Africa on the ground

The internationalisation of Spanish companies in Africa: testimonies and commentaries
África sobre el terreno

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Several African nations have outgrown China recently

Introduction

The African continent is home to 54 sovereign countries, more than a billion people, and unlimited potential for investment and growth. While the world's attention has been firmly focused on China in recent years, several African countries have quietly outpaced China's growth and the trend is expected to continue. However, despite Africa's robust economic activities and promising opportunities, the continent also presents a multitude of challenges: vast landscapes, improving but still limited infrastructure, erratic political climates, multiple countries, each with unique legal rules, health hazards, and complex business environments. All of this poses challenges and difficult challenges for companies and the mobility of their workers. 

Africa, which has seen its GDP triple in twenty years, has moved into the path of emerging economies.  The continent was undergoing a quiet revolution driven by digital technology and was opening up to foreign influences. It had made the integration choice and was about to celebrate the entry into force of the AfCFTA. This trajectory was hit by the COVID-19 crisis. For the first time in more than a quarter of a century, Africa entered recession in 2020. It is estimated that, without adequate support, 39 million Africans could fall into extreme poverty by 2021 with disproportionate effects on women. Nevertheless, the World Bank expects Africa's real GDP to grow by 3.4 percent in 2021, after contracting by 2.1 percent in 2020. This expected recovery from the worst recession in more than half a century will be underpinned by a resumption of tourism, a rebound in commodity prices, and the easing of pandemic-induced constraints1.  

Favorable factors that could lead to better-than-expected growth on the continent include the effective roll-out of COVID-192 treatments and vaccines, especially in African countries, the full implementation of the African Continental Free Trade Area, and continued progress in advancing structural transformation, including digitalization and teleworking provisions. However, the outlook is subject to considerable uncertainty due to external and internal risks.
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It stands to reason that a continent that is home to 54 countries and 1.2 billion people is also home to contradictory developments. Africa has several of the world's fastest-growing economies and a burgeoning middle class. Yet much of the continent remains mired in debt (which is certainly not globally forgivable, good students may indeed be rewarded but never bad ones), wracked by conflict, disease, or terrorism, and plagued by elites clinging to power. Now, while the human cost of the coronavirus pandemic has been less catastrophic than many feared, its economic impact could undo much of the continent's growth over the past two decades. Even during the years when economies across Africa expanded, many people were forced to migrate - either within Africa or to Europe and even South America - because of humanitarian catastrophes or because economic opportunities did not come fast enough for everyone. Those who stayed sometimes succeeded in disrupting the status quo. Civilian-led reform movements toppled regimes in Algeria and Sudan in 2019, and recent examples of independent courts overturning fraudulent elections - as well as other signs of democratic institutions taking hold in formerly corrupt or authoritarian states - offered hope for the health of democracy in Africa. However, a series of recent elections marred by fraud and violence, including several involving incumbents seeking a constitutionally dubious third term, confirms that the phenomenon of long-serving authoritarian leaders - known as 'presidents for life' - remains a problem.   www.btd.es

Geopolitically, European countries and the US want to strengthen bilateral trade and investment in the continent. These moves are driven by an interest in stimulating individual economies to help stem migration flows and counter China's growing presence in Africa. As part of its Silk Road initiative, China has leveraged infrastructure financing deals to access resources and increase its political influence. 

Some African leaders say these activities border on neo-colonialism, as they seek to promote greater continental autonomy. They have taken steps to strengthen internal trade opportunities and facilitate freedom of movement. They are positioning the AU to play a more prominent role in resolving continental disputes and contribute in fields such as disease surveillance. And they are increasingly outspoken critics of international institutions that appear to punish Africa for the benefit of others.

Will popular protest movements, and a younger generation of opposition leaders, succeed in toppling long-ruling authoritarian leaders? As China's footprint on the continent grows, how will leaders in Africa and elsewhere respond, and will the coronavirus pandemic spell the end of the African economic boom that has swept countries such as Ethiopia, Rwanda, and Ghana? 
Africa's rebound will come largely from the business side.

As we enter a new era, we need new concepts and new words when it comes to Africa.  We need to start replacing certain terms that should no longer prevail in the African alphabet. Africa does not need AID but INVESTMENT and FINANCING, as the company understands it and as Africans demand.      

International aid to Africa needs an overhaul. Many African countries remain heavily dependent on foreign aid. However, several studies have shown that foreign aid has failed to deliver sustainable economic growth and poverty reduction. The fact that foreign aid, as currently practiced, has not achieved its poverty reduction objectives in Africa is clear from the data. More than 75% of the worlds poor live in Africa today. In 1970 the figure was 10%. Some projections indicate that it could reach 90% by 2030. Africa is the only continent in the world where the inflow of official aid far exceeds the inflow of private capital. This is problematic, as no country in the world has achieved substantial development based on aid dependence3.   

The other is that foreign aid is not a problem in itself, but that misallocation of resources, corruption, and poor governance limit Africa's ability to use aid. Aid becomes ineffective where bad governance is present, and unnecessary where good governance exists.

1. Summary

The purpose of this document is to show a more realistic picture of what Africa is today in terms of investment, trade, and the presence of Spanish companies on the ground. We will undoubtedly rely on macroeconomic data and trends, but we will give much relevance to what Spanish companies have been experiencing in recent years with the continent. To this end, we will examine their vision of the African reality through their participation in projects, commercial exchanges, relations with Africa, and the support of governmental and non-governmental initiatives and measures in their African adventure. Success and disappointment will also form part of this document, because, in Africa, timing, limited infrastructures, the questionable quality of institutions, and the intelligent or clumsy treatment in personal relations with Africans, among many other aspects, condition and will condition the path towards one or the other.

We have selected the vision of a few medium-sized companies who have seen and experienced the African reality at first hand, which is often different from that offered by the binoculars of a few who, from afar, offer a biased view of the region.
África sobre el terreno

2.    First reflections 

In times of economic crisis, when planning which markets in the world one should target for export, the African continent was not always (and still is not today) at the top of the list, in fact, rarely.

In part, this is due to preconceived views of the continent. The constant images of war and famine do not always make companies believe that they can do business with the continent. Some things have changed for the better, we will cite. Others, however, which are more fundamental, are still in need of improvement, and the latter has a major impact on trade, investment, and the establishment of a company on African soil. 

Above all, I would highlight the desire and the generalized effort on the part of Africans themselves to improve the pessimistic version that many people absent from Africa still have of the continent. There is indeed a desire on the part of Africans to make amends and rid themselves of a past that still haunts them and brought with it corruption, conflicts, famine, disease, and other scourges that hinder their development. 

Africans must also be recognized for their efforts to integrate into the world economy. Integration means participating in world trade as a whole, although they must strive to exchange more of their products and services among themselves. This is still an unfinished business in their balance sheet; they still have to do it. Let us hope that the African Continental Free Trade Area ("AfCFTA") will indeed open the door to this and result in much higher trade rates than those prevailing at present.

Integration also means investing in improved business facilitation and reducing the administrative hurdles and timeframes for any business initiative. The World Bank's Doing Business ranking testifies to this every year, with some countries showing a clear improvement (Mauritius in 13th place, Rwanda in 38th place), but others continue to stagnate or even regress (South Sudan in 185th place, Eritrea in 189th place, and Somalia in 190th place)4.  

The region's economies are performing better in raising finance. In contrast, the region is underperforming in the areas of electricity procurement, cross-border trade, and property registration. For example, the cost of obtaining a permanent electricity connection in Sub-Saharan Africa is 3 times higher than the world average and 52 times higher than in countries in the high-income group of the OECD. In Côte d'Ivoire and Cameroon, it takes more than 200 hours to comply with export border procedures for maritime transport, compared to 13 hours in high-income OECD economies. Sub-Saharan African ports are the least efficient of any region. - Sub-Saharan Africa remains one of the worst-performing regions in the ease of doing business ranking, with an average score of 51.8, well below the OECD high-income economies' average of 78.4, and the global average of 63. Compared to the previous year, however, Sub-Saharan African economies increased their average score by 0.9 points.
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However temporary, we are now in the midst of a pandemic. 

What strengths does Africa have to resist it? 

A continental climate, the youthfulness of the population, the accumulated experience of other pandemics, the African way of life, and still isolation from the rest of the world.

However, we should expect Africa to have a higher incidence of severe forms of COVID-19 in younger patients due to demographics and associated endemic conditions affecting the immune system. Malnutrition, anemia, malaria, HIV/AIDS, and tuberculosis are likely to increase the severity of COVID-19.         

Africa definitely has another narrative that is very different from the rest.

What challenges is Africa facing? 

- The digital sector is still the one considered to be making the most progress, while education, health, and security have deteriorated over the last 5 years.
- Security, education, and the fight against corruption, as well as certain economic issues, not forgetting governance and the quality of institutions, are the priority challenges.
- Africa will overcome the health crisis but the economic crisis may persist.

3. Africa and Spain: opportunities 

A report by the Elcano Royal Institute (Policy Paper November 2020) states that the clearest opportunities in African markets for Spanish companies are: (1) the growing population and urbanization; (2) the growth of per capita income and the middle class; (3) progressive industrialization; (4) the African drive to boost its infrastructures; (5) the interest in exploiting its resources efficiently; and (6) the growing connectivity of the African population. 

Some concepts need to be clarified about this report and the opportunities... 
- Growing population and urbanization. This potential opportunity must be analyzed with caution because as long as the percentage of demographic growth is equal to or higher than that of economic growth, the much-desired African development will be impossible. 
 

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An important characteristic of Africa's demographics, which qualifies it as an advantage, is the youth of its population. The under-15s account for 43% of the population. This, in principle, could be a demographic window of opportunity for growth of the potential labor force (aged 15-64), but to benefit from this demographic dividend, it is necessary that the young people who arrive and will arrive en masse on the labor market can actually find decent and formal employment with higher productivity than the current one. Disadvantage: If this young demographic force fails to enter the labor market, we will find ourselves with a huge mass of hopelessly underemployed in both rural and urban areas. And we already know, and we have examples of what this situation leads to social revolts and new - in this case, African - springs.

Today, 90% of those aged 15-25 are either unemployed or employed in the informal sector, i.e. without a decent job.  One problem to be addressed is migration from rural areas to the cities and from the cities to the coast. This raises another problem, that of how cities are filled and how the human rush to cities is managed. Are Africa and its cities ready for this? 

This would lead us to analyze the concept of insurgent urbanism or the absence of urbanism, the Afropolis model resistant to the Western urban project.
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- Per capita income growth and the middle class

Money, education, consumption - what criteria do we use to define the middle class in Africa? According to the African Development Bank, 350 million Africans belong to the middle class, i.e. one-third of the population. In fact, this figure is highly disputed, as is the term middle class itself. From one country to another, between the capitals and the peripheries, the situations vary. The use of this term according to some would mainly serve to mask poverty and inequality in Africa while transforming the generally Afro-pessimistic perception of the continent into an Afro-optimistic one and attracting investors. Of the 350 million 'middle class' Africans identified by the African Development Bank, 250 million have incomes between $2 and $4.

That is, right at the upper limit of destitution, which would, by definition, exclude them from being considered "middle class".

- Progressive industrialization

Industrialization, because the industry is the engine of growth and Africa has a young and abundant workforce, abundant natural resources, and finally a supply aimed at emerging and mature markets such as Asia and Europe. Africa's industrial future will depend on the progressive transformation of its local raw materials, as well as a basic industry that can be exported to the rest of the world.

- Africa's drive to boost its infrastructures

In this context, the need to finance development, especially infrastructure, has become more pressing than ever in Africa. The continent suffers from a glaring lack of infrastructure. Yet this would allow both the development of economic activity (the lack of electricity would cause a loss of 2 to 4 points of growth per year according to the World Bank) and access to essential needs (340 million people do not have access to drinking water, and 640 million live without electricity). The development of infrastructure in Africa is undoubtedly a basis for economic progress and prosperity for African peoples. It is at the root of a significant improvement in the level of human development and living conditions, poverty reduction, and the achievement of the Sustainable Development Goals (SDGs). Investing in infrastructure has contributed to more than half of Africa's economic growth momentum in recent years, and could continue to fuel this momentum.

By 2050, Africa will be home to 2.5 billion people, almost twice as many as today. In the face of this formidable transformation, the continent urgently needs to accelerate the provision of infrastructure - such as roads, bridges, power, water, and broadband - while ensuring its quality. There will be some 120 cities of more than a million inhabitants, including several mega-cities and a significant number of other very large cities, although two-thirds of the urban transition will take place in smaller intermediate cities, along with new types of rural agglomerations. New models of infrastructure development will be needed in Africa as demographics transform its economic geography.

It should also be noted that Africa's difficult economic geography poses a major challenge to infrastructure development on the continent. Some of the characteristics of this geography that inevitably condition the viability of infrastructure could include: The low overall population density, with 36 inhabitants per km2 and a low urbanization rate (35%) but with a very high urban growth rate (4% per year), as well as a significant number of countries from the interior of the continent with very small economies and still poor intra-regional connectivity and few cross-border connections favorable to regional trade. 

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No trade without viable infrastructure

On the financing side more than ever, the continent will need to develop its own infrastructure financing model that allows private investors to play their full role, as is increasingly the case in emerging countries and, increasingly, in more mature economies. So far, private capital in Africa has only accounted for an average of $2-3 billion per year in infrastructure financing, or around 4% of total investment. In this context, the need to mobilize massive private institutional investors, both international and domestic, seems clear.

- The interest in efficiently exploiting natural resources

Africa's natural resources offer a unique opportunity to foster human and economic development. However, there are major obstacles that prevent African countries from realizing this potential.  

First, there are sustainable development and governance challenges, including environmental problems, desertification, resource conservation, the displacement of communities from their traditional lands, and the lack of clear guidelines for catalyzing growth and development through effective natural resource management. Secondly, weak institutions lead to poor border controls, lack of human security, reduced investment, poor policy choices, and a decline in biodiversity and formal trade. In this context, there is pressure to solve problems quickly. The need to protect natural resources increases as consumption increases and as trade-offs between different resource uses offer more alternatives (e.g. mining activities versus conservation for tourism). On the other hand, persistent poverty, unemployment, inequality, and the growing voice and influence of civil society organizations increase pressure on governments and investors to share the benefits of natural resource wealth. While there is a clear understanding of these needs and challenges, it is not matched by the capacity to respond to them. 

- The growing connectivity of the African population 

CONNECTIVITY IN AFRICA TODAY is as follows: 16% internet penetration,167 million users of which 50% of users are urban residents,51.6 million Facebook users, and 67 million smartphones.

INTERNET IN AFRICA TOMORROW: 50% penetration of 600 million users $75 billion in annual e-commerce sales. 300 billion contributions of the Internet to GDP. 

The challenges in this chapter would be the following as the main challenges in terms of internet accessibility: Lack of sufficient skilled manpower; lack of sufficient competition in the communication industry; lack of clearly defined regulation; lack of governance... In 2000, all of Africa had less international internet bandwidth than Luxembourg (a country the size of the state of Rhode Island). Two decades later, despite some progress, much of Africa remains unconnected and large populations are unable to take full advantage of the benefits of connectivity.
África sobre el terreno

 
4.    The Spanish reality in Africa: direct testimonies

PPP

Patience, Prudence, and Perseverance

Defining priorities are at the heart of any strategy

The efforts made by the Spanish administration: Ministry of Foreign Affairs, Casa África, and the Ministry of Industry, Trade, and Tourism. For example, III Africa Plan, Focus Africa 2023, and commercial and financial strategy "Horizon Africa", as well as seminars and forums by business associations, CEOE, Club de Exportadores, CESCE, as well as some media specialized in Africa, show that both companies and Spanish foreign policy are aligned on the need and opportunity to strengthen Spain's presence on the African continent. However, all of this is not enough, and we are lagging far behind other neighboring countries that are already occupying a table where we are arriving as last-minute guests. What are other neighboring countries doing?

United Kingdom

- Africa-UK "Business as usual"
África sobre el terreno

At the first UK-Africa Investment Forum in London on Monday, January 20, 27 deals worth more than £6.5 billion (7.6 billion euros) were signed. British Prime Minister Boris Johnson brought together 16 African leaders, including Egyptian President Abdel Fattah al-Sisi and Nigerian leader Muhammadu Buhari, and several businessmen working on the continent. This summit, conceived by former prime minister Theresa May during her time in office and musicalized by her successor, is part of the country's post-Brexit political and economic program.África sobre el terreno

Outside the EU, the UK technically has less bargaining power. This could mean that African countries that trade with the UK could get slightly more preferential terms in negotiations. Trade negotiations are always complex and take time and resources. But the post-Brexit UK is pursuing a new partnership with the continent's English-speaking countries such as Nigeria, Kenya, and South Africa.

France

Relations with France are complex. The French hesitate between indifference and interference, and Africans talk of abandonment or neo-colonialism. France has a plurality of objectives with the continent that are at once cultural, humanitarian, economic, geopolitical, and that continues to be partly interested in pursuing a post-colonial relationship. The term Françafrique, created by the first president of Côte d'Ivoire, Félix Houphouët-Boigny (he sincerely believed in a community of destiny between France and Africa), has been much used to characterize the hidden relations, the double language, the confusion between private interests, the raison d'état and political and military games. But the relaxation of these interests and ties led rather to AfricaFrance, with the Africans holding the cards today (when African leaders are the masters of the game and of the time in the face of France, the former metropolis).
África sobre el terreno

France is indeed much more in the trenches than other European countries, but in return, despite its economic diplomacy, it has lost more than half of its market share over a period of 15 years to the detriment of China, which is already a leading supplier to markets such as Côte d'Ivoire, for example.

Despite all this, our neighbor has reacted and, together with the French Development Agency (AFD), launched a project in 2019 for 16,000 SMEs, for which they have released 2.5 billion euros. Despite the crisis, they decided in 2020 to increase this allocation by €1 billion. This innovative measure demonstrates confidence in the strength of the African economic fabric and the creativity of business leaders, especially young people. Working only through governments is no longer a policy. Working through businesses and entrepreneurs is the policy they want to promote in Africa. Emanuel Macron and his diplomatic team constantly travel to the continent and receive numerous African leaders. French policy on the continent remains a priority.

We could extend this to other countries such as Morocco, India, Brazil, and Turkey, which are now major trading partners and investors on the continent. These countries are present and emerging in their relations with Africa. China would merit a separate document. As for the European Union as a whole:
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In March 2020, a joint communication to the European Parliament entitled "Towards a comprehensive strategy with Africa" outlined the new joint strategy for the EU-Africa partnership. The text recalls that Africa is Europe's 'twin continent'. Indeed, several African Union (AU) structures resemble those of the European Union. Increased regional integration has been effective since the creation of the Continental Free Trade Area, but remains slow. The EU draws on its experience with the customs union and the single market to support the construction of the African Continental Free Trade Area.

However, all these documents lack one follow-up aspect. This is the obligation of the two partners, and thus of the 82 states (27 + 556), to have systematic and legible information on the EU's financial commitments7 and their results. It is at this price that the relationship will be "mature and exhaustive", and that we will see more clearly the multitude and effectiveness of the programs and donations that give rhythm to relations between the EU and "Africa".
 

SPAIN IN AFRICAÁfrica sobre el terreno

Based on trade and investment statistics, Spain has a long way to go in Africa. There has been a better trend in terms of exports in recent years, but the investment is still not very representative iii.  According to Datacom, Sex, and the Spanish Chamber of Commerce, the African continent was the destination in 2019 of 6.4% of total Spanish exports, the origin of 8% of Spanish purchases abroad (including oil and natural gas), and the destination of 2% of Spanish investment outside our borders (Datainvex)ix.  Morocco, Algeria, Egypt, and South Africa account for 77% of sales abroad.

In terms of difficulties, the Spanish administration is not the solution to the main obstacles pointed out by companies that have to do with the destination country, such as bureaucracy and administrative barriers, collection and payment problems, and corruption. However, it is also true that the experience and advice of private companies on certain issues may help the Spanish administration to focus and guide Spain's foreign economic policy in Africa.

A greater understanding and better collaboration between the public sector and private enterprise is therefore called for.
To this end, we wanted to gain first-hand knowledge of the experience and knowledge of some Spanish companies that have been working with Africa for some time, are witnesses on the ground, and who tell us about the different reality they experience in their exchanges and relations with the continent. We did not want to carry out a survey with a standard form based on response percentages. We preferred to hear the direct testimony of 3 or 4 companies with extensive experience in dealing with the African continent.

5.    TESTIMONIALS 

This chapter corresponds to companies such as BTD, Radiotrans and CometCigars, 3 examples to take into account and to illustrate.

BTD 
 

Enrique Puente Fernández, director general
Jose Antonio Suarez, Vice-President

To explain BTD's position in Africa, the first thing to understand is that Africa is neither homogeneous nor does an African market exist, since the two major geographical divisions of Africa, North Africa, and sub-Saharan Africa, also define completely different markets in terms of both size and risks. And if we also consider that Sub-Saharan Africa is further divided into four different sub-regions: East Africa, West Africa, Central Africa, and Southern Africa, to treat the African market as one is, in our opinion, one of the first mistakes that companies make when they arrive in Africa..., which is why BTD works mainly in Sub-Saharan Africa and mainly in West Africa. After 17 years working in Africa in the basic infrastructure, water, education, and health sectors, and taking into account that in these sectors the main investments depend on the public sector, he identifies the problems and opportunities that we encounter. The first problem is that of project financing. Taxation in most Sub-Saharan African countries is simply non-existent, which makes the informal economy the norm, which is why, for substantial progress to be made in most countries, what is required is serious fiscal discipline, for which imaginative solutions are being sought, such as outsourcing tax collection through international operators, but without much success so far due to the lack of clear tax legislation. This lack of taxation means that the only way to tackle basic infrastructure projects is to seek multilateral funds from the African Development Bank, bilateral funds through buyer credits, with very high-risk perceptions from the ECAS or with cooperation funds mainly from Europe (France, UK, Portugal and, to a much lesser extent, Spain). All these solutions tend to be long and tedious, which leads governments, urged on by their populations, to throw themselves into the comfortable and quick arms of Chinese funds, with which it is very difficult to compete. If Spain, as it announces, really wants to have a significant presence in these markets, it should provide agile financial structures without disproportionate costs to address both direct project financing and Apps or concessions, demanding in return clear laws and guarantees overtime for Spanish companies that make these investment efforts.

RADIOTRANS

www.radiotrans.com.

Domingo Pasaron. RT International General Manager.
Domingo Pasaron. Director-General of RT International.

Radiotrans is a transnational company dedicated to the engineering, marketing, supply, installation, commissioning, and after-sales service of telecommunications equipment and systems. Radiotrans started its African operations in Morocco with the creation of a branch office in 2000. From there we developed the North African market. Taking into account that in these markets our product is considered sensitive to security, 90% of sales are destined for public security, mainly the Ministry of the Interior and Defence. Sales in these cases are almost always with Letters of Credit, which limits the financial risk. The most liberalized private market is the Moroccan market, as sales in Algeria and Tunisia are very limited. Having qualified staff in Morocco and our own warehouse made it much easier for us to develop the business, and the French tradition of the cheque with criminal liability was from the beginning the most used form of payment and allowed us to offer credit with very low risk. In 2005 we began to explore West Africa's sub-Saharan market, where the type of client and the operation changed radically as most of the time, given the very high cost of letters of credit for private individuals and the small amounts involved, they were cashed in advance.  The key was to create a network of trusted distributors, which required a significant investment with a slow return, but which in the long run allowed us to gain the trust of local companies. This, together with a corporate effort in support and integration, allowed us to access larger projects where the letter of credit is the generalized payment tool. For us, Africa is divided into three very distinct zones: North Africa, French-speaking West, and Central Africa, East Africa, and, as a separate case, Nigeria. We do not have a presence in Southern Africa at the moment.  

In terms of on-site training, local staff training and remote support have been key to the development of our business from the very beginning. During the last year, we have developed webinars and remote courses that have been very much appreciated by customers. 

In terms of bureaucracy and administrative hurdles, our most recent experience in East African countries is much better than in West African countries. More guarantees and more agile bureaucracy. Uganda is where our work is best and most successful, mainly because of the administrative facilities, but above all because of the capacity and presence of our local partner, possibly the best we have in Africa. Confidence built up over time. 

About collections and payments, CESCE has never offered us competitive solutions in Africa, in our opinion t, the objective should not be to make money, but to maximize the opportunities for exporting companies, assuming the greatest possible risks. Today we know how aggressive the Chinese are in large infrastructure projects, but lately, ECAS such as the German Hermes, the UK Export Credit in the UK, even EGAP in the Czech Republic, and COFACE in France have become more active. This makes it very difficult for Spanish companies to bid for large projects with a chance of success. In medium-sized projects for us, up to half a million USD, the difficulty for the client is that the budgets are respected, and the lack of firm budgets leads to situations like the last one we have experienced. A project in DRC signed in Nov 2019, has just been approved for this year.

In conclusion, having a plan with allocated budget resources and patience and perseverance is in our view the key to success. Finding the right partner with resources and local influence is a necessary condition for success in each country.
 

Cometcigars

Compañía de Tabacos del Mediterráneo, S.A. (COMET) https://cometcigars.com/

https://cometcigars.com/
Enrique Puente Fernández, Director General

Investment in our case has been made almost entirely with our own resources, as this is one of the fundamental problems in doing business in Africa: financing is very expensive and it is even difficult to obtain financing from suppliers as soon as you tell them that the company to be financed is African, even if it is owned by a European company. In the beginning, we had some political risk insurance coverage, but in the end, it did not help us much, as when an incident occurred involving the policy, we did not use it, because if you wanted to continue doing business in the country, you could not claim the local administration (as was the case), as you would be up against them as soon as the insurance company repeated the claim against the administration, once it had paid us, so we had to pay for the demerit. On the other hand, at least in consumer products, as in our case, if you want proper penetration in the channel, in many cases, it is necessary to provide some credit, especially when it comes to new brands, and this is a further obstacle, as there are no means to guarantee debts or even to obtain reliable information on the financial situation of the companies, as in Europe. This is solved by keeping a close eye on customer balances and being very rigorous in complying with the agreed conditions, providing credit only to the ones you already know and have no problems with. Even so, there have been occasional problems. Bureaucracy in these countries is indeed another big problem, against which you have to be patient and persistent, but of course, things go at a different pace than what we are used to here. In terms of personnel, we have local and expatriate managers, we believe that this is the best formula for success, and we try to train local staff by complying with the necessary work and control procedures, but it is also hard work.

You also have to have a certain ability to adapt to the local culture of the region, as imposing the European way of doing business just doesn't work.
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6.  Conclusions 

Africa is a continent still little explored by Spanish companies. There is a differential vision here among those who have been working with the continent for years and identify opportunities that other more global observers cannot detect. Africa, however, is not an easy place to do business given its complex geography, infrastructure gaps, and relative economic and political volatility. Nonetheless, we think investors and large, medium and small companies should focus on Africa today. There is plenty of room for SMEs on the continent. The key is to plan your Africa strategy correctly. The long term must be part of that strategy, as well as the choice of the right country to do business in. Africa is not a country (there are still some who unwittingly miss seeing the continent as if it were a country). We should not think that doing business in Nigeria is like doing business in the Ivory Coast or South Africa as in Angola or in Algeria as in Morocco. If we experience it on the ground, we will realize this, and if we also get the necessary information provided by international organizations such as the World Bank (doing business classification), the African Development Bank, IFC, OECD, etc., we will realize the different realities that the African continent offers.

Information, and even more so, correct information, is a necessary vehicle for decision making, as it allows us to avoid and manage the risks that the company would face when it decides to leave its borders. In short, converting information data into intelligence, which will allow the company to decide and act with a better commercial and investment strategy.  

To enter a new market that is not our own, like any African market, especially those with weak regulation, it is necessary to seek advice before taking a step. Prior inspection on the ground, the necessary consultation with those who have already been there, the need to be accompanied by an international business intelligence consultancy, as well as the logical approach to legal and tax advisors, without forgetting the ideal financial institutions in each of the countries, are actions that must be carried out from the international business strategy of a company.  

Finally, in the analysis of potential future markets, it is also necessary to define the competitive map and analyze the commercial, regulatory and political strengths and weaknesses of competitors to obtain a clearer idea of how to obtain a commercial advantage. For all these reasons, Africa deserves special attention, as well as an in-depth analysis of what is African, and not to remain on the surface, which is, unfortunately, the case in many circles. It is not easy to describe Africa - it is a vast continent. We say Africa, but it's a convenient oversimplification. And as Ryszard Kapuscinski said in his book Ebony: "In reality, except as a geographical appellation, Africa does not exist.”

NOTES

  1. African Economic Outlook 2021 | African Development Bank ... 
  2. https://www.afdb.org 
  3. The Paris summit on Tuesday ( May 18) pledged to help Africa overcome the COVID pandemic with a "New Deal" that will streamline global financial power to replenish depleted coffers and speed up the slow roll-out of vaccines. The signatories will push for the IMF to quickly allocate $650 billion worth of Special Drawing Rights (SDRs) to all its members, of which some $33 billion would go to Africa.
  4. https://theconversation.com/international-aid-to-africa-needs-an-overhaul-tips-on-what-needs-to-change-160710 
  5. Doing Business 2020 Fact Sheet: Sub-Saharan Africa. Source: Doing Business database. Note: Rankings are referenced as of 1 May 2019 and are based on the average of each economy's scores for ease of doing business in the 10 topics included in the aggregate rankings. For economies reporting data covering two cities, the scores are a population-weighted average of the two cities. Doing Business 2020 rankings are calculated based on the score rounded to two decimal places. The ease of doing business score shows how close each economy is to global best practices in business regulation. A higher score indicates a more efficient business environment and stronger legal institutions. Doing Business 2020 Fact Sheet: Sub-Saharan Africa What ... https://www.doingbusiness.org    DB20-FS-SSA https://www.wto.org/english/tratop_e/devel_e/a4t_e/s2Jean-Guy_Afrika.pdf 
  6. The Sahrawi Arab Democratic Republic (SADR) is recognised by the African Union and participates in the organisation's various summits.
  7. For example, the eleventh EDF (2014-2020) has a budget of 30.5 billion euros. France, Germany, the UK and Italy contribute 20.58%, 17.81%, 14.68% and 12.53% respectively (Cf. "For a redefinition of the partnership between Europe and Africa", MEDEF, February 2019).
  8. Spanish investment in the African continent appears to be of little relevance, given that, despite a notable increase in 2019 compared to previous years, during the period 2000-2018, it does not exceed 1%.
  9. Elcano Royal Institute Policy Paper 2020 Spanish companies in Sub-Saharan Africa: strategies, experiences and risks/Ainhoa Marin. Datacomex and Datainvex.