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Guidelines on Doing Business in Africa

  Jul 18, 2014

“Culture is a shared social blueprint for life- the constellation of values, assumptions, beliefs and behavioral norms that define a group of people,” said Kroeber and Kluckhohn.

In order to successfully transact business, it is important to understand the culture of a country and its business ethics. Speaking at a session on “Doing Business in Africa” a Program, held at Strathmore Business School, Dr. Mudida focused on the theme of Negotiation and Business Engagement in East Africa. He addressed participants from Gordon Institute of Business Science, South Africa where he placed emphasis on ensuring that business people, Understand the context of a particular people/region which is necessary in building good working relationships, especially when engaging in negotiations within the East African region.”

Naturally, Africans are communal and have an appreciation for each other’s well-being. They make it a norm for them to exchange pleasantries before getting into any formal matters. This is especially true in countries like Tanzania and Uganda where greetings are highly appreciated and citizens are considered as friendly and polite. It is therefore important for foreign business persons to learn one or two words in the local language of the different countries they are likely to visit.

Foreigners should understand and respect the ruling standards of the different countries in which they wish to conduct business. Kenya is an open state and its citizens speak openly on political issues. However, this is different in Uganda where authoritarian rule is exercised and one dare not criticize the government for there will be adverse consequences.

Patriotism is considered close to the hearts of Africans. In Rwanda for instance, the last ten years have been a period of re-invention both economically and politically, and most Rwandese are very proud of this. Rwanda is one of the fastest growing countries in Africa, averaging growth rates of 7-9% annually over the last decade. For business personnel visiting the country for the first time, it is important to acknowledge the achievements of the current regime. Don’t go in with arrogance because patriotism is important. It is wise not to openly criticize the government.

Equally foreign investors need to have local partners who will help them conduct their business without difficulty. Kenya has a complex business environment which makes it difficult to start a business. However, the Kenyan economy provides many opportunities as it is the largest economy in East Africa with a GDP of approximately 40 billion dollars. Political developments in the five East African countries (Kenya, Uganda, Tanzania, Rwanda and Burundi) have had a critical impact on the negotiating cultures, and as such, investors need local partners with good political connections in order to penetrate the market.

All countries in the East African region face a number of challenges as well as benefits which make it either easy or problematic to start a business. For example, most of the countries have incentives that are awarded to those who engage in particular productions,productions; also, tax exemptions may be given on specific items.

It is also evident that for one who seeks to do business in Africa one ought to understand key principles that guide the negotiation process:

To begin with, one needs to identify the tangible and intangible needs at the individual, organizational and third party levels. Some needs are tangible and objective such as cost, profit, timing, quality level and specifications. On the other hand, Some needs may be intangible and subjective such as the relationship, the character of the negotiation process, the precedent it sets, its fairness to both parties and their constituencies, its sustainability, the effect on your reputation and self-image, whether trust is enhanced or eroded.

Secondly, while negotiating, be sure to satisfy the needs that underlie the wants. Focus on the needs of the other party as much as yours. In many cases the wants stated by the other parties are only the tip of the iceberg.

Thirdly, be aware of your relative power and use it effectively . Negotiators with little experience tend to assume that each party’s power is an absolute and unchangeable quantity. This often leads them to suppose that they have less power than they actually have, or at times to believe that they have more power than they actually have. It is important to be aware of the power that you have. Power is relative and it depends on who the parties are as well as the subject of negotiation.

Finally, frame and position your case advantageously . You should always have supporting data and anticipate the arguments that are likely to come from the other party. After all is said and done, interpersonal communication is key to Africans and especially people in East Africa. Therefore, manage interpersonal relationships well. Generate trust so as to facilitate the process of exploring, persuading and confronting. No matter how stable your relationship with the other party may be, one must grapple with the problem of trust each and every time you negotiate. This implies that one must get into the habit of reviewing the relationship factor as a routine part of effective negotiation planning.

In the Business of Africa program, participants are exposed to challenges, opportunities, threats and risks associated with doing business in Africa. Africa’s rich diversity requires a more granular approach that differentiates business practices between regions and from one country to the next.

The program includes travel to three significant business destinations – South Africa, Kenya and Nigeria, structured to balance in-depth content and thinking around the African business environment with practical insights and immersions crucial to building business acumen on the continent.

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