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Oct 9-12, 2024

Business

Challenges of Doing Business in Africa

Africa’s economy has gradually grown during the last few decades. This has given investors and businesses hope that their investments will succeed. Although the African market has the potential for exponential expansion, it is also afflicted by several obstacles. These problems have had a significant impact on business life cycles as well as the quality and quantity of investors available in the market.

So, what are the common issues?

  • High taxes and low border trade
  • Shortage of electricity
  • Poor access to finance
  • Cost of starting and running a business
High taxes and low border trade

The majority of African economies rely on foreign borrowing. Frequent borrowing and misuse of finances by governments result in exorbitant interest rates. Fear of failing and facing the repercussions of bad credit has compelled countries to levy substantial levies. This has hurt the region’s economic growth, as most enterprises have fled their homelands.

In addition to hefty tariffs, Africa has one of the lowest rates of cross-border trade. This was primarily due to poor policymaking, which limited commerce among specific countries. Fortunately, the Continental Free Trade Area was passed in 2018, with 44 of the 55 countries participating. This has affected the economic structure of the

Shortage of electricity and energy

All modern economies are based on stable and inexpensive energy. This is not the case, however, because the majority of Africa lacks one of both. Electricity installation is expensive, and those who have access to it are unable to rely on it. This has proven to be a difficult task, as industrial companies struggle to operate in Africa. Furthermore, electricity consumption in Sub-Saharan Africa is 17% of the global average. This is quite low when compared to other regions in the West.

Lack of capital

Thriving firms require access to capital. This is accomplished mostly through grants and investment funding. Because of the unfavorable economic situation, most investors avoid Africa. This is due to a history of political instability.

Africa has immense potential for economic revolution, but this may be accelerated by addressing these issues. These difficulties are at the core of most, if not all African economic arrangements, and if solved, much is likely to change.

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