DIVERSITY NEWS
BY THOMAS W. LARYEA
AFRICA: NOW OPEN FOR BUSINESS WEIGHING THE OPPORTUNITIES AND RISKS
OPPORTUNITIES ABOUND FOR COMPANIES SEEKING TO SHARE IN AFRICA’S RAPIDLY GROWING MARKETS. T e International Monetary Fund projects that over the next fi ve years, 12 out of the 20 fastest-growing national economies will be on the African continent.1
With economies at home relatively fl at, U.S. 44
companies cannot aff ord to overlook the potential for expanding growth presented in Africa (and in other dynamic developing regions). While the challenge of development in many African countries should not be underestimated, the rising middle class and ensuing breadth of needs across industries including power generation and distribution, transportation, telecommunications, agribusiness, oil and gas, fi nancial services, healthcare, education, housing, and consumer goods provide an array of prospects for foreign investment. Although the region’s legacy of political instability and corruption continues to be a concern, economic gains have gone hand-in-glove with improvements in governance and security in many of the countries in Africa.
Nevertheless, companies that are seeking to invest in
Africa should conduct risk-based due diligence as part of their decision-making process. It is also important for companies to give early consideration to potential post-closing compliance programs and internal controls enhancements that can help mitigate structural, third-party, and other potential risks.
Per ceptions and the Strategic Importance of Africa
Our sense is that many within the international business com- munity have not fully realized this evolving picture, or have not found the strategies that may allow them to benefi t from it. A considerable gap persists between stereotypical perceptions of Africa as a single place of prohibitive risks, and the evolving reality of the rising potential within an extraordinarily diverse and vibrant continent. In order to inform a process to bridge this gap, we asked senior executives at multinational companies about their business objectives and experiences in Africa. Our survey group was comprised of chief operating
offi cers, general counsel, and other senior executives who are responsible for legal, compliance, and corporate business
DIVERSITY & THE BAR® SEPTEMBER/OCTOBER 2013
development. T ey came primarily from U.S. companies with annual revenues of $250 million or more (more than a third had revenues of $10 billion or more). Accordingly, the survey results do not purport to present a “world view.” On the contrary, we recognize from our own experience and cli- ent work that in a number of respects, the U.S. business and legal communities have lagged behind others in reorienting their perspectives of the business opportunities in Africa. Now is a chance to catch up. In conducting this survey, we hoped to better understand
the extent to which senior executives were aware of opportu- nities in the region and to identify any concerns they had. We wanted to determine whether companies were already invest- ing in Africa, and if so, in which countries. We also sought to identify industries that viewed Africa as strategically important and assess the attractiveness of markets in Africa, relative to other regions. We asked participants how well they understood Africa’s business cultures and their risks, and to identify factors that might increase their likelihood of invest- ing there. Here is what they had to say.
Ind ustry Insights and the Attractiveness of Africa
According to our survey, many companies have yet to enter Africa. More than two-thirds (68 percent) of respondents indicated that their companies are currently not doing business in Africa. Of those that are doing business in Africa, however, nearly 60 percent said it was important to their overall busi- nesses. Within this group, business and professional services (16 percent), energy (16 percent), and technology (13 percent) companies indicated that the region is critical to their busi- nesses. Conversely, companies in chemical (3 percent), real estate/construction (3 percent), and healthcare/life sciences (3 percent) said that Africa was not important strategically. We wondered which countries were perceived as the
most attractive among respondents doing business in Africa, particularly in light of the fact that African markets are diverse and at various stages of economic development. South Africa ranked the highest among our respon- dents—72 percent indicated they did business there. Egypt
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