Africa’s emergence as a growth area is attracting interest from businesses all around the globe. Pete Frielinghaus from ContinuitySA tackles its top risks.

According to Pete Frielinghaus, senior business continuity management advisor for ContinuitySA, companies need to be aware that Africa is not a single market, and that its economies are extremely diverse. This heterogeneity must be taken into account, and South African companies in particular must make a concerted effort to understand a very different set of risks, and not assume they “know” Africa. “Expanding into new markets is intrinsically a risky business and so has to form part of the business continuity management cycle,” he suggests. Therefore, companies must be aware of some of the top risks when putting a business plan together and when thinking about entering the African market.

Risky business

Here are five key risk areas that Frielinghaus has identified.

1. Infrastructure. Overall, reliable infrastructure remains a key risk in Africa and there are no uniform standards deployed to measure quality. Roads are poor and in some cases extremely congested, with inevitable impacts on supply chain operations and movement of personnel. In addition, theft and vandalism further undermine the infrastructure while natural disasters also take their toll.

2. Power. Africa’s energy grid is chronically underdeveloped, something that’s worsened by increasing demand. Companies should therefore prepare for power outages and spikes, with the constant drone of backup generators rumbling on through day and night. Ensuring a regular supply of clean diesel should also form part of the risk-mitigation strategy.

3. Communications. The communications infrastructure is inadequate for the growing demands placed on it. Even when fibre and VSAT infrastructure is in place, performance is not consistent due to incorrect specifications and poor maintenance.

4. Political issues. Overt conflict is on-going in a number of African countries but often apparent political stability masks undercurrents of contention. The direct impact of political turmoil is obvious – what may be less so is the link between conflict and corruption, which in turn affects the business environment in many subtle ways. Staff evacuation plans should be in place with a reputable service provider.

5. Corporate governance. Standards of corporate governance remain variable from country to country. In many African countries, both political and business elites still do not buy into the link between corporate governance and prosperity. This in turn impacts companies which need to adhere to international codes like Basel III, King III and Sarbanes-Oxley. The recent formation of the African Corporate Governance Network is one initiative that shows that the move towards building a culture of corporate governance is growing.

Business beware

“In the main, though, corruption and nepotism remain significant risks that must be factored into business continuity planning,” comments Frielinghaus. “Africa offers many opportunities but realising them requires insight and staying power, but the same is true when a company expands into any new markets. Perhaps the first and most important misconception one needs to get rid of is thinking of Africa as a single place. As in any business venture, understanding your market is the first thing to get right,” he concludes.