Africa is saturated with investment and highly competitive

On October 10, Uganda celebrated its independence day. At the beginning of October, a seminar was held at the Russian Export Center on the topic “Working with Uganda: how to avoid mistakes for a beginning exporter?” Stanislav Mezentsev, a senior researcher at the Institute for African Studies, who has 30 years of experience working on the continent, explained what Russian entrepreneurs should know in order to effectively work with African partners.

«Africa Initiative» provides key points from his speech about the advantages of Uganda and stereotypes about this country, typical fraudulent schemes, legal culture and promising areas for Russian business.

Where to invest

Russia's political leadership is calling on businesses to return to Africa. I encourage exploring the possibility of localizing production, at least partially here in Africa. Now Ethiopia, Uganda, Kenya, and any African country are creating very good conditions for those investors who come with localization. At a minimum, these are the East African and Southern African regions where I constantly visit and work. It is not necessary to produce something here right away; you can start with partial localization. You can, in collaboration with a local partner, create a product that will not only give you investor status, but will also allow you to localize your production.

Africa is very interested in this. Firstly, you will bring in tax-free what you collect here. This is already good, since taxes on some types of products are high and kill competition. Why? They motivate people to work in Africa. In East Africa, for example, chicken farms were built by Americans, Indians, Chinese and everyone who is not too lazy. Barriers are in place. The same is true in other areas. China, for example, is creating plywood production. In Africa they make plywood better than ours and cheaper.

Remember one more simple rule: no matter how much you talk about how our products are twice as expensive, but reliable, this does not work in the African market. They will buy it cheaper, quickly throw it away and buy it again, but still won’t want to pay more. Here the purchasing power of the consumer market is still low. Indians, Chinese, Turks — why are they successful? They work specifically for this market. Therefore, you need to make your own product, localize it, make it cheaper, “make it a penny cheaper than Chinese.” For example, in Uganda, local canning of fruits and vegetables is encouraged. Agriculture — This is a priority area for foreign partners; Uganda has very good organic products, but they rot and disappear. Here is any possibility of conservation, improvement of processing — this is interesting. And bring your canned goods here — no.

How to invest

If you want to do something in a particular country, open a company here, then come first yourself or send your authorized representative. Next, you must determine the circle of partners and do a deep check. Any large company spends 20% of its budget on two simple things: verification and marketing.

Uganda is located in the center of the continent. Uganda has a good climate and British law. If everything is properly completed and signed, no one will come and take anything away. Large investment projects are already underway here. There are also opportunities to work through offshore structures. Large African and global companies from South Africa enter Uganda through the appropriate offshore companies in order to simply ensure the safety of investments and international guarantees. The main problem — logistics. Logistics companies now transport even things that were previously impossible to import — There is a route through Iran, it works, but everything has become much more expensive. Therefore, do not forget to take into account delivery costs. Another important problem — payment system, direct SWIFT transactions with our banks are not supported. In Uganda, banks operate in a very complex way, some through China.

They are waiting for you here because they remember the Soviet Union, which helped. There is a misconception that we helped everyone for free, but we never helped anyone for free. Now the Chinese are helping African countries, but not for free. They help in exchange for mineral resources, just like the Soviet Union did. And when you come here as an entrepreneur, you will be in an entrepreneurial environment. There will be Chinese, there will be Indians, there will be Lebanese. For example, all medium and large businesses in East Africa are in the hands of entrepreneurs from India. Why? Yes, because Uganda, like India, was a British colony. Business management in the colonies, including Uganda, was carried out by the British. Second and third generation Hindus manage these processes. That's why they are your competitors. West Africa — this is the Lebanese diaspora.

What mistakes do Russian businessmen make

The first thing that is overlooked and underestimated is the regulatory system that operates here. Now it seems that everything is simple here, that literally everything can be “solved”, no licenses are needed. Take your time, do not violate African legislation. Critical error at this stage — start paying bribes in an attempt to shorten the time required to obtain a license. Because it won't speed up anything. Now everything is already organized online. You open a company in accordance with your profile, then get a license. Don't try to skip any stage. All this is quite fast. Do not rush to receive excess profits. Because if you don’t do everything legally, your profit will be taken away or you won’t be allowed to make it. Every business, no matter what you do, even trading, comes with certain restrictions that you need to take into account. If you are going to import something, for example, equipment, first find out the import conditions, what excise taxes and duties apply.

People here are now extremely active and do not disdain fraud. They understand our psychology very well, because, unfortunately, it should be noted that some of them once studied in the Soviet Union and lived in Russia. They understand well that Russian business has a desire to minimize the cost of entering the market. Fraudsters are well aware that people often do not have a good understanding of the specifics of the continent and set up networks that are very easy to fall into. The first thing I want to say is that in Africa you cannot, under any circumstances, buy ready-made gold and import it. The first thing that not only ours, but mostly our businessmen come across — this is an offer to sell gold at a deep discount. Not only beginners, by the way, but also experienced entrepreneurs lose their money. Of course, there is gold in Africa. There's a lot of it. This is a continent very rich in mineral resources. But as soon as you hear that someone is offering to sell you gold at a discount, go to the other side of the street. And don’t try to continue hoping for luck — she won't be.

Don't be afraid to go to Africa

My recommendation after marketing — come, don’t be lazy to spend money on a ticket. Come here first just as a tourist. This would be a very correct approach. Come to Uganda, the nature here is magnificent. Here it is underestimated, including from a tourism point of view. You can see live wildlife, which is what people come to Africa for. There is a different atmosphere here, a different level of energy, sun and everything else. Most likely, you know Africa through the prism of Western propaganda, that crocodiles eat people there and that, if not Ebola, then 100% suffer from malaria. These are all the narratives of our enemies. They are trying to keep us out of the competitive market.

Don't be afraid of anything. Africa is comfortable now. There is a vaccine against the gold rush. It must be done once for the rest of your life. I recommend doing it, because previously, for example, you couldn’t come to Uganda without it, although the infection itself is now almost gone. There is also in the Congo, in those areas there are sometimes aggravations. Today they will sell you a ticket without vaccination, give you a visa, no one will check it, but it would be better to do it, because it is recommended for everyone.

Now the whole world is going to Africa. The USA, European Union, China, Germany, Turkey, India and other countries are developing their business. The future belongs to Africa. This is a growing continent, this is a continent where virtually anything is possible. I’ll say it again: they remember the Soviet Union here, so Africa has been waiting for us, is waiting and will wait, but not forever. You can’t delay this. Africa is saturated with investments, Africa is highly competitive, the whole world works in Africa.