{"id":1352,"date":"2011-12-12T06:41:40","date_gmt":"2011-12-12T06:41:40","guid":{"rendered":"http:\/\/abdas.org\/?p=1352"},"modified":"2011-12-12T06:41:40","modified_gmt":"2011-12-12T06:41:40","slug":"a-sober-approach-to-business-in-africa","status":"publish","type":"post","link":"https:\/\/abdas.org\/2011\/12\/12\/a-sober-approach-to-business-in-africa\/","title":{"rendered":"A sober approach to business in Africa"},"content":{"rendered":"

\"\"Foreign companies and entrepreneurs need to stick to what they know and do their homework thoroughly when investing in Africa.<\/strong><\/p>\n

So says Micha van Winkelhof, managing director of Tanzania-based Newport Corporate Advisory. The firm advises companies on best practices in investment throughout East and Central Africa. One of Newport\u2019s most recent projects is the restructuring of a tobacco business in the Democratic Republic of Congo (DRC).<\/p>\n

Van Winkelhof explains that foreigners frequently have a \u2018know-it-all\u2019 mentality and think they can make a success of any venture in countries where they have no experience, often only to see their businesses collapse. \u201cThey come here and find a product or service missing from the market, they have no prior experience in that sector, they don\u2019t even know where to source it. But because they are educated, they think that they are better than everybody else. Arrogance creeps in.\u201d<\/p>\n

He says that many Western business people would probably be more successful in their projects if they made an attempt in the developed world, rather than in Africa, merely because they would be more \u201crealistic\u201d about it.<\/p>\n

\u201cFor example, if you have a project or an idea and you want to invest specifically in Tanzania, the first thing that I suggest is that you look at the wealthy African and Asian communities living in Dar es Salaam, and ask yourself, \u2018Why hasn\u2019t someone else done it yet?\u2019 Certain communities have access to a great deal of capital that doesn\u2019t involve banks, there are no stringent investment criteria and therefore they can take advantage of opportunities quickly. So taking a deeper look into why someone else has not invested in the project you are interested in, could save you time in the long run. Generally, there are three reasons why others have not invested. First, they have tried and failed; second, they haven\u2019t tried because they knew it would have been too difficult; or third, the margins available do not justify the risk.\u201d<\/p>\n

\u201cDon\u2019t make the assumption that a product is transferable just because it is not available locally, this could lead to disappointment,\u201d says Van Winkelhof. \u201cTurn the equation on its head, think to yourself, how could the West and Asia benefit from Africa in terms of products, services or investment opportunities?\u201d<\/p>\n

From investment banking to flowers<\/strong><\/p>\n

Van Winkelhof grew up in Tanzania, but left the country to work in the financial sector in the UK and US. Before he returned to Tanzania\u2019s commercial capital Dar es Salaam in 2006, he was an investment banker for nine years at NatWest and JP Morgan Chase in London.<\/p>\n

He is no stranger to making business mistakes in Tanzania. \u201cI came out of investment banking and thought I knew everything. My parents started a flower farm and I jumped in there thinking we were going to make lots of money selling flowers to Europe. By the time we were half-ready, 2008 came along and the global flower industry collapsed.\u201d<\/p>\n

A dabble in the biofuels industry also didn\u2019t work out as expected. Van Winkelhof blames these failures on the fact that he became involved in an industry he didn\u2019t understand. \u201cHow did I think that an ex-banker could come to Africa and start farming?\u201d<\/p>\n

Understanding the market<\/strong><\/p>\n

Companies and entrepreneurs need to make sure they understand the unique workings of the markets in which they wish to do business.<\/p>\n