Starting a business is never easy. However, starting a business in Africa poses even more specific problems due to the unique nature of the emerging markets. You’ll agree with me that Africa is the most diverse region in the world. This is a major contributing factor to the increased entrepreneurial drive that happens on the continent.
Although Africa holds the fastest-growing economies and most promising business opportunities, there are numerous challenges that businesses have to overcome. To optimize these business opportunities, you’ll have to develop innovative business models and resilient strategies. However, to build out these strategies, businesses have to be aware of the challenges that exist. This is to ensure that such a business can factor the challenges into building an effective business model.
These challenges will indeed differ across the 54 nations on the continent. Nevertheless, this post highlights and offers effective solutions to common problems facing African businesses. Without further delay, let’s get into it.
Common Problems Facing Businesses in Africa
Due to the impact of technological advancements, Africa’s economy has been on the rise. As a result, Africa has presented businesses with exciting opportunities for expansion in a range of sectors. However, the African landscape often presents unique challenges that are not encountered outside of the continent. We’ll take a quick look at some of the major factors that make it challenging to do business in Africa.
High Cost and Difficulty in Securing Capital
Capital is, inarguably, the oxygen that keeps a business running. Compared to other regions, the cost of capital to start and run a business in Africa is high. Bank loans often come with high interest rates. This is due to the perceived risks of doing business in Africa. As a result of these high interest rates, many companies find it difficult to reinvest in their businesses to fuel growth. Consequently, these businesses cannot reach a significant scale to expand globally.
Solution:
Thanks to the emergence and development of fintech companies, this challenge is gradually being eradicated. Businesses are now able to access financing at a more equitable rate with less burdensome terms and conditions.
Fintech institutions like Changera help entrepreneurs raise capital for their businesses through informed investment and savings plans.
Inadequate Infrastructure
This is another major challenge that new businesses face in Africa. Many African countries suffer from erratic power supply, poor road systems, and insufficient social amenities, amongst other problems.
The insufficient supply of basic amenities can significantly increase the operational cost of businesses. This is because businesses sometimes have to develop self-sufficient solutions to stay operational. Many of these solutions can significantly increase their overheads.
Solution:
In the coming years, it will be important for businesses to look to other sources rather than the government to supply them with the basic infrastructure they need.
For example, businesses can harness other sources of energy such as solar and biofuel to tackle electricity shortages. Likewise, businesses need to find innovative approaches to tackle distribution problems by partnering with local service providers.
In summary, to succeed in the African business community, businesses will need to invest in their reliable support systems.
Shortage of Skilled Labor
Although there is a huge population of young people on the African continent, the skills gap in the labor market is still very high. This shortage of skilled professional labor is mainly due to the population’s low education level and the ever-increasing brain drain of the continent’s most educated workers.
Also, there needs to be more alignment in schooling and training programs in Africa. Many schools focus on providing theoretical capability rather than practical ability which doesn’t transfer well to the world of work.
Solution:
The truth is Africa has a young and eager-to-learn population that when given the right training will perform excellently at any task they’re given. One way to gain a competitive advantage is to focus on meeting the labor demands and skill requirements of your industry. This may be achieved by offering on-the-job training and skill support to your employees.
In addition, businesses should be committed to ensuring that salaries and remunerations are correctly benchmarked against competitors. This is to ensure that you don’t lose your best talents to the competition.
Unfavorable Government Policies
Government policies are major determinants of economic development and have a significant impact on business productivity. In Africa, there are numerous government policies and regulations that can make entrepreneurship difficult.
Because of the ever-evolving landscape with dynamic government policies, it can be difficult for business owners to build long-term plans. This inherently increases the cost of doing business in Africa.
Solution:
Business owners need to collectively be more proactive in their dealings with the government. There should be unity amongst them when disseminating their challenges to the government. This will enable policymakers to create policies that consider the needs of the private sector.
Market Access
A major reason business owners face this problem in Africa is due to a lack of market data. Research is an essential part of branding and marketing. Sadly, there is a scarcity of market data, information, and technological tools to help companies in locating and reaching their market.
Solution:
Instead of depending on limited information about your consumers from the internet, you should gather your information. As a business owner, you should invest heavily in analyzing the extreme differences between your consumers. This will help you tailor products and services to local needs and preferences. Additionally, a proper market survey and analysis will help you identify possible categories for new growth.
Takeaway
In recent times, Africa’s flourishing economy has presented exciting opportunities for expansion in various sectors. However, there are still unique challenges that plague the African business landscape, making it difficult to conduct business on the continent.
The good news though is that some of these challenges are surmountable. With the right information such as that contained in this post, you can navigate these challenges and establish a successful business in Africa.
Nevertheless, after successfully expanding your business to Africa, what next? You need to ensure that there are no barriers to smooth business transactions between you and your customers. That’s where Changera comes in. With Changera Business, you get all the features you need for business transactions with people all over the world. Now, you can not only start your business but also guarantee seamless business operations.
What else are you waiting for? Download Changera for Business on the Google Play Store or the App Store today to get started.
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