Mining activities have driven African economies for decades. People have made and lost fortunes, all while navigating cultural and ethical challenges found on the continent. It’s difficult to generalize the entire African continent’s business environment. After all, there are dozens of individual African countries each with their own way of government and regulations. Doing business varies as you move throughout different regions. There are, though, certain things investors can do to avoid common pitfalls investing in emerging markets. Many African countries have reached a new level of development brought on by more transparent, established governance. It’s resulted in a business environment more open and efficient in handling outside investment. Still, starting a stone business in Africa will still be challenging. Entrepreneurs will need to know how to navigate sometimes uncertain waters if they want to get a foothold there as a natural stone fabricator. Go in armed with this helpful information so things go as smoothly as possible.
Limited Language and Skilled Labor
Some African countries speak English Natively, but most of them don’t. Depending on where you’re looking to start fabricating natural stone like granite, you could have a hard time finding English speakers. There’s also a widespread skilled labor shortage in Africa. Many college graduates or technicians leave their countries to go to Europe or the United States in search of higher wages. The result is that labor challenges are very common in many African countries. A lot of businesses fail because they can’t find the right people to build or make products. The reality is that either a new business owner will have to go themselves to get things going or pay to send someone else to manage the operation. Several African countries have incentives in place for foreign companies to hire and train local workers, so see if there are any in the places you’re looking.
Locating Natural Resources
It’s true that many African countries are resource rich. They’re known for heavy deposits in precious gems, oil, valuable mining resources and other sought-after products. The problem many businesses that move into Africa is that perception differs from reality. It’s common for investors to be presented with land rights that appear attractive but end up being a can of worms. There are limited resources available in a lot of African countries for investors to hold people accountable. Foreign investors often chalk situations like this up to the cost of doing business there. Make sure to do as much research as possible before jumping into any stone mining rights contracts. Do what you can to develop local connections who can point you in the right direction. It might even be worth the cost to pay a foreign consultant who’s done business in the country you’re prospecting in. They’ll be best able to guide you through the legal ins and outs with regards to land and mining rights.
Investments are Capital Intensive
Be prepared to invest a significant amount of capital to get your stone fabrication business off the ground, if you are looking to offer a multitude of natural stone options. Infrastructure in many African countries is underdeveloped. A lot of businesses end up having to build their own roads, supply their own power, and even construct accommodations for their staff. Equipment sometimes is not available for purchase there and needs to be shipped in. The bottom line is investing in new business in Africa is not something that can be done on a wing and a prayer. Owners need to have a solid understanding of the costs and operations involved in doing business before they get there. They need to know what they’ll need to develop on their own, and what may lurk around a corner. Some business-friendly African countries will chip in incentives for new business. This depends on the size of the investment, though, and a company’s track record. Before jumping in, businesses would be well-advised to contact the local embassy or US Chamber of Commerce in the initial planning phases. They’ll be able to give you the lay of the land and even set you up with some investor meetings.
Unclear Regulatory Requirements
This is a problem investing in any foreign company. Imagine a Japanese investor who doesn’t speak English coming to the U.S. to open a business. He won’t know about federal and local tax laws, environmental laws, labor union issues, or the plethora of other regulations and requirements governing business in the States. The same goes for U.S. investors opening stone businesses in Africa. The problem in a lot of African countries is that limited oversight results in mixed messages from government. It can be unclear who has ownership over taxes, labor rights, or investment requirements. The mantra for entrepreneurs in Africa was sort of ‘anything goes’ for years. That, however, is less and less the case.
The rule of law is more established in economically developed countries. Even though outright corruption, labor strikes, and even sabotage still occur, it’s rarer. That doesn’t mean things will be smooth sailing. Running an international natural stone fabrication business means international supply chains, shipping product across borders and dealing with customs. Just because the country you’re doing business in is transparent, the country that supplies your energy and equipment may not be. A lot of mining businesses in Africa struggle inconsistencies across countries. They frequently have operations disrupted because supply chains don’t function effectively.
Thankfully, despite the challenges, Africa is now more than ever a viable business investment destination. Perhaps the best approach to opening a company there is to hire local consultants who can walk investors through the necessary paperwork and everything else involved. It will add more to upfront costs, but it will likely pay off in the long run. The difference in resource allocation between Africa and the United States presents an attractive opportunity for investors. Some of the highest-quality natural stone is found on the continent that can fetch high prices back home. Countries like Kenya, South Africa, Namibia, Zimbabwe and Angola all have growing and thriving stone industries with some of the finest granite, soap stone and other natural stones in the world. All it requires is patience and preparation to make sure the venture is a success.