- Nearly a Third of Companies Doing Business in Africa Say the Market is as Attractive as or More Attractive than both Asia and Latin America
- 63% Believe that Doing Business in Africa Requires More Emphasis on Managing Legal and Compliance Risk
NEW YORK, April 11, 2013 (GLOBE NEWSWIRE) -- While many multinational companies are recognizing the potential for growth in Africa and incorporating that into their business strategies, nearly a quarter (24%) of senior executives say they avoid operating in Africa due to concerns over complying with anti-corruption laws.
Meanwhile, nearly two-thirds (63%) of those whose companies are doing business in Africa believe that doing so requires a greater emphasis on managing legal and compliance risks than when operating in their home jurisdiction. Among that number, 86% believe that their companies are at risk to corruption. That's according to a survey of more than 200 senior executives from companies around the world released today by AlixPartners, the global business-advisory firm, and Dentons, a global law firm.
The poll also found that 30% of those doing business in Africa say the African market is as attractive as or more attractive than Asia or Latin America, with 59% viewing Africa as strategically important to their businesses and 52% saying the continent is just as or more attractive than the countries of the former Soviet Union. South Africa was viewed to be the most attractive country for doing business in Africa, with 72% of respondents indicating they do business there, followed by Egypt (48%) and Nigeria (31%).
"These findings demonstrate the degree to which multinationals are recognizing the African growth story and are taking steps to fully grasp the enormous benefits of investing there," said Charles Laurence, managing director at AlixPartners. "At the same time, though, companies need to comprehend the complexities and risk factors that could impact a decision to enter the region or increase the amount of business they do there. In order to capitalize on these investment opportunities, companies need to develop appropriate compliance mechanisms that are tailored to Africa's dynamic environment."
Corruption and Inadequate Knowledge Represent Hurdles for Many Companies
Underscoring the need to carefully evaluate complexities and risks, 28% of respondents in the survey say they had ceased doing business in Africa due to corruption concerns; and 22% say they avoided doing business there for the same reason.
However, the survey also finds that inadequate knowledge may also be hampering the degree to which multinationals are investing in Africa. Among those whose companies that are not operating in Africa, 86% say they didn't have a good understanding of the opportunities and risks of doing business there. Interestingly, more than three-quarters (76%) of the executives whose companies do not operate in Africa said they had a limited understanding of the benefits of establishing a presence there, consistent with perceptions in the survey about corruption risk. However, only 29% of respondents attributed corruption risks to first-hand knowledge, while nearly two-thirds (65%) based these risks on Africa's reputation.
"The findings of this survey suggest that there is a perception gap that continues to exist among many potential investors that are not yet doing business on the continent," said Thomas Laryea, partner at Dentons. "Despite the support that many respondents expressed for establishing a presence in Africa, even among companies who believe there are significant benefits to investing in the region, many still do not have a sufficient understanding of the market, or may be unduly influenced by news or other negative reports. Too many companies are missing out on the business potential within Africa's dynamic markets."
Respondents also said that better-tailored anti-corruption programs and assistance from legal and financial advisors represented means to better understand Africa's business culture and to reduce potential risks.
About the Survey
The AlixPartners/Dentons Africa: Now Open for Business Survey was conducted in December, 2012, and polled senior executives who deal with, among other things, their companies' operational and compliance issues. Respondents came from multinational companies with annual revenues of $250 million or more, with 75% representing companies with revenues of $1 billion and above. Industries represented included financial services, insurance, healthcare, life sciences, information technology, energy, consumer products, transportation, aerospace, retail, chemicals and agriculture, among others.
AlixPartners, LLP is a global business-advisory firm offering comprehensive services in four major areas: enterprise improvement, turnaround and restructuring, financial advisory services and information management services. Founded in 1981, the firm has offices around the world, and can be found on the Web at www.alixpartners.com.
Effective March 28, 2013, SNR Denton proudly combined with international law firm Salans and Canadian law firm Fraser Milner Casgrain (FMC) to form Dentons—a new Top 10 international law firm with more than 2,500 lawyers and professionals in 79 locations in 52 countries—to provide clients a competitive edge in an increasingly complex, interconnected and competitive marketplace. Dentons was recently voted the "leading law firm in Africa" by emeafinance for the third consecutive year. The firm has been working in the African market for over 60 years. Dentons' 20 associate offices in major business and financial centers across Africa are integrated in client service with our established presence. Dentons has a team a team of dedicated Africa specialists in Washington, DC, New York, London, Paris, Cairo, and Dubai, and offers a full range service on Africa-related matters, including finance, energy, infrastructure, mining, dispute resolution, compliance and anti-corruption. For more information, visit www.dentons.com.