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Doing Business in Africa: will small businesses get a piece of the pie?

The August 4-6, 2014 African Leaders Conference, hosted by President Obama made headlines worldwide. The White House blog stated that the Summit was the largest event any U.S. President has held with African heads of state and government. President Obama, his Cabinet members, and business executives from the U.S. and Africa, Members of Congress, and members of civil society discussed critical issues concerning the peace, security, and economic development of Africa. The US Africa Business Forum focused on how US companies can do business with African countries. Vice President Joseph Biden, Secretary of State John Kerry, Secretary of Commerce, Penny Pritzker and business leaders from major US companies and Africa participated in this forum as speakers, or panel members. Former President Clinton was a panel moderator and President Obama provided closing remarks for the Forum. The participation of the highest level of US leadership in business and politics in the US Africa Business Forum indicates that doing business with Africa is a national priority. The first paragraph of the US Africa Business Forum agenda captures the economic opportunity in Africa.

“Africa is the world’s next great economic success story. With growth expected to reach above five percent in 2015, the continent is now home to six of the ten fastest growing economies in the world. Real income has increased more than 30 percent over the last 10years. According to the African Development Bank, the middle class in Africa has tripled over the past three decades to 355 million or more than 34 percent of the population. By
2040, Africa will have a larger workforce than China.” (Source)

The US Small Business Forum provided information and networking opportunities for US and African companies to develop symbiotic business relationships. The question is will small businesses be able to get a piece of this large business opportunity? The answer is yes, but small, women-owned, minority, and veteran owned businesses must be proactive and strategic. The process is similar to gaining market share in federal government contracting whose foundation includes, market research, business planning, and relationship building. Also consistent with the entering the federal market, entering the African market is a daunting challenge and only the most business savvy and strategic companies will be successful. Africa is a complex continent with lucrative business opportunities as well as great risk. The 2004 report, “The Experience of South Africa Firms Doing Business in Africa” captures the rewards, complexity and risk of doing business in Africa.” However, China has demonstrated that profitable business can be done in Africa with the right strategy.

A strategy for small business success in Africa should be based on the general business model for entering a new market:
1. Identify a product or service needed in one of the Africa countries.

2. Develop a business plan to determine market, competitors, barrier to entry, such as politics, infrastructure, and political stability of the country. Research and due diligence are a must! All that glitters is not gold! Research assistance is provided by the Department of Commerce, the State Department, the Small Business Administration, and United States Agency for International Agency, the Department of Agriculture and other federal agencies. Also states have important agencies and offices dedicated to assisting small business with international trade and business development. Universities are also important resources. In particular Historically Black Colleges which often employ significant numbers of faculty members from Africa and have set-aside status for doing business with the federal government.

3. Relationship building and strategic partnerships are essential to success for a small business entering the federal contracting market but the requirement to build relationships exponentially increases if a small business wants to do business in Africa. The fastest way to success is to have a product, service or relationship that adds value to larger entity doing business in Africa or is attempting to do business in Africa. Historically Black Colleges can play a critical role as strategic partners as well as major universities and nonprofit organizations.

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