7 Best African Countries for Starting a New Company
Today, an understanding of every African market and its unique situation is crucial for entrepreneurial success. In this blog, we will be discussing some of the top African countries for people looking to start a new business, as well as the business advantages that Africa, on the whole, has to offer.
Best African Countries for Starting a New Company:
With an annual growth of 6 percent for the last two decades, Rwanda claims one of the fastest-growing economies on the continent. In 2018, it had the most entrepreneurial reforms implemented throughout the region. According to the World Bank, Rwanda has “carried out the most reforms since the inception of Doing Business”.
A major improvement, according to Doing Business 2019, was the ease with which you can start a new business in the country. Rwanda has brought in electronic systems to replace the obsolete bureaucratic designs. In 2018, Rwanda introduced free software allowing the issuance of value-added taxation invoices through any kind of printer. Furthermore, the country is only second to New Zealand in terms of easy property registration.
As per the World Bank, Kenya was one of the top performers around the world in Starting a Business and Getting Credit. During 2017-2019, the country improved its Doing Business rank by 31 places. A major reason for this huge improvement was the introduction of a law that significantly simplified the obtaining of credit. Also, Kenya’s collaboration with IBM for the development of a technological solution for the country’s agencies has led to the introduction of an online system that can receive fees and provide digital certificates for property registration.
According to the IMF, Kenya’s economy is expected to grow at a healthy 6.1% per annum, while the World Bank makes a similar prediction, putting the expected growth rate at 5.9% per annum. Either way, Kenya will retain its status as the East African hub for communication technology, information, transportation, and financial services.
Since 2016, the Nana Akufo-Addo government has encouraged the growth of the private sector in order 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. Ghana agreed to a credit deal with the IMF back in 2015, and the country hopes to develop a resilient and strong economy so that it will not have to go back to the IMF for another financial bailout.
According to the Doing Business Report published by the World Bank, Ghana has made further simplifications to the importing process with its paperless system of customs clearance.
4) Cote d’Ivoire:
Thanks to a stable political situation, Cote d’Ivoire has been able to make considerable improvements to its business environment. According to the Ease of Doing Business report, the country is one of the ‘most improved’ around the world. Over the last four or five years, Cote d’Ivoire has reduced the processing time required to build credit, as well as developed a new system allowing for electronic tax payment along with a credit bureau. In 2018, it also introduced an online system for the filing of value-added and income tax returns.
This largest global cocoa beans exporter is expected to maintain a consistent growth rate of 7% over the next few years. Thanks to a better developed port and road network, Cote d’Ivoire is a desirable location for business investment.
The landlocked nation of Ethiopia is striving hard to become the continent’s manufacturing hub. The Ethiopian government is using the availability of cheap labor, infrastructure development, and tax incentives to attract more and more investment. Moreover, the government plans to add nine more industrial parks across the country, in addition to the six that the country currently has.
With a reformist like Abiy Ahmed at the helm, the economy has really opened up for private investments. Ahmed announced his plans to offer minority shareholding in public monopolies such as Ethiopian Shipping and Logistics Services, Ethio Telecom, and even Ethiopian Airlines Enterprise (the biggest airline in Africa) to domestic and foreign investors. In 2019, the IMF predicted Ethiopia to be the continent’s most rapidly growing economy, at a rate of 8.5%.
In December of 2018, the EIC (Ethiopian Investment Commission) introduced an online guide for investment in the country. This guide, created in collaboration with the ECA (United Nations Economic Commission for Africa), and UNCTAD (United Nations Conference on Trade and Development), will enable investors in finding new business opportunities in the country, through an understanding of the key laws, procedures, and business costs.
Unfortunately, Mauritius’ small market size means that investors often pay little to no attention to the state. However, at the moment, Mauritius sits pretty ranked 20th in the World Bank’s index of Doing Business. This makes it the highest-ranked African country.
Thanks to an open-minded financial sector, low taxes, and a steady political environment, Mauritius is a highly desirable spot for investors looking for a business environment with low risk.
Back in 2017, Mauritius signed an FTA (Full Trade Agreement) with the Chinese government, which was the first FTA between China and Africa. Mauritius has communicated its desire to become a financial and trans-shipment hub for the Maritime Silk Road Trade route. Mauritius already has an FTA with three trade blocs in Africa – Southern African Development Community, Common Market for Eastern and Southern Africa, and the East African Community.
When people talk about Morocco, they usually refer to the stunning landscape, delicious cuisine, and buzzing culture. However, Morocco’s business environment is also one of the country’s standout features. The tremendous improvements in the operating environment have contributed significantly to Morocco becoming a financial platform and hub that is easily accessible to Europe. From 2011-2019, Morocco was able to climb 54 spots in the rankings for Ease of Doing Business (114th to 60th), which reflects a consistent improvement in their business climate.
According to the Central Bank of the Kingdom of Morocco, manufacturing and tourism will be the key economic drivers over the next few years. The manufacturing sector, in particular, will benefit from the large foreign investments in the aeronautics and autos industries.
Benefits of Doing Business in Africa:
1) One of the fastest growing regions:
It is expected that, by 2050, Africa’s GDP will amount to a whopping $29 trillion, making it one of the most powerful economies across the world.
Even though the drop in commodity prices might have caused an economic slowdown, African countries have some of the most potential for growth within this decade.
What makes us say that? For one, out of the ten fastest-growing economies in the world, six are in Africa. Ghana was the leader of the world rankings.
The second reason is Africa’s consistently progressing business environment – which is why more and more global businesses are focusing on Africa as part of their global strategies.
According to the Doing Business index published by the World Bank in 2019, five African countries made the list of top 10 most improved countries. Out of the 264 reforms implemented around the world, 83 belonged to African nations (more than a third of all global reforms).
2) Emerging market:
By 2050, Africa is expected to have a population of 2 billion people, half of whom will be living in urban regions.
Additionally, Africa’s growing middle class boasts an after-tax income that is significantly higher than that of previous generations – not to mention Africa’s middle-class occupies land area greater than that of the US, Europe, China, and India combined.
Companies that can navigate the complexity and scale of the African landscape will reap significant benefits in their on-the-ground operations.
3) Rapid urbanization and youthful population:
These are the two demographic indicators telling the story of Africa’s promise as a consumer market.
Out of Africa’s roughly 1.2-billion-person population, 60% is aged 25 or less, making it the youngest global population.
Companies looking for emerging customer bases for new products and services can really benefit from Africa’s youthfulness.
Complementing this youthfulness is the continent’s increasing urbanization. Africa currently has more than 80 cities housing at least a million people. Moreover, it is expected that, by 2030, Africa will have 18 countries containing a minimum of 5 million inhabitants.
4) Better governance and more attention to diversity:
Over the last 10 years, regions that were once conflict-ridden have started focusing on implementing democratic ideals.
Furthermore, the recent reduction in commodity prices led to recessions in many major African economies, which subsequently led to newer, better governments that are now focusing on creating better business conditions and providing incentives to lure more investors.
One aspect of these improvements is the commitment towards diversification of the African economic landscape. This shift means that industries that were previously based solely on commodities are now also focusing on added value.
With increasing investments in several industries, multinationals that operate in industries other than mining, gas, or oil, can take advantage of these opportunities.
Firms can now broaden their global footprint by benefiting from the favorable policies and a growing workforce within the industrializing Africa.
5) Infrastructure improvements:
At the moment, the infrastructure required to unleash Africa’s business potential is not yet fully in place.
Bridging gaps between Africa and its markets while simultaneously decreasing the trading cost will present major opportunities for new businesses.
The ACFTA (Africa Continental Free Trade Agreement), involving 54 African countries, is the first step towards connecting African markets with the rest of the world. According to this agreement, there will be a significant increase in inter-trading within African markets, and perhaps even the establishment of the biggest free trade agreement ever since the WTO (World Trade Organization) was created.
6) Digital revolution:
Africa is the biggest global mobile phone adopter. African consumers do not see a mobile phone as a mere communication device. For them, it opens up access to the internet and a range of other life-altering services like education, healthcare, and banking.
There has been a rapid increase in mobile phone adoption in Africa: in 2011, subscriber penetration in the country was 25%; by 2017, this number had jumped to 44%. In the next four years, subscriber percentage is expected to go up to 63%.
These sharp increases in mobile connectivity and adoption open up tremendous opportunities for internet providers, network operators, mobile and computer manufacturers, information service companies, and communication providers.
However, such opportunities are not only restricted for companies in the IT world. In fact, any business that wishes to establish a sustainable relationship with its increasingly tech-savvy target audience can enjoy the benefits of this digital revolution.
To conclude, it is clear that Africa’s young customer base, growing and diversified investments, and increasing buying power make it one of the most desirable business spots around the world. Companies willing to make their way into Africa are bound to benefit from the many advantages that the African markets have to offer.
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