Doing business in Africa can be somewhat of a challenge, considering the continents’ vastness, underdevelopment in certain areas and political and cultural diversities. However, with endless opportunity and resources, making money on the continent it is definitely worth the risk.
Doing business in Africa: Mining
Recently I sat down with a business partner of mine, Jon Harris, a chemical engineer with an MBA and Projects & Planning Manager at Opun. He and I met seven years ago at Shepherds Market in London, and we soon went on to do business together, as his qualifications and experience made it attractive for me to invest with him in African mining projects. During our recent sit-down, I asked Jon what he would consider the ten most important things to consider when doing business in Africa, particularly in the mining sector. This is what he had to say:
1. Never pay upfront
Particularly for permits. In most cases it is illegal to transfer permits in this way and more than one unwary investor has discovered to their cost that “their” permit has been sold to one or more other parties.
2. Verify everything yourself
Go on regular site visits – don’t take things at face value and don’t rely on so-called “expert” reports unless you have been directly involved in the reporting process.
3. Management by walking around (MBWA)
This, for me, is more important than an MBA when running a project – don’t rely purely on local management which often lacks the experience needed to be managed remotely.
4. Be realistic
Things will often take twice as long and cost twice as much as your original budget and financial projections, which need to be realistic rather than optimistic. It is far better to under-promise and over-deliver than the other way around, especially if you need funding for subsequent stages of development.
5. Watch the cash!
By definition, management accounts are based on information provided by management. Don’t rely on what you are being told by management (see point 3).
6. Familiarise yourself with the locals
It is of great importance to invest your time in getting to know the community and engage with their leadership. Do this as early as possible in the project so that realistic expectations can be set and managed.
7. Be wary of conflicts
Be wary of potential conflicts of interest between promoters and management. All too often promoters have short-term goals of maximising their personal returns whereas management usually recognises that successful mining projects are usually medium to long term.
8. Think on your feet
When running a project remember that it is easier to ask for forgiveness rather than to seek permission. You need to be able to think on your feet and adapt plans to local conditions and requirements without getting “head-office” approval for everything. (After all, with MBWA you are better placed to make a decision than anyone else.)
9. Be accountable
Remember that when the proverbial hits the fan you are the only person accountable – you cannot apportion blame to any third-parties, be they experts or not.
10. Use your common sense
Structures and laws are important – there are no short cuts – but a common sense approach usually prevails. (Look what happened in the UK after David Cameron resigned. A common sense approach based on party rules resulted in a quick and smooth transition to Teresa May’s appointment than might otherwise have been the case.)
Author: Dr James Makamba