Managing risk in Africa: recognising, identifying and managing risk is core to running a successful company. This becomes even more critical when dealing with foreign investments where other types of risk enter the frame. Richard Seymour writes that Africa's risk management may have come late, but it is coming on strong.

Author:Seymour, Richard
Position:Risk Assessment
 
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For a long time, Africa has had to manage crises. But for stable, sustainable growth to be possible, all successful economies must be able to manage risk.

As much as African businesses need to be able to manage risk, they need also to manage perception of risk. In the West, when Africa appears on the news or makes the front pages of newspapers, it is almost invariably to report on civil wars, famine, disease and political instability. There is little they can do about that.

But businesses in countries like China, which are less risk averse, are stealing a march on their European and American counterparts by investing heavily. That they are, and in doing so are helping to reform the business environment in the countries in which they operate, has not gone unnoticed by foreign investors elsewhere.

With so many saturated markets and so much potential having been recognised in Africa, what risk there is, is increasingly being deemed worth it. It would be a mistake, however, to overstate the risk of investing in Africa, to fall for the image presented in the world's media. It is demonstrably true that the business environment in Africa has improved. Even a country with such an infamous recent history as Rwanda is winning awards and attracting praise all over the world for the strides it has made. (See page 48).

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However, as is the case anywhere in the world, wherever someone is thinking of investing, accurate risk assessment is essential. The collapse of the sub-prime market in the US demonstrated how, in a globalised system, a failure to manage risk in one country can spread its ill effects to other countries who had otherwise done a much better job in that regard, bringing down other sectors with it. It is no longer possible to contain risk to one institution, sector or even to one country. So issues of risk are more important now than ever before.

Not all one size

Entering Africa by setting up a base in South Africa is a well-tried method of dipping one's toes in the continent. But someone attempting to do this now will have to battle with already well-established competitors and may find themselves outmanoeuvred by those who took a chance and opened for business somewhere else on the continent. In addition, it is foolhardy to imagine that what works in South Africa will also work north of the Limpopo. It is like setting up a base in France in order to exploit opportunities in Russia. In fact...

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