This is a short article I sent around in March 2011.
Provinceroot International is a project developer and advisory firm focused on sub-Saharan Africa. I founded Provinceroot International (www.provinceroot.com) in 2010 to pursue a broad range of opportunities in Africa and to help other businesses do the same. Here are my top 5 tips for working on one of the fastest growing and most exciting places in the world today:
1) Be on the ground !
If you want to do business in Africa, you need to be in Africa. The right amount of time, and the timeline for establishing your presence, varies for the individual project.
If you set up a meeting with a company or government official, don’t fly out on the next flight after the meeting. Spend several days or a week, preferably including a weekend. Schedule meetings with embassy staff, local banks, contractors, distributors, or whomever you might be in contact with if your project goes forward. This will be time well spent.
If you do stay, don’t be a tourist. Look for friends of friends or other introductions to people who can take you out to dinner, local coffeeshops or bars. Try to understand what life is like in that city or town – you may very well be living there in a few months, or supervising someone who does.
As your project advances, one week at a time is not enough. You’ll need to spend two or three weeks. At some point you will need to open an office with a manager and support staff for a full-time presence. If that manager is not you, you’ll still need to visit regularly (see point 2 below).
While email, cellular phones and skype are useful tools, they cannot replace time in country.
The trick, of course, is finding people that are flexible enough to spend time on the ground and experienced enough to have high impact.
2) Include experienced commercial and investment managers
As your project matures through development phases, you’ll need to make sure that your on-the-ground team is in close communication with senior management, the board of directors, etc.
Many projects in Africa, especially ones in infrastructure, end up being a broad partnership between many diverse institutions, including the primary developer and/or equity investor but also other shareholders, lenders, insurers, sovereign governments and all the participants in the host country. Someone needs to be coordinating and constantly re-assessing the process between all of these parties, and especially the impact on your organization.
You will need a manager with commercial and investment experience to be this coordinator. And Tip #1 applies here: this manager needs to spend time on the ground to be most effective.
Do not treat the project as simply an engineering or sales task ! You need a focused, experienced executive to oversee the process.
3) Consider political risk insurance
Political risk is one of the largest concerns about investing in emerging markets for many investors in North America and Europe. You should know that there are ways to mitigate many of the risks.
Political risk insurance does not just cover “gunboat expropriation,” i.e. the host country government seizing assets using violence (though to be sure part of the policy can cover outright political violence).
Many other political risks can be covered such as the risk that the central bank will not allow local currency to be converted or transferred out of the country. “Creeping” expropriation, a more subtle way for a government to apply pressure on a project by eroding the commercial and legal framework, may also be covered.
Both the Overseas Private Investment Corp. (OPIC) and the World Bank’s Multilateral Investment Guarantee Agency (MIGA) offer sophisticated packages of insurance to cover these risks.
4) Establish a – credible – network
You may be contacted by someone who is related to a government official, or someone with a permit for a site and a special connection to a minister. If you work with them, they promise, you’ll have a carefree project in no time.
In almost every case, just say no.
If you are interested in doing business in a country, you’ll need a high-grade network. Contact your embassy’s commercial service and economic officer. If a law firm you have worked with has a local office, set up a call with -- or better visit -- one of the partners. Consult with any of the development finance institutions (DFIs) active in the region. Meet with regulators, investment promotion agencies and privatization commissions. If you can raise interest in your project by contacting these entities you will be able to credibly step forward to the ultimate decision makers in the country.
Good local representatives are critical, but in general a credible rep is just one element of a broad consortium to setting up operations.
5) Talk to lenders early
Whether you are using commercial banks or DFIs, involve them in the process early. Early stage feedback is critical if debt is an essential component of your investment.
Plus, if the lender supports your idea it can provide a letter of interest or commitment letter during the initial development phase to lend credibility and peace of mind. Most governments will want to know that financing is in place before authorizing your project.
DFIs especially can be highly effective partners in any development process. Because DFIs have high-level contacts in the governments themselves, they can assist in a broad range of issues once their support for a project is established.
