Awakening Africa Magazine


6 Harsh Realities of Investment in Africa

2 Mins read

When it comes to investments, investors need to be highly accurate and precise to ensure that they are safeguarding their hard-earned money. In current times, there are tons and tons of foreign investors out there who are learning of the high amount of outstanding potential and financial incentives waiting for them in Africa. However, there are certain realities that investors need to keep in mind before they think of investing in Africa. This can help them take proactive measures to combat such issues.

Realities to Keep in Mind

  • Political Instability

The first and foremost harsh reality to consider is that of political instability. This is a huge consideration that needs to be kept in mind, especially for infrastructure-related projects. One should pay special attention to this domain as the government is often directly linked as a partner. Any political instability can lead to trouble, renegotiation as a change of government, or even as far as withdrawal of licenses. 

  • Changes in Groups

Every region comes with its fair share of instabilities, especially in the social area. Africa, too, is vulnerable to some of these. There are thousands and thousands of ethnic groups residing in this area, which means there are tons of distinct cultures, languages, and laws that have to be considered. A failure to do so can lead to trouble.

  • Law and Legislation

The following domain to consider is that of the implementation of different regulations and laws. In Africa, the central legal system works on the principle of civil law and common law. At times, this can turn into a mixture of the two as well. For a new person, the limitations here can be pretty astonishing. Decisions regarding disputes, arbitrating, litigation, etc., can be much easier to handle with a deep understanding of Africa’s legislation. 

  • Labor Costs

While investing, various external elements need to be kept in, such as the costs and expenses that can come along the way. If you are looking for a reduced-cost investment, you might find yourself in trouble since the region’s labor costs are pretty high. The minimum wages offered can be difficult to handle financially if you need your company to work based on the employment of semi-skilled staff members. 

  • Social Instabilities

Africa faces some social instabilities too, which, if not taken into consideration, can mess up your business venture and drown down your investments. This includes different types of civil unrest, from strikes to union activities and even demonstrations. These can not only have terrible consequences for the business but the society as a whole as well. It usually stems from economic inequality and can be dealt with by a well-thought-out approach. 

  • Security Issues

While this is fortunately not a very significant one, it is still a reality as the region of Nigeran has been recently struggling to handle the security crisis taking place. There have been higher rates of banditry and kidnapping noted in the northwest.  It gets even heightened considering the limited resources and funding.

While it might all seem like doom, that is certainly not the case. Like all other regions, Africa has some areas that need improvement. The good news for investors is that they can do their research and come out victorious. 

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