Preamble:
Investors are finally waking up to the potential of Africa’s competitive advantages. This is one of the most unexplored markets for investment. It is a huge opportunity for those who want to be involved in early-stage investments, and for those who want to invest in sectors that have been neglected – like manufacturing, infrastructure and food processing. In addition, the cost of doing business in Africa is cheaper than it is in other parts of the world, and this provides opportunities for both local and foreign investors. In a world that is increasingly globalised, Africa cannot be neglected.
Investment potential in Africa has attracted much interest from startups, strategic investors and financial investors. Over the past decade, the continent has gone through a lot of changes. Some of those changes have been positive while others tarnished the reputation of Africa as a developing market with great investment opportunities. With more growth and stability, it may be time to once again put Africa on the map for investors.
One of the areas that investors should pay attention to is vertical integration in Africa. Vertical integration is a business model that involves owning and controlling the entire supply chain from raw materials to finished products. This model has been successful in many industries around the world, and Africa has the potential to be a great location for vertical integration.
Vertical integration has become a popular way to make production more efficient because of its ability to bring in many different elements of production under one roof. Vertical integration makes manufacturing easier because it allows companies to have full control over the entire production process from start until finish. It can bring down costs by reducing any unwanted processes that add no value to final products or services. In addition, vertical integration may be able to boost overall profits by being able to sell additional products made through their own vertical systems.
Again, vertical integration is a popular model because it brings in many different sectors of the economy under one roof, which can allow for more economic growth. It can also increase employment within a country and make it a more attractive investment opportunity, since the possibilities are endless for adding different services such as marketing and facilitation or distribution. It can be done with small, medium and large companies, both public and private. The key is to focus on the core process of what can be produced in a country by adding all the possible services that are available.
One of the main benefits of vertical integration is that it allows companies to be competitive in the global market. When a company can control all aspects of production, this gives them better control over their products and services as well as how they are marketed. Vertical integration can also be used by companies to increase efficiency within their businesses. This means vertical integration can help cut down on overhead costs and give rise to greater profits by being more efficient with money and resources.
Having more efficient businesses allows investors to gain a much higher return on investment (ROI). This is due to more money being made because of how efficient the business has become. Vertical integration plays an important role in increasing the overall ROI and keeping investors interested in a country’s economy and market.
Another way it can be good for investors is that it gives them better control over their business. Having control over your company means you can push your business further than you would be able to do on your own. This is beneficial because it allows investors to take advantage of economies of scale, which will ultimately cause them to increase profits while lowering costs at the same time. This is one of the main reasons why vertical integration is a good thing for investors to take advantage of: they will be able to see a large return on their investment while still having great control over their business. Vertical integration can also be beneficial to government in that it allows companies to contribute more money to the country and its economy. This can be tax revenue or other forms of profit-sharing offered by certain countries – like South Africa, which offers investors money-back guarantees in government programmes.
Lastly, vertical integration can help boost employment numbers because it requires more people for a company to produce goods or provide services in bulk. It can also mean higher wages, since a company may have to offer higher pay in order to recruit these people. In addition, companies will be contributing back to the economy by paying taxes or giving money back to government – which can fund different programmes or projects that can help bring more money into the country.
However, vertical integration comes with a few downsides as well. One of these is that it has become an increasingly popular way for corporations to compete in the global market. This means that competitors from many different countries have become more inclined to take advantage of this opportunity, and are beginning to outsource jobs and production so they can lower their costs and gain an edge over other companies. This is a problem because it can lower employment numbers; and some companies are even beginning to take advantage of this push for lower wages to reduce their costs and increase profits by a large margin.
Vertical integration also has the potential to hurt government and the economy. This is due to companies being able to keep more profits for themselves by not paying taxes or giving money back to government programmes. This can discriminate against other countries which are unable to compete with companies that are taking advantage of this model to cut costs. This can decrease government revenue and its subsequent ability to invest in the economy. A country that subsidises companies in a certain market that is being outcompeted by vertical integration will see a drop in overall economic growth because of how many jobs are being lost due to this change.
There are many different reasons why vertical integration could be harmful to an economy. The key is to effectively monitor and control the process from beginning to end so that companies do not have an upper-hand over government and economy. This also means that there must be clear laws put in place by a country’s government which clearly define what it means to be a vertical integration company, including how organisations and businesses will be allowed to do business within the country for them to compete with those that are already doing this well.
Why Invest in Africa?
Africa has long been neglected by investors. Stepping into this environment provides great opportunities for early movers, as well as those who have been too busy or reluctant to venture into the continent. The reality is that the future market lies in Africa – it’s a market that has often been overlooked or ignored by larger multinational companies. The world is changing rapidly, and those who do not adapt will find themselves at a disadvantage. It’s time investors woke up to their investment opportunities on the continent. Here are some of the advantages of investing in Africa:
- The market for Africa has been overlooked for a long time – meaning there are tremendous opportunities to be discovered. Investors who have been sticking with the same ideas, businesses and industries are missing out on some of the greatest potential that exists in the market today.
- Africa is extremely appealing because it has the lowest corporate tax rates and the highest net exports per capita in the world. The African economy has a lot of room to grow, which means that any investment can turn into an advantage quickly.
- Africa has a young population, with around 60% being between 15-29 years old. This is one of the most favourable demographics among developing economies, and it means that more working people will be needed in the future to fuel the economy. As a result, there needs to be more job opportunities for this demographic through investments in food processing, manufacturing, infrastructure, manufacturing and other sectors where employment can be created.
- Special Economic Zones (SEZs) are emerging on the continent, and this presents great leverage for investors. Investors stand to benefit from the incentives and lower costs of doing business in SEZs, while African countries can benefit from the influx of foreign investment, technology transfer and job creation. As the continent’s infrastructure and regulatory environment continue to improve, SEZs will become increasingly attractive investment destinations; making Africa an even more compelling investment opportunity. One example of an emerging SEZ with great potential is the Dawa Industrial Zone in Ghana.
- One of the biggest advantages for investors is that Africa has a competitive advantage over other emerging markets like China, because it has lower labour costs as well as higher production capacity than its Chinese counterpart. These two factors combine to create a situation wherein Africa can remain the leading source of growth for the global economy and increase its market share.
- African countries are able to lower their costs through vertical integration, which can create savings in production and supply chain costs. This will be an opportunity for investors who have the resources to take advantage of this situation. For example, those who invest in agricultural inputs for farming will get cost-benefits from African producers by purchasing from local farmers or selling on their own. This is a situation that is unique to Africa, and this is why it will be possible to save so much more money by doing business in Africa rather than anywhere else.
- Africa’s market is affected by global trends, and there are huge opportunities for investors who study these trends and invest in the right places. There has been a lot of focus on Africa’s sub-Saharan economy because it is in a region where growth is likely to become more stable. This means that any investment can be translated into growth quickly, and this should encourage investors to increase their involvement in Africa.
The writer is an award-winning financial advisory, trade and transformation consulting professional with almost two decades of enterprise leadership experience across EMEA.
