Doing Business in Africa

Manufacturing, technology, Commodity Export, Viable China Alternative

For most of the modern world it is widely known that the cheap labor has given China a really solid standing in the manufacturing of everything from plastic knobs and lighting to car parts, concrete and clothing to name a few.

There are a number of companies in the United States and Europe that have opted to either outsource their manufacturing or build manufacturing plants in China due to the cost effectiveness of producing products at a lower cost basis thus increasing their net profits by a long margin.

Companies such as General Electric, Emerson, Honeywell and Rockwell are now developing automation plants in China to develop computer chips and parts etc, as well as outsourcing to China.

Companies such as General Motors, Procter & Gamble and Motorola are benefiting nicely from dealing with China on an import basis and on an export basis companies such as Wal-Mart, Target, Home Depot and others are showing their shareholders nice returns due to the high profit margins from their selling China exports in their retail chains.

Here are some fun facts:

Manufacturing in China today has seen a continual increase in manufacturing prowess, the cost advantages go beyond the simple cheap labor cost, China is beginning to produce higher quality goods which makes it even harder for the United States to be a viable manufacturing solution.

More or less 30% of all television and air conditioners, 50% of all cameras, 25% of all washing machine come from China and that is just the tip of the iceberg.

Walmart purchases over US$18 Billion worth of merchandise from China every year thus flooding the U.S. market with China imports, while 40% of all microwave ovens sold in Europe come from China.

The issue for companies that are seeking to reap the rewards of manufacturing in China is that they first must build a solid relationship with the local and national politicians in order to even get in the door to speak about their desire to build a manufacturing plant, its not as easy as buying a lot to build, there are many steps that need to be taken before you even have a chance to be approved for anything. It can be a lengthy process.

Over the last decade a number of non-China based companies have been  flocking to China to manufacture and that it is increasingly making the countries economic stance stronger thus making it harder for companies to build in China and with the United States and Europe being the major importers of China merchandise there is a definite open door of opportunity elsewhere in the world.

Africa a Viable China Alternative

FGA Partners has a viable alternative to China and that is Africa.

Africa offers numerous benefits for businesses, particularly in the manufacturing and technology sectors, due to its diverse resources and expanding opportunities. One of the continent’s key advantages is its cost-effective labor and expanding workforce. With a large, youthful population expected to double by 2050, Africa provides businesses with a competitive labor pool. This expanding workforce is particularly valuable for manufacturing and technology sectors, allowing companies to benefit from significantly lower wage costs compared to other global markets, resulting in substantial savings in production and operations.

In addition to labor, Africa is rich in natural resources, including minerals, oil, gas, and agricultural commodities. This wealth of resources makes the continent a prime destination for industries such as manufacturing, energy, mining, and agriculture. By establishing operations in Africa, companies gain direct access to these resources, simplifying supply chains and reducing costs. Africa’s emerging consumer market is another key factor driving business growth. The continent’s growing middle class and urbanization are fueling demand for consumer goods, technology, and services. As disposable incomes rise, this burgeoning market presents significant opportunities for companies across multiple sectors.

Africa is also experiencing rapid technological growth and digital transformation. Many countries are investing in IT infrastructure, mobile connectivity, and internet access, making the continent fertile ground for technology companies. Whether through fintech solutions, e-commerce platforms, or software development, Africa offers a growing digital economy with numerous opportunities for tech innovation and expansion.

To further boost business prospects, many African governments have introduced favorable policies and incentives. Initiatives like tax incentives, special economic zones (SEZs), and streamlined processes for foreign direct investment (FDI) are designed to attract international businesses, particularly in sectors like manufacturing, technology, and infrastructure development. Africa’s involvement in regional and global trade integration, such as through the African Continental Free Trade Area (AfCFTA), further enhances its appeal. Companies benefit from reduced tariffs, easier access to neighboring markets, and improved trade terms, enabling cost-effective manufacturing and distribution across the continent and beyond.

Investment in infrastructure development is another critical advantage for businesses in Africa. With significant improvements in roads, ports, airports, and energy grids, the continent is becoming more equipped to support manufacturing, transportation, and logistics industries. These infrastructure advancements reduce supply chain challenges, lower production costs, and create opportunities for foreign companies looking to establish operations on the continent.

Africa’s burgeoning innovation and R&D potential is also noteworthy. With thriving tech hubs in countries like Kenya, Nigeria, and South Africa, multinational companies can tap into local talent and benefit from a fast-growing start-up ecosystem supported by venture capital, incubators, and accelerators. This environment fosters innovation in research, development, and technological advancements.

Furthermore, Africa is well-positioned for sustainability and green technology opportunities. With many nations investing in renewable energy sources such as solar, wind, and hydropower, the continent offers excellent prospects for companies involved in clean energy solutions, energy-efficient manufacturing, and environmentally sustainable technologies.

Finally, Africa’s untapped markets and industry diversification present first-mover advantages across various sectors, including healthcare, education, agriculture, and logistics. Businesses that venture into these underdeveloped industries can position themselves for long-term growth as the continent’s economies expand.

By leveraging these benefits, businesses can access new markets, diversify their portfolios, and build a strong presence in one of the world’s most promising regions for future economic growth.

FGA Partners can be a key player in facilitating USA and European-based companies’ expansion into Africa, offering expertise across multiple industries, including manufacturing, precious metals, and oil. With deep knowledge of the region’s business environment, FGA Partners helps companies navigate the complexities of outsourcing, develop strategic partnerships, and identify growth opportunities. By leveraging our vast network and resources, we enable businesses to capitalize on Africa’s emerging markets, rich natural resources, and growing workforce. Our experience also ensures that companies can enter these sectors with confidence, positioning themselves for success in one of the world’s most rapidly evolving regions.

Feel free to contact us for a discovery call if you believe that working in Africa is the right fit for your company.