Senior Managing Director, EMEA
The last 6 months has seen the conclusion of two of the most politically seismic events of recent times; the UK’s vote to leave the EU, and Donald Trump’s election as next president of the United States. While it still remains unclear how these results will fully play out on the global stage, both have the potential to turn the current dogma of international business on its head, as the commercial trade agreements and relationships that bind nations and continents, upon which much of the current international trade paradigm is based, fall under review. Irrespective of one’s political views of both these events however, from a commercial perspective, in addition to the substantial challenges to business, opportunities are likely to be revealed, as new markets and regions seek to position themselves as candidates for new trade agreements and investment flows.
Africa as a continent, and the 54 states that comprise it, is one region that has acted fast to try and capitalize on this new environment. A number of key African governments have already made clear their interest in signing new trade deals with the UK, and in seeking to make doing business with Africa easier, in the same month the UK voted to leave the EU, leaders on the continent agreed to create the Tripartite Free Trade Area (TFTA), the largest free trade area on the continent covering 26 countries. The continent also boasts 6 of the 12 fastest growing global economies, the world’s fastest growing urbanized middle class, a rapidly growing consumer market, and an abundance of natural resources.
Despite this cause for optimism, substantial hurdles remain. Africa has long been known for its governance issues – corruption persists and ease of doing business is poor. In addition, a fall in global commodity prices has given rise to a liquidity crisis across the region, compounded by a lack of adequate infrastructure to help support businesses and productivity. All of this takes place alongside political, security and regulatory uncertainties, each of which has the potential to negatively impact investments.
Consequently, any investor looking to capitalize on the opportunities Africa offers needs to ensure suitable effort is given to understanding the risks of operating on the continent – some obvious, some nuanced, and balancing these against the commercial gains and opportunity cost of operating elsewhere. With this diligence however, sound deal making in Africa can be done, and as conventional economic flows are challenged over the coming years, the continent may prove an increasingly interesting choice for investors.
Hugo Williamson is Senior Managing Director, EMEA at IPSA International, a global risk consulting firm that helps both private and public sector clients manage the risks of conducting their business activities internationally, including in Africa.