A business refers to situations in which individuals, firms and economic systems exchange goods and services for another or money. With the exception of non-profit organisations, firms established in various jurisdictions seek to maximise profit and minimise losses.
The realisation of the foregoing objective hinges essentially on the firm’s ability to (a) raise the needed capital for investment (b) attract a significant number of customers (c) produce reasonable quantities to meet customers’ needs, and (d) convince customers to effectively patronise the finished goods and services.
Although the continent is saddled with some recurring challenges, its prospects for business development are very high.
The continent continues to attract foreign investors into various sectors of the countries’ economies despite the challenges. In 2015, the total number of projects embarked on through foreign direct investments in Africa increased from 666 to 705 projects, representing about 6 per cent increase.
Again, in 2015, although the total FDI projects in Africa increased in number, the total value of projects decreased from US$87.5 billion to US$66.5 billion. In percentage terms, the negative US$21 billion (US$66.5b - US$87.5b = - US$21 billion) reduction in the total value of Africa’s FDI in the referenced year (2015) represented -24 per cent.
Information and Communications Technology (ICT), power and construction accounted for about 44 per cent of the total FDI projects in Africa in 2015.
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Business Development Challenges in Africa
Some challenges saddled with investors on the African continent include:
• Relatively low Internet connectivity in Africa.
• Two out of three Africans lack access to electricity (Africa Progress Panel.Org, 2015). This negatively impacts on economic productivity on the continent.
• Lack of constant power supply for businesses in Africa.
• People on the African continent are exposed to global warming.
• Low level of infrastructural development in some parts of the continent – poor roads, undeveloped railroads, and airports with limited international standards.
• Organisation of classes under trees (Examples include Ghana and South Africa) – has negative effect on development of individuals to meet the manpower needs of organisations established on the continent.
• Bureaucratic process of establishing businesses in many African countries as evidenced in the World Bank Group’s economic rankings for 2016, using June 2015 as a benchmark.
Rankings of World Economies
The World Bank Group (2016) released the economic rankings of 189 countries based on the following criteria: ease of doing business, starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, and resolving insolvency. A careful review revealed the top-ten world economies are geographically situated in Asia, Europe and North America. The top-ten world economies as released by the World Bank Group (2016) include:
2. New Zealand
4. Republic of Korea
5. Hong Kong SAR, China
6. United Kingdom
7. United States
The World Bank Group’s release revealed no African country forms part of the top-thirty economies in the world in 2016. Table 1 presents a list of African countries and their economic rankings.
Table 1: Economic Rankings of African Countries
72. Botswana 145. Papua New Guinea 166. Sao Tome and Principe
73. South Africa 146. Ethiopia 168. Mauritania
74. Tunisia 147. Sierra Leone 169. Nigeria
75. Morocco 150. Togo 172. Cameroon
97. Zambia 151. The Gambia 176. Republic of Congo
105. Swaziland 152. Burundi 178. Guinea Bissau
108. Kenya 153. Senegal 179. Liberia
114. Ghana 154. Comoros Island 180. Equatorial Guinea
115. Lesotho 155. Zimbabwe 181. Angola
131. Egypt 158. Benin 183. Chad
133. Mozambique 159. Sudan 184. Dem. Rep. of Congo
139. Tanzania 160. Niger 185. Central African Republic
141. Malawi 162. Gabon 187. South Sudan
142. Cote d’Ivoire 163. Algeria 188. Libya
143. Burkina Faso 164. Madagascar 189. Eritrea
Source: World Bank Group (2016)
We could review the World Bank Group’s (2016) release and assess Africa’s economic rankings in isolation to determine countries on the African continent with effective governance policies which are attractive to foreign investors.