How to succeed when doing business in Africa? Klaus Endresen Oslo, September 29th 2011
A matter of perspective
‘’There is more genetic diversity between different African people than between all the races of the world combined. So the difference between Asian and European is less than between Amhara and Hausa’’
Africa • • • • •
995 million people > 410 distinct tribes 30 million km2 > 3000 languages Heterogenous, open, flexible
Norway • • • • •
5 million people 2 population groups 0,3 million km2 2 Languages Homogenous, closed, square
Squaring the circle = Adjusting the mindset Cut some edges off the square frame of mind Fill in on values and attitudes
Survey • Suggest: ‘5 most important success criteria for a Norwegian company that wants to do business in Africa’ • Sent to 25 people (11 African, 14 Nordics) • 19 respondants (10 African, 9 Nordics) • All are senior people in business or government • Many in energy sector, but also other industries • 89 suggestions (46 – 43; Africa and Nordic) • 19 suggested criteria/groups of criteria
Main 5 criteria/groups ‐ I 1: Good country and local knowledge. Cultural sensitivity and social skills. Understand and respect local values and systems 2: Get local partner; after careful selection. Be prepared to help fund and develop the local partner. Local partner needs to be committed. Develop personal relations
Main 5 criteria/groups ‐ II 3: Be aware of local skills shortages, even if not locally admitted. Use resources on technology transfer, training and education. Use newest technology 4: Work closely with host country authorities. Draw on Norwegian/Nordic individuals/reps already in the area
Main 5 criteria/groups ‐ III 5: Never assume lower standards are acceptable in Africa. Product/Service must be good and be needed. Client selection important. Be clear on terms and conditions
Some alarming results! • 7 of 10 Africa repondents, and 0 out of 9 Nordics stated specifically: – CSR. Be an active corporate citizen from Day 1. Involve the local community – Local Content. Have a progressive and active attitude towards building Local Content
CSR ‐ I • Term is shaped by stakeholders from the ‘North’ • Since 1994 many international initiatives – OECD guidelines on Multinational Enterprises – the Global Reporting Initiative – the UN Global Compact – the Global Sullivan Principles – the Caux Principles for Business,etc.
• Agenda not always relevant for countries from the ‘South’
CSR ‐ II • Example – UN Global Compact ‐ covers – Human rights – Labour rights – Environment – Anti‐corruption
• Companies sign up. Report annually on this. • Confidently assume CSR committment fulfilled
CSR ‐ III • Definition of CSR from African perspective more specific and focused on playing an active role • “Our social involvement strategy in support of Namibia's sustainable socio‐economic development is founded on the principle that social upliftment is not a luxury, but a business imperative in Namibia.” • “The way an organization tries to plough back and play a meaningful role in the development of society.” • “Companies ought to play a role in the socio‐ economic development of the country.”
Local content – I Doing business in Africa • Traditionally: – IOC gets exploration/production contract with Government – IOC subcontracts a variety of technical services to other international service companies; seismics, rigs, supply vessels, helicopter, pipes, cement, etc – IOC and service companies pay taxes locally, employ some few local staff, and buy only basic goods and services in the host country – This is business in Africa
Local content – II Doing business with Africa • Now: – IOC most likely carry the NOC and/or local oil companies in the exploration phase, and have them as paid‐up partners in the production phase – Subcontracting of most services • To be approved by the NOC • Preference to either local service companies, or JVs between local and foreign service companies
– Major emphasis on maximizing local staff (hiring and training), and sourcing of goods locally – This is business with Africa
Mixed results • 25 cases – 12 successes – 13 did not make it
• The 12 successes – 4 related to the Norwegian Government (as client or for funding) – 1 is a temporary success, which might fail (short‐term and opportunistic perspective)
– 7 made it ‘on their own’ – All 7 met the 5 suggested main groups of criteria
The 13 that did not make it • • • •
6 opportunistic; not long‐term 3 badly prepared 3 under‐resourced 1 all of the above
Each morning when the antelope wakes up he knows that for him to survive that day he has to run faster than the fastest lion. Each morning when the lion wakes up he knows that for him to survive that day he has to run faster than the slowest antelope. It doesn’t matter who you are: When day breaks in Africa you better start running.
Klaus Endresen Appiah‐Endresen & Co klaus@appiah‐endresen.com Namibian mobile: +264 811243239 Norwegian mobile: +47 90565707 Private Bag 13303, 39 Schanzen Weg, Windhoek, Namibia
The Lamb Story
Norwegian credo: ‘Trade not aid’ • Norway: • Lamb deficit, import from e.g. New Zealand • High local prices • Open for LDC import
• Namibia’s lamb production – – – – –
Rural, in areas without alternative employment Poor farmers Ecological Very high quality meat Low production costs
Norwegian reaction: – ‘Closes’ the border – Imposes import tariffs – Insists on bone‐free meat (despite 50 years without foot and mouth disease) – Each animal must be tested for brucella millitentis =˃ The problem is not always where you expect it