Doing IT differently

Anecdotes abound of truckloads of crucial equipment held up for weeks by flooded roads, projects stalled while bribes are paid to everyone who holds a hand out, and the sheer complexity and cost of getting products transported to distant countries past tricky customs and bad roads.

Even fairly large local IT players say they`re not keen to expand into Africa until the infrastructure improves. It`s a logistics issue, they say.

Apparently, only the biggest players can foot the bills for shipping product thousands of kilometres and training locals to run the business. Many feel that African business is very much an "old school tie clique" affair, and newcomers to each country can forget about signing deals anytime soon.

Those who do venture further north often encounter hair-raising crime, bureaucracy riddled with corruption, delays and some unusual local customs.

UNTAPPED MARKET

For those with the infrastructure and the know-how, Africa is a gold mine waiting to be claimed.

Communications is seen as one of the biggest growth areas, and mobile telecommunications companies and satellite firms like Israel`s Gilat Satcom have made major inroads into the African market.

South Africa`s MTN is forging its way across the continent.

Barely eight years since it first ventured into Africa, MTN has become the dominant cellphone provider on the continent, with 20.6 million subscribers across its operations (as at 30 September 2005), according to Business in Africa. MTN is licensed to operate in ten African countries, including SA, and at last count, had invested over R23 billion in infrastructure and other developments across its operations on the continent.

MTN`s venture into Africa has paid off handsomely. Its financial results for the six months to September 2005 showed that MTN`s revenue amounted to R17,2 billion, while adjusted profit after tax came in at R4,2 billion.

Where some companies cite the lack of infrastructure in Africa as an impediment to doing business on the continent, MTN sees this as an opportunity for further growth, continued the Business in Africa report.

"There is a demonstrable link between the current exponential growth of telecommunications and the rates of economic growth on the continent. The lack of infrastructure on the continent has provided MTN with an opportunity to introduce world-class systems and technologies, resulting in rapid growth and the ability to `leapfrog` the communications divide," said Santie Botha, executive director of the MTN Group.

But still, the company has had to contend with challenges such as currency fluctuations and uncertain political/ ulatory environments in some countries. "These challenges have provided an opportunity for MTN to be highly innovative and manage risk effectively," Botha added.

The mobile telecoms growth also paves the way for other IT firms to expand across the continent. Less mainstream products, such as mining software, is also finding its way across the continent, and Gartner Dataquest expects the IT service market alone in the Middle East and Africa to grow from 6.2 billion in 2004, to 7.7 billion in 2009.

TRICKY BUSINESS

But even large companies doing business in Africa are not always keen to base themselves there. Econet Wireless Group recently denied that founder and CEO Strive Masiyiwa planned to move himself or the company`s headquarters to Zimbabwe. Masiyiwa, who is a Zimbabwean citizen, moved to SA in 2000 in order to "access capital and skills not available" in Zimbabwe and to grow his company. In a media statement, senior executive Zachary Wazara said SA was the only country in Africa with the capital and skills base to support a global business, followed closely by Nigeria. "If the company needs to raise money for its subsidiary Econet Zimbabwe, it will do it from SA," he said.

Keith Boyd, MD of SA-based Venture Communications, had a different story to tell. "The biggest challenges for South African-based entrants into the sub-Saharan market are that they will have no access to short-term financing mechanisms from South African banks and finance houses, such as securitisation and factoring, while the SA Reserve Bank`s policies of approving every outgoing payment transaction makes it difficult to do business in Africa," he insisted.

This notwithstanding, the four-year-old Venture Communications, a communications infrastructure integration company, recorded a turnover in excess of R200 million for the 2005/6 financial year. And since launching in Tanzania, it has expanded into Uganda, and from there, into the DRC, Kenya, Mozambique, Zambia, SA, Holland, and Chad.

BANKS GET AFRICAN

It would seem, though, that with the growing number of South African companies wanting to do business elsewhere on the continent, local banks have been galvanised to follow suit.

Standard Bank and Absa seem to be leading the way. In July, Absa Capital introduced Gateways for Africa Payments (GAP), a new electronic payments platform aimed at facilitating cross-border payments in all major currencies between Africa and the rest of the world. Standard Bank has apparently been running a similar platform - Gateway into Africa - for about eight years.

GAP will facilitate payments in 21 countries through Absa or Barclays (following its takeover by Barclays). Absa has a presence in five sub-Saharan African countries, excluding SA, while Barclays has operations in nine.

Meanwhile, Standard Bank`s platform was mostly available for Anglophone countries in East and Southern Africa, but also including Ghana and Nigeria.

BOUND BY RED TAPE

The World Bank`s Doing Business in 2006 report found that African countries are tying up their formal economies in red tape. While it takes only days to register a new business in countries like Australia, it can take months in places like Burkina Faso, Angola, or DRC. The report cited as an example Mozambique, where an entrepreneur must go through 14 separate procedures over 153 days to register a new business. "Africa has the most complicated business environment. At the same time, we find the least reform effort so far," noted the World Bank report.

STRANGE HURDLES

Professor Ibrahim A. Gambari, then UN Under-Secretary and special advisor on Africa, told Forum Africa in Canada some years ago that the problems of investing in Africa were "myriad and well known". He cited the absence of peace and security, inadequate infrastructural facilities and lack of a sound regulatory and legal framework.

It appears not much has changed.

Zimbabwean IT executives note that hyperinflation and problems like irregular power supply and no data lines make doing business there a constant challenge.

A business development manager from a major telecoms provider, who prefers not to be named, says having focused on the Central and West African market, he feels the Democratic Republic of the Congo is the country most fraught with challenges.

"To do business in the DRC takes forever. Regulatory approval of your products will take at least six months. Then there is also the lack of infrastructure and personal security to consider."

Not only has he been caught in crossfire between rebels and government forces, but he describes arriving at the airport on various business trips as a very unpleasant experience. "Whatever you do, make sure you`ve had the requisite yellow fever inoculation and familiarise yourself with the procedures of passing through customs and immigration.

"Don`t accept extra help at any stage of the process, because it will involve you paying a bribe sooner rather than later."

If you`re dealing with a local company, he advises you ask them to send someone to assist you upon your arrival and to escort you to your hotel.

At the other end of the spectrum is Senegal, which has the best ICT infrastructure in West Africa, but also the least regulatory and business red tape, he says of his experiences.

He advises that in all dealings with other African companies, local companies receive cash upfront before shipping products off to them, unless they get a letter of credit from credible banks. "Also be warned that some countries` funds transfer can take three to six weeks to reflect in your South African account," he observes.