IT and business - 2 unavoidable paths to Africa’s future (II)

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.

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: 

1. Singapore

2. New Zealand

3. Denmark

4. Republic of Korea

5. Hong Kong SAR, China

6. United Kingdom

7. United States

8. Sweden

9. Norway

10. Finland

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

32. Mauritius              

144. Mali

165. Guinea                           

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.