The Challenges of Operating a Business in West Africa

Africa, a continent rich with opportunities for potential investors looking to expand into the market as the continent has seen rapid growth in multiple industries. That trend is sure to continue in the coming years. West Africa is located in the western part of Africa and most of it is in Sub-Saharan Africa.

However, underlying difficulties are facing potential investors penetrating the market. We will be looking at the prospects of doing business and the challenges in the West African countries of Nigeria and Ghana.

 

NIGERIA

Nigeria is Africa’s most populous nation, with over 200 million people. The country is arguably one of the top countries foreign investors are likely to take their business to when expanding or entering new markets. With a population that huge, it is expected that investors have a massive chance of succeeding. However, while everything is rosy and promising on the surface, there are difficulties that potential investors are most likely to encounter in Nigeria. They include;

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1. Poor power supply

At the forefront of the challenges of doing business in Nigeria is the never-ending epileptic power supply. Nigeria’s shortage of reliable power supply is a constraint on the country’s economic growth. Every business operation depends on electricity for smooth operations and efficiency in delivering service. Unstable power supply impacts potential investors coming into the country as inadequate power supply inevitably means investing in an alternative means of power, which will incur more investment cost.

While this may be bad for business in many ways, it opens up a massive market for industries in alternate power generation sources. As expected, the demands are always high as most people would rather depend on alternate sources of power than the government grid.

2. Government regulations

African countries rank poorly in the World Bank Ease of Doing Business rankings. Nigeria is no exemption, as it takes between two weeks and a month to set up a business after dealing with the frustrations that come with each hurdle during the process.

Some of the processes involved when setting up a business in Nigeria are yet to be digitized, making it take a longer processing time than necessary to be ready.

Most recently, between December 2020 and April 2021, the Nigeria Communications Commission placed a ban on SIM card registrations in order to foster National Identification Number registration by the citizens. The ill-thought declaration harmed potential investments as no one traveling into the country could get a SIM card to make calls on stay on the internet.

Heavy tax rates levied on these businesses also contribute to difficulties doing business in Nigeria. Most already existing companies like MTN, DStv, and co are charged heavy taxes, which ultimately leads to higher service rates on the customers to make profits.

3. Rising insecurity issues in the country

Insecurity in the country is increasing at an alarming rate and is spreading to different parts of the country. The agriculture sector is an investment hotbed in the country, poised to see investors constantly. However, continued unrest and insurgencies in North-Eastern parts of the country, such as Boko Haram terrorist groups and bandits, make it difficult to penetrate that sector.

Herdsmen attacks in other parts of the country such as Benue, Oyo, Ogun, Ondo, and some parts of the South Eastern states have led to more difficulties in the sector. The fight against this menace is still far from ending, limiting the possibility of any guarantees that the industry will see many improvements.

4. Poor road network

A poor road network is another stumbling block in the country. Most of the roads are in a bad state, making it difficult to transport materials such as raw materials, finished products, equipment, etc., from one destination to another. Without raw materials reaching the plant for production, or finished products getting in the hands of the consumers, the process is incomplete, thereby leading to waste of resources.

 

 

GHANA

Ghana is another West African giant and an investment hub. Investors seeking alternative options other than Nigeria have found solace in the country’s peaceful socio-political and economic environment in markets such as petrochemical, real estate, agriculture, and agro-processing. However, unlike any other part of the world, the country has its fair share of difficulties. Some of which includes;

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1. Poor and inconsistent power supply

The country’s power supply has been epileptic for many years, irrespective of the government in power. The situation of power in the country makes it difficult for companies in the production industry to operate as it affects production output. What that implies is that firms in that industry will have to invest in other alternatives of power generation, which are usually more expensive than power from the national grid.

2. Heavy bureaucratic system

While it is an age of advancement and innovation, some things are still begging to be digitized. A bureaucratic system of operation runs deep in the Ghanaian system, leading to a crippling and delay in processing a business in the country. It may take weeks and months to get approval because of the process involved and before a final decision is made.

3. High corruption rate

In Transparency International’s Corruption Perception Index 2020, Ghana ranked 75th out of 180. Corrupt practices exist in every sector of the country’s economy, although it is higher in some industries than others. This leads to difficulties in establishing a business, hiked prices of services, and most importantly, discourages potential investors.

 

The Take-Away

Every economy has its good and bad sides to doing business, so also does Nigeria and Ghana. While these challenges may be stumbling blocks to doing business in these countries, there are multiple reasons why investing or expanding the growth of your business here is worth it.

 

Do you want to start a business in Sub-Saharan Africa? Are you overseas and would love to enter a new market? Let’s help you discover the continent filled with unlimited business opportunities. I am the Founder & Business Director of Attind Consulting. We work with international investors, corporate companies & entrepreneurs to develop their projects, enter a new market, and invest in businesses in Sub-Saharan Africa.