5 key challenges for doing business in Africa

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1. Find a skilled workforce

According to The Guardian, the world’s failure to help Africa deal with labor shortages will negatively affect global affairs. The labor shortage on the continent and the lack of skilled professionals are affecting companies expanding their operations. Despite a young population, skilled labor is scarce in Africa as many countries misalign training and schooling programs. In addition, low education budgets and weak education systems that fail to develop skills for the labor market are other reasons.

According to EG Scholars, Niger, Burkina Faso, Mali, Central African Republic and Ethiopia are the top countries with the worst education system in 2022. So if you’re looking to start a business in Africa, consider attracting talent providing support and providing on-the-job training. Africa has a highly educated population capable of surpassing any job with the proper training. Additionally, encouraging staff with the potential to learn new skills will help your business fill the skilled labor gap.

2. Electricity

According to Africa Energy Portal, despite improvements made by different governments, electricity remains a major challenge in the region. With over 600 million Africans without access to electricity, the continent needs a significant increase in investment in electricity. Electricity is essential for businesses to control the cost of energy and production.

Many companies operate industrial machinery and motors, ventilation, office equipment, lighting and heating facilities that require electricity to generate revenue. Lack of access to electricity limits the quality of life, the provision of public services and modern economic activities in Africa. Insufficient supply often results in loss of productivity and lack of revenue for businesses.

Despite the electricity challenge, it is essential to focus on African countries that are making giant strides in the sector. According to Energy Capital Power, Egypt, Morocco, Tunisia, Algeria and Gabon will be the most electrified countries in Africa in 2022. Consider renewable energy alternatives and how to finance them collectively or individually before starting a business in Africa.

3. Supply chain challenges

According to Defense Web, Africa has unique supply chain challenges with its population and size. Additionally, the continent has weak infrastructure and movement between countries can disrupt your business’ supply chain. Facilitating face-to-face business transactions is not easy, but moving goods to the end consumer in Africa is also difficult.

Many African businesses have gotten creative with moving goods due to supply chain and transportation barriers. For example, companies like Dangote and Coca-Cola have armies of entrepreneurs who sell products by bike and on foot to the end consumer. If you want to establish successful business bases in Africa, consider addressing innovative ways to bridge the supply chain gap. Partnering with local service providers and communicating and optimizing inventory are other ways to approach the distribution challenge.

4. Government regulations and policies

According to African Liberty, government regulations and policies hinder the growth of African businesses. Governments create principles and frameworks that impact business; these rules change from time to time. Regulations and policies influence interest rates, reducing customer spending and business revenue growth. Obtaining regulatory permits, registering new properties, protecting investors and starting a new business can be difficult in Africa due to changing policies.

These policies also affect the ability of companies to develop long-term business growth plans. While many countries are dramatically improving the ease of doing business, Africa needs more work to compete globally. Africans generally believe that no one fights and wins government, but you can lay the foundation for a successful business with a team. Therefore, companies need to be more proactive and strategic in their dealings with African governments, especially when challenging private sector policy makers.

5. High cost of securing capital

According to the World Bank, Africa has a high cost to obtain capital to start a business compared to other regions. Securing capital from African banks to start a business comes with high interest rates, and repayment affects business reinvestment programs to fuel growth. In addition, bank rates are high due to a lack of means to prove the solvency of individuals and companies. This is why many African businesses fail to scale and expand beyond the shores of the continent.

Meanwhile, fintech companies are solving the problem of corporate funding at a fairer pace. Consider securing fintech business capital fairly to build a successful business in Africa. Establishing a successful foundation for your business in Africa is different from anywhere else. You have little success if you don’t address these issues before you start the business. Opportunities abound in the African market if you can develop a sustainable strategy for business growth.

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