Business Opportunities In Africa

Africa is the second largest continent and demand for consumer and capital goods is always high in the local markets. Most African economies rely on imports to satisfy the needs and requirements of their large population. If you want to export goods and products to Africa, good research and knowledge of the legal regulations are a must for your success. 

The IMF estimates that economic growth in sub-Saharan Africa will cross 6.5% in 2025. Africa hosts the majority of the top ten fastest growing countries in the world.
The World Bank believes that most African countries will reach “middle income” (at least US$1,000 per person a year) by 2025 if current growth rates continue.
Nearly 65% of the labour force in Africa is expected to have some secondary-level education by 2025.

Africa has around 125 million people with household incomes exceeding $5,000 – meaning they can direct more than half of their income towards discretionary spending. It’s expected that this figure will cross 150 million by 2025.

Exporting to Africa looks a much rosier prospect than in the past and already countries such as the US, Brazil, China and India have increased their business dealings with the African continent. 

Main Products Exported To Africa

Demand for many consumer and capital goods has been growing steadily across many African markets. If you are looking to break into the African market, there are many norms that you should consider as an exporter. There are many products and services that are in demand in the African markets. Here, we will discuss the top products to export to Africa:

Pharmaceutical Products
Pharmaceutical products such as different medical drugs and vitamins as well as health supplements are in big demand in Africa. Since the industry of health and pharmaceutics is in constant development, investing in such goods is one of the best decisions to make nowadays. Also, African people suffer from a variety of conditions, especially in the rural environments where medical drugs are not so accessible.

Iron and Steel
When it comes to raw materials, exports of iron and steel which are much needed on the African market is indeed a profitable business. Africa can’t produce such metals due to lack of funds, and the demand is high especially in the urban areas of the continent.

Automobile Spare Parts
Automobiles and its components such as spare parts, tyres, batteries, lubricants and different mechanical pieces needed for repairs are also very much in demand in Africa. Many countries have been exporting a wide range of automobile spare parts to Africa and making a neat profit.

Demand for automobile spare parts and accessories in Africa is expected to reach US$18.5 billion in 2025. Led by countries such as Kenya, Ethiopia, Tanzania, and Uganda.

African demand for auto parts and accessories is growing 11 per cent year-on-year according to analysts Frost & Sullivan. There’re nearly 22 million vehicles on the continent’s roads today, creating demand for parts and accessories worth more than US$8 billion per year.  It’s therefore become an increasingly significant market for global manufacturers of accessories and engine components such as bearings, brake pads, spark plugs and filters.

Countries such as Nigeria, Kenya, Uganda, Ghana, have witnessed double digit growth in demand of parts in the past five years. Focusing on the tremendous opportunities of doing business in the fast-emerging African market, there are currently more than 21.6 million cars on the continent’s roads which make up for nearly 70 per cent of spare parts consumption.

Cars
Used cars are being imported into Africa from all across the world. However, exporting cars comes with a lot of new regulations and some of them keep changing. You have to consider the value of the car, the demand present on the market as well as the financial capabilities of African people. Used cars are also in big demand in African countries.

The African market for passenger vehicles is emerging as one of the most important re-export markets, growing more than 11 per cent year-on-year, and estimated to be worth US$20 billion in 2018 and based on the double-digit growth of demand in key Sub-Saharan countries, the value of the Africa’s automotive market is likely to reach US$28 billion by 2022.

Textiles Clothing
One of the main exports to Africa is textiles and different clothing. Clothes will always be a must and a basic necessity which is why they are a great opportunity for those wanting to export to Africa. However, your best bet as an exporter is to supply clothes and textiles in urban areas of Africa because they will not sell so good in rural villages or undeveloped regions.

Used clothing has diverse names in the various African countries. In Rwanda, it’s chagua, in Kenya, mitumba, and  salaula in Zambia.

The global trade of second-hand clothing has a long and rugged history. It became prominent due to its affordability and to the surge in liberalization policies in the early 1990s. Second-hand clothing provides work for millions of resellers, distributors and market stall holders in developing markets, particularly in East Africa. But the decision by some countries to cut its imports of second-hand clothing in order to encourage local textile manufacturing has brought forth charges of protectionism from developed country exporters.

Rice
Rice is being imported into African in increasingly large quantities in recent years. Countries like Nigeria are big consumers of rice, and there is never enough on the market. Imports keep coming to support the demand which is a great opportunity for foreign exporters. Even if Africa started producing their rice, the quality is still not the same as the imported rice. That is why many African people prefer to consume rice from other countries like India, China, Thailand, Pakistan and Malaysia. Local production of rice is also still very low due to lack of financial possibilities and no investments. Some rice producers decided to set up a rice farm in Africa to produce such goods locally. It helps them skip the entire import-export process which can be time-consuming and even unprofitable in some occasions.

Rice is one of the basic goods consumed in Africa and mainly the white type of rice. But even so, some countries consume it more than others. While rice is also locally produced in Africa, it is never enough to supply for all the demand on the market. Rice production in Africa is constantly increasing, and the authorities try to find the funds to support this industry as well.

Some African countries like Benin try to improve their rice production, but they are also exporting it to Nigeria. And the examples go on and on because this is a common practice within the African continent.

Plastic Raw Materials
Plastic raw materials are also a great category of goods to import in Africa because they are highly functional and tend to come at a fairly low price as well. The demand for plastic increased along with the urbanization process that took place in the past decades in Africa. More people live in cities, and the need for plastic materials and objects became a real struggle. Especially in countries like Nigeria where more than half of the population lives in urban areas. Even if other countries try to stay away from plastic since 2015, Africa still relies on this material mainly because it is affordable for all types of processes.

Opportunities For Export To Africa
There are enormous opportunities in Africa but you have to thoroughly research the market. If your business produces machinery and equipment, chemicals, petroleum products, scientific instruments or foodstuffs then exporting to Africa is a great idea.

It’s important to have an agent who can travel to your target market on a regular basis and has established a network of customers there. This allows you to concentrate on supply and production. At some point though it’s important for you to get on that plane and travel to Africa. It’s important to meet people face-to-face and build proper relationships but make sure that you learn about their culture to avoid any potential embarrassing mistakes.

Some countries such a Nigeria offer both complimentary and fee-based market research tools to help possible exporters from other countries to analyze the market and gain insight into specific sectors.

Other advantages with Africa are lower salaries and rents, improving infrastructures and growth in those who have broadband.

There are risks though as in any emerging markets. These include crime and corruption. Also in a country such as South Africa you have to respect laws that demand a certain percentage of employees, directors and shareholders are black.

In Gabon there are strict rules that have to be adhered to. These protect the health, safety and environment of Gabon’s citizens from sub standard imported goods. Exporters need to provide a Certificate of Conformity for Customs clearance. 

Increased Trade With Africa

Exports from Africa totaled US$476.6 billion in 2018. That dollar amount reflects an -11.3% drop since 2014 but a 12.8% year-over-year upturn from 2017 to 2018. In comparison, global exports from all countries worldwide equaled $19.228 trillion in 2018, rising 1.2% in value since 2014 and appreciating by 8.5% from 2017 to 2018.
Africa’s exports represent an estimated 2.5 per cent of total world exports in 2018.

Based on statistics from the International Monetary Fund’s World Economic Outlook Database, the total Gross Domestic Product (GDP) for Africa calculated on a Purchase Power Parity (PPP) basis amounted to roughly $6.813 trillion in 2018. Therefore, going by these figues exports account for about 7 per cent of Africa’s total economic output.
Given Africa’s population of about 1.264 billion people, the total $476.6 billion in 2018 exported goods originating from continental Africa translates to roughly $375 per African resident.

In conclusion, it’s important to break into a growing market as early as possible. Africa offers more than one option, and if you are planning to export to Africa you have many chances of success. 

Make sure you do your market research, employ reliable agents and distributors to keep a close eye on your investments and make sure that you comply with all the relevant laws in the country you are exporting to and exporting to Africa really can pay dividends.