If your firm is looking to commence or expand operations in Africa, there is a good chance that you will want to establish a local base of operations. Your choice could be a simple one—if your primary market is Nairobi, then that’s where you will end up; if it’s Kenya more broadly, you may consider another city like Mombasa, but even then Nairobi probably would be your choice.
However, if you are looking for a base for regional or even Pan-African operations, then you must do a bit more thinking about where you end up. For the past two decades, South Africa’s Johannesburg has been dominant as an African base of operations, but with increasingly decentralized economic opportunities, growing flight connectivity around the continent, and more appealing urban choices, there are more options than ever before. Before making a choice, there are a few considerations every firm should consider:
- Reliable air connections: If you have decentralized operations, you must make sure you can get to them. The good news is that more and more airlines are flying on the continent, making the traditional need to fly to Europe to make African connections an anachronism. However, a few hubs still dominate the market.
- Skilled workers: Even with expatriate workers, your firm most likely will need large numbers of local workers to fill positions, so you need to go where the talent is. All across the continent, young people are flocking to cities, so the talent is out there—although you might have to pay to recruit them in a competitive market.
- Quality of life: This is a tough one, particularly if you anticipate bringing on expatriate staff. Expat managers will expect Western-standard housing and access to good schools for their children. While these are increasingly on offer in African cities, they often come with a hefty price tag.
- Local considerations: As you narrow down your search, there are a host of local considerations you will need to take into account. How long do you anticipate staying? Do you buy or lease real estate? Do you base operations in currently vibrant neighborhoods, or follow longer-term population trends? Real estate in largely undeveloped peri-urban areas may be much less expensive than center cities (with greater disparities than urban centers in the US or Europe), but there may be a need to invest in basic operational infrastructure. All of these considerations should be taken into account early on.
So what are some of the options? Four major markets dominate the African landscape in regard to corporate basing, each with their own advantages and downsides:
Johannesburg: South Africa’s largest city, with a metropolitan population of about 8 million people, Johannesburg has been the go-to spot for African corporate headquarters’ since the country’s 1994 transition to majority rule. The reasons are many: easy continent-wide access from OR Tambo International Airport, well-developed infrastructure, wonderful climate, first-world amenities (including health care), and a very low cost of living. The bloom, however, is increasingly off the rose, as Joburg is also plagued by seemingly intractable violent crime, power cuts (although capacity improvements are addressing them), and infrastructure strains brought on by mass migration. The South African Government also has gotten stricter on work visas for expatriates, making it more difficult to bring in foreign staff, and South African human capital can be of questionable quality depending on the industry.
Cape Town: More and more businesses are moving to South Africa’s second city, Cape Town. It’s easy to see why—Cape Town (with 3 million people) is possibly the world’s most beautiful city, with world-class amenities that keep expatriates enthralled. Compared to Joburg, it is a nicer place to live, although more expensive and less accessible to the outside world (you need to fly two hours through OR Tambo, although there are flights there hourly). Crime is perceived as less of a problem than in Johannesburg, although it is still daunting.
Nairobi: Any business operating in East Africa must consider Nairobi, Kenya’s capital (with about 3 million people), as a hub. It has excellent regional air connections, a vibrant economy, a large number of skilled workers, and a pleasant climate. However, there are downsides. Infrastructure is lacking, leading to a well-earned reputation for traffic jams, and the nickname “Nairobbery” communicates its reputation for crime. Perhaps most daunting, however, is the potential for Islamic extremist terrorism emanating from neighboring Somalia, most recently seen in the 2013 Westgate mall attack.
Lagos: Africa’s 16-million-person mega-city, Lagos is the beating heart of Nigeria and all of west Africa. It is the epicenter of regional business operations, with a vibrant technology sector and perhaps the strongest human capital base on the continent. It also is a chaotic place choked by traffic and struggling to meet massive infrastructure challenges, although the regional government has made great strides in recent years. Lagos is a difficult sell for expatriates, particularly those with families.
There are, however, options beyond the “Big Four.” Several other cities around the continent offer potential bases of operation, particularly as airline connectivity improves.
South Africa’s smaller cities: South Africa has several smaller cities—notably Durban, Port Elizabeth, East London, and Nelspruit—that are less hectic, less touched by crime, and cheaper than Johannesburg or Cape Town, but with the upsides of a South Africa base. All have frequent, direct air access to OR Tambo, making continental access easy.
Harare: Southern Africa has a lot of appeal for corporate bases: generally good infrastructure, climates that appeal to expatriates, and often solid human capital. Of all regional cities outside South Africa, Zimbabwe’s capital Harare has perhaps the best potential to emerge as a base for your business. Although Zimbabwe has suffered from political and economic crisis in recent years, the situation has stabilized of late. The international airport offers reliable regional connections, while the human capital base is highly educated and returning in droves from South Africa. Zambia’s capital Lusaka has similar characteristics.
Kampala: Uganda’s picturesque capital has a large regional air hub (Entebbe International), a pleasant climate, good housing stock, and—despite a terrorist attack in 2010—is largely safe. For businesses looking at both central and east Africa, Kampala is perhaps a sleepier alternative to Nairobi. Another regional alternative is Rwanda’s capital, Kigali, which in the past two decades has sought to transform itself into a regional technology hub.
Accra: Ghana’s capital has emerged in recent years as viable alternative to Lagos for businesses looking to do business in west Africa. Traditionally rather sleepy, Accra (population of 2.5 million) has seen a building and economic boom in the past decade. Infrastructure, while not ideal, has made great improvements, and the air links in the region and further abroad (including thrice-weekly flights to the United States) have significantly improved. Other regional possibilities are Cote d’Ivoire’s Abidjan and Senegal’s Dakar, although their Francophone populations makes them tough sells for non-Francophone businesses.
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