouraging and will boost foreign direct investment (FDI) in 2016.
President for life?
Africa will experience national level elections in 16 different countries: Benin, Central African Republic, Chad, Republic of Congo, Cote D’Ivoire, Democratic Republic of Congo (DRC), Equatorial Guinea, Gabon, The Gambia, Ghana, Mauritania, Niger, Rwanda, Sao Tome & Principe, Uganda, and Zambia.
In most cases, these elections may be marked by incumbent victories and extended term limits. In 2015, violence broke out in Burundi over Pierre Nkurunziza’s bid to hold on to power for a third term. Several other presidents have followed his lead to try to hold on to power. For example, Sassou Nguesso in Congo-Brazzaville and Rwanda’s Paul Kagame have taken legal steps necessary to extend their time in office. Both countries hold elections in early 2017 that could become violent. In Africa’s biggest Nation-Democratic republic of Congo (DRC), the opposition believes that President Joseph Kabila plans to follow his neighbors in Congo-Brazzaville and Rwanda to retain power after his current term ends.
Tough times ahead for Zuma.
Zuma became president after the removal of Thabo Mbeki in 2008. He is increasingly likely to face the same fate as pressure is ramping up over allegations of corruption related to $20 millions misuse of public funds spent on his private estate, Nkandla. Furthermore, he recently, fired the finance minister (Pravin Gordhan) for a poor performing economy and replaced him with an unknown. He has recently reinstated mister Gordhan. As such, Zuma’s decision-making is perceived to be poor. This has galvanised the opposition to his administration within African National Congress (ANC) and opposition parties. His tenure as South African President seems to be perilously drawing to a close.
Africa’s economy is expected to expand by 5 percent in 2016 close to 2008/9 levels before the global crisis, also a 0.5 percent increase compared to 2015. Policy makers will seek to deepen economic integration and find ways to attract more foreign direct investment (FDI). Last year, thirty-five of 47 economies (74 percent) implemented at least one reform making it easier to do business. 69 in total-slightly up from the annual average of 67 reforms over the past five years according to the world bank. Furthermore, greater emphasis will be placed on human development especially on health, inequality and education to improve the socio-economic impact of economic growth.
Dismal oil prices
Oil prices are in free fall compared to the highs of 2012 and do not look like stabilising anytime soon. Market watch predicts the price for oil to go lower than its current price of $38 per barrel. This will have serious implications for Angola, Nigeria, Gabon, Equatorial Guinea who rely on oil revenues for fiscal spending. For example, two-thirds of Angola’s fiscal spend is from oil. Furthermore, oil producing projects in Uganda and Kenya will be affected if the return on investment (ROI) looks unfavourable.
For companies wanting to do business in Africa, according to Boston Global Consulting (BGC), 2016 should be the year to focus on the four Fs (focus, field, facts and flexibility) to direct your strategy. The four Fs are developed from observing what BCG calls ‘African Lions’-companies based and grown out of Africa that are able to withstand and win market competition from multinational firms.
- Focus — African lions are winning because they consider the continent to be their primary home. For a winning strategy in African business, give it your attention. Consider putting in place resources to your company, a permanent face on the continent and make your business visible and strengthen partnerships.
- Field—Being overlay professional and disregarding of cultural practices is not the way to do business in Africa. CEOs of the firms categorized as African Lions, are down to earth, build strong personal relationships and understand that not all agreements need to be formalised according to BCG.
- Facts—it is a norm that business is based on accurate data, however in Africa it is not a given. To win, firms investing in Africa gather their information through innovative strategies and use personal judgement.
- Flexibility — business process, products and activities must be tailored to local conditions. For example, innovative businesses in Africa are using mobile phone technology and flexible firms are taking advantage of the payment systems there.
ICT & Startups
Governments growing influence in ICT
According to Frost and Sullivan, African governments increasingly see connectivity as a critical means to encourage economic growth, so they are becoming more involved in ICT (information, communications technology). For example, MTN Nigeria is facing a $3 billion bill levied by the Nigerian government. However, regulators in Uganda and Kenya have also imposed penalties on telecoms.
Disrupt Africa predicts a very exciting year for African start-ups in 2016 in relation to the ecosystem, fundraising, getting acquired or even closing down. Below are some of the start-ups they have selected for a special 2016.
- Shield Finance (leverages mobile money to offer underbanked employees salary advances directly to their mobile phones) – the startup is still looking to raise a seed round of US$350,000 for equity, which will be used to hire sales staff and ramp up its technical capacity in readiness to scale.
- WeFarm (peer to peer knowledge sharing platform)- Launched in November last year, WeFarm already has over 38,000 users, and is targeting more than 500,000 active farmers by the end of 2016.
- meQasa is a web and mobile-based real estate platform, providing a free service which helps brokers, landlords and other real estate industry professionals conduct business efficiently online while also simplifying the search experience for prospective tenants and buyers. It raised US$500,000 from a VC firm and in 2016 it is looking to ramp up its mobile and service experiences.
- Social lender is a platform that allows users to lend cash using their social media profile as their collateral. The platform was launched in 2014 and currently serving sterling bank customers in Nigeria.
Not mentioned here is the rising threat from global Jihad and how that might impact the continent. Nevertheless, terrorism is an increasing reality for many Africans across the continent.
All in all, the political situation in many African countries in 2016 looks frustrating and challenging as Presidents for life look to hold on to power. Low oil prices will limit growth rates in Nigeria, Angola, Gabon, the Sudans’, Equatorial Guinea, Ghana and Chad. Nonetheless, the IMF, World bank and the UN predict economic growth, the four Fs of doing business in Africa if implemented correctly seem profitable and start-ups will make life easier to live in 2016 Africa.