In recent decades, major investments and, thus, investors’ attention have concentrated on four emerging economies: China, Russia, Brazil and India. Asia, in particular, has been viewed as the Shangri-La of large-scale investment.
In more recent times, Africa’s economic development has been discussed in newspapers and other publications from the point of view of its potential to become “the next Asia.” Ethiopia’s status as the world’s fastest growing economy is frequently mentioned.
Many export analysts have signaled that the time to enter the African market is right now, when engineering skills and investment-led expertise are in high demand on the fast-developing continent.
Over a quarter of the world’s countries are located in Africa, and the continent’s total population is approximately one billion. Economic growth in Africa has remained above the global average for the last ten years, although Africa’s share of global trade is currently only about three percent.
Finland is lagging behind other Nordic countries in exports to Africa: for example Sweden is currently beating even Germany in terms of export volumes. In recent years, the annual export value for Finland has been approximately €1-€1,5 billion for North African countries and approximately €1 billion for sub-Saharan countries. Approximately half of the volume comes from exports to South Africa.
Infrastructure and production technologies
Forestry and technological industry machines and equipment are Finland’s main exports to North Africa. Algeria, the region’s most stable country, is estimated to be the world’s fourth largest natural gas producer. In addition to major developments in the oil and gas sector, the country is investing heavily in energy-efficient housing developments designed for middle classes as well as in road, railway and port infrastructures.
In sub-Saharan Africa, investments are currently needed in the development of infrastructures and production technologies, since the local industries are concentrated in the primary sector. Finland has expertise specifically in these industries. For example in South Africa, the development of the mining industry – the driving force of the country’s economy – requires not only mining technologies but also new energy solutions.
The challenges?
The main challenges related to the African market are the lack of necessary infrastructure and the unestablished regulatory environment.
Long-held views about corruption also pose a challenge. However, the results of the Global Corruption Barometer published by Transparency International may come as a surprise to some: for example Botswana came 31st in the 2014 survey, above countries such as Portugal, Poland and Spain. Namibia was 55th ahead of Croatia. South Africa was 67th, scoring better than Italy and Greece. Algeria, Finland’s third most important export destination in Africa, came in joint 100th position with China, ahead of Mexico and Argentina.
Russia, an important trading partner for Finland, placed 136th on the list. The results show that corruption perceptions should not automatically be seen as barriers to entry into the market.
Trade shows offer new business opportunities
Trade shows organised in the Middle East have traditionally served as a gateway to Africa, and they will play an increasingly important role as Africa’s economic development continues apace. The number of noteworthy fairs organised in African countries has also increased. For example, Finnish companies who exhibited at the Bauma Conexpo Africa in September found the event highly interesting specifically from the point of view of the African market.