'Quiet' boom in Africa is big business for Australian companies prepared to take a calculated risk
Export Finance and Insurance Corporation (EFIC) believes a publication released today that details the Sub-Saharan Africa resource boom is further evidence that Africa will continue to become a more important market for Australian companies.
The publication, Into Africa, authored by economists Roger Donnelly and Ben Ford, was launched at the Lowy Institute today. It examines the ‘quiet’ boom that continues to grow in Sub-Saharan Africa (SSA) fueled by the continent’s significant natural resources.
“Australian companies are now the third-largest spenders on exploration in Africa after South African and Canadian companies. They will invest up to $20 billion dollars in the region’s growing resource sector in the coming years and this makes SSA a significant market for Australia,” said CEO of EFIC, Mr Angus Armour.
According to the publication, big Australian mining engineering companies now make a substantial part of their sales from African projects. BHP Billiton alone plans to invest US$4.7 billion in the coming years.
But, Mr Armour is quick to point out that it’s not only big resource companies that can benefit from the boom in SSA.
“Australian companies that supply housing to mining towns, associated services or even catering in remote locations could all look to Africa for growth opportunities,” says Armour.
Mr Armour believes that Australian companies who already work in remote locations in Australia are well placed to operate in Africa.
“There are still significant opportunities for SMEs and corporations in resource sector associated services that, if willing to take a calculated risk on Africa, could see big rewards.”
But, while there is significant opportunity for companies to grow and establish a presence in Africa, there are still risks associated with doing business in SSA.
“The key to successful investment in Africa is mitigating and managing risk,” says Armour.
“For all the conflict resolution, democratisation and economic improvement that has taken place in SSA this decade, there are still areas of significant risk.”
“Protecting companies assets and their reputation from these risks while still making money is difficult but companies can manage the risks in three ways — through corporate social responsibility (CSR) policies, political risk assessment and political risk insurance (PRI).”
“Political risk isn't foreign to Australian companies already in Africa, but it does need to be carefully considered by those companies embarking on growth in SSA and where possible, insured against.”
And, while there are social and human rights issues – health, poverty, education - investing in Africa invests in its people and a strong CSR program that works to assist local communities and can be as important as any economic investment companies make in Africa.
“I would encourage anyone considering Sub-Sahara Africa to come and talk to us about how we can help them benefit from the opportunities a booming SSA offers.”