Johannesburg, South Africa — With the ‘Great Africa Business Migration’ well under way, discussions around the realities of doing business on the continent are now at a critical point. Africa is far from being a homogeneous continent, with 55 countries all boasting different regulatory, tax and competitive environments. Transacting in Africa poses complexities that companies need to consider.

In light of this, KPMG convened a panel of experts for the sixth episode in its Africa Conversations Series, to discuss the most pertinent trends and challenges related to investing in Africa today. CNBC Africa broadcast the panel discussion, entitled Transacting in Africa, live across the continent while KPMG made the session available globally via live webcast.

John Geel, Head of Transactions & Restructuring at KPMG, noted that historically multi-nationals and larger listed South African companies have conducted investment into and across Africa. “However, we are now witnessing an increasing number of smaller companies undertaking investments due to improved growth opportunities and regulatory and tax regimes. This means that companies are now seeking out the right entity to transact with, negotiate details of collaboration and sign legal contracts.”

Coupled with this increased investment appetite, KPMG have also noticed that the banking sector on the continent has improved, and there continues to be consolidation and expansion appetite. In May 2012, KPMG Africa released the Africa Banking Survey to provide a better understanding of regulatory frameworks on the continent. The survey provides information in several areas including the commercial, legal and tax, and banking environments, as well as governance and reporting issues.

Fourteen countries were analysed covering all African regions. Alan Field, KPMG Head of Tax & Legal, said, “Much depends on the kind of investment you are making and what kind of legislative framework exists for the investment in a particular country. Of course, banks need to examine this since they want a stable environment to reap investment rewards – so while some countries in Africa offer attractive investment opportunities, some are still complex.”

Recent over-banking trends in Africa have led to regulatory challenges, but these are increasingly being addressed. For Heloise Smith, Executive Vice President, Business Development, Standard Bank, companies and banks still need to manage risks carefully while investing. “More banks and companies are gaining a better understanding of the continent. However, there is always a trade-off between risk and return on investment. Banks still need to find ways of mitigating the risks.”

Despite the financial crisis of 2008, there is now more private equity available in Africa. As KPMG’s Alan Field points out, “Private equity on the African continent is relatively new but has started to gain momentum and there are funders who are very excited about the opportunities. However, even with the increased awareness, capitalisation rules and regulations regarding extraction of funds are still missing. It is uncharted territory at this stage, but it is developing. Funders will compete about opportunities in Africa in the future.”

Substantive investment comes from China, now Africa’s biggest trading partner. The panelists agree that China’s engagement in Africa is increasingly to the benefit of Africans. China is an important partner in infrastructure development, which enables economic growth. Says Habil Olaka, Chief Executive Officer of the Kenyan Bankers Association, “Unlike the Chinese, many African companies have limited capacity to deliver on major infrastructure projects. In Kenya, we have seen increased side opportunities for local companies, and this helps people on the ground. African collaboration with the Chinese is a win-win scenario.”

Recently, regional blocks such as the Economic Community Of West African States (ECOWAS) and East African Community (EAC) have become stronger economic groupings, but panellists believe that besides reducing trade barriers and enhancing informal economic exchange, little impact is visible regarding foreign direct investment. Potential investors prefer to follow country-specific opportunities, rather than engage with a regional block. Investors into Africa may take advantage of gateway countries to access a region, for example South Africa for the Southern African region.

Carel Smit, KPMG Africa Head of Energy & Natural Resources, also a panel participant, added: “Investors want to see predictability and Africa has to provide the necessary frameworks. Africa is so rich with natural resources. As long as the world comes after these resources, Africa will do economically well. The world’s population is growing rapidly and needs resources. A resource hungry world cannot ignore Africa.”

Image Courtesy of  World Bank Photo Collection

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Singapore, Republic of Singapore — The development of sustainable urban infrastructure is one of the greatest challenges of the 21st century. With more than half of the global population already squeezed into cities that, collectively, make up less than two percent of the planet’s land cover(1), the pressure now being placed on urban infrastructure is unprecedented. This worldwide demand for infrastructure is expected to require the investment of tens of trillions of dollars over the next four decades in order to create and maintain sustainable and highly-liveable urban areas that balance the needs of the population, the economy and the environment.

To that end, KPMG’s Global Infrastructure Practice is pleased to announce the much-anticipated second edition of the Infrastructure 100: World Cities Edition – a high-profile report showcasing 100 of the most innovative and inspiring urban infrastructure projects from around the world. Released at the World Cities Summit in Singapore, this edition provides insight into the infrastructure projects that make great cities, with a particular focus on the innovations that make them ‘Cities of the Future’ – places where people want to live and do business.

“Existing urban infrastructure is in urgent need of revitalization, and demands for new infrastructure have skyrocketed to meet the basic needs of growing populations. The world’s cities are already home to more than half the world’s population, and that number is expected to jump by more than three billion by 2050,” said Nick Chism, KPMG’s Global Head of Infrastructure. “The World Cities Edition looks specifically at the challenges faced by cities around the world and features 100 innovative projects that can inspire readers to conceive, finance and develop infrastructure projects that make a positive difference to the cities we live in.”

From managing exploding urban population growth to updating aging infrastructure or effectively managing a declining population and tax base, each region of the world faces major infrastructure challenges that must be met in order to ensure the economic health of the region.

“Cities are playing an ever more important part in their country’s economy. However, current global economic conditions and austerity measures have resulted in a need to identify innovative infrastructure solutions to deliver the required investments,” said James Stewart, KPMG’s Chairman of Global Infrastructure. “Strategic city infrastructure projects are delivering economic renewal by connecting communities and increasing jobs while delivering tangible long-term impacts and growth. But the importance of investing in sound, smart infrastructure cannot be overstated.”

Image Courtesy of  Neale Cousland / Shutterstock.com

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Africa has become one of the fastest growing regions in the world, now firmly positioned as a global investment destination of choice. In 2012-13 alone, the continent is expected to grow by 5% and it is estimated that Africa’s GDP could be US$2.6 trillion by 2020.

While it is clear that individual countries perform economically with different levels of success, there are significant business opportunities across the continent driven by an insatiable demand for Africa’s resources, a rapidly growing population with an unprecedented rise in consumer demand, and the related infrastructural development that is urgently required in all areas.

Reflecting on these mega-trends shaping Africa’s future, Tim Bashall, Head of Strategy at KPMG Africa says: “We are obviously dealing here with long term investment strategies. The African story still has elements of political and economic uncertainty but overall business opportunities are greatly improving. Investors are therefore thinking in cycles of 15-20 years.”

Tata Africa’s Managing Director, Raman Dhawan explains that they took a conscious decision to expand into Africa since the leadership of the Indian conglomerate acknowledged the need to export.

“We came to South Africa and Africa to build a footprint on the continent, and we are looking at sectors which are untapped, such as the telecoms. We have successfully managed to establish ourselves in about a dozen countries including South Africa which we consider as a benchmark for our operations in other African countries.”

Many investors are still weary of potential risks of putting money into Africa. Says Tim Bashall: “We are aware that people worry about political risks and change of legislation in different African countries. But it has become a lot better.” African countries have become increasingly stable and there are many promising examples of public sector reforms which have helped to improve the business landscape, including improving regulatory frameworks.

Key to mitigating the risks is to have local presence on the ground which creates relevant and adequate capacity to deal with the prevailing realities and challenges. The lack of well-trained human resources offers a chance to build a work force suited to the business environment.

“We pursue a strategy of hiring global business leaders for our African operations who have proved themselves elsewhere. To us, it is not important where the talent comes from as long as we get the talent we need. Of course, human capital is one of the major business risks in Africa, yet corporations have successfully managed this challenge for decades but have failed to tell the success story,” Says Henri Obi, Chief Operations Officer at Helios Investment Partners.

To potential investors looking for opportunities in Africa, KPMG’s Dapo Okubadejo has a number of suggestions. “Buy and build existing companies, invest in value-chains while adopting partnerships in the logistics and distribution sectors, engage proactively with regulatory institutions, thoroughly build your human capital and adopt a portfolio strategy approach.”

“Doing business in Africa requires a lot of patience and time, but the rewards can be very high. It is important to understand the local cultures in African countries where companies want to invest,” further notes Henri Obi.

Image Courtesy of   Attila JANDI / Shutterstock.com

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Reputation and risk management are key concerns of corporate directors, and social media can define a company’s risk profile and redefine its reputation at electron speed,” says reputation, marketing, and crisis adviser Davia Temin.

“But there isn’t a lot of real strategy around corporate social media out there. Instead, what you see primarily is ad hoc tactical execution and activity, without a lot of high-level strategy directly tied to corporate goals, including reputation and risk management. Boards need to take a greater role in social media oversight.”

On January 23, Ms. Temin will speak before a group of more than 60 corporate directors at the New York City chapter of WomenCorporateDirectors. The event will be held at KPMG.

Author of the recent 11-part Forbes.com series, “The 10 Don’ts of Corporate Social Media,” and a frequent corporate speaker, Ms. Temin advises CEOs, CMOs, legal counsel, and corporate boards of directors on how to manage the risks inherent in a social media presence – and how to leverage social media to achieve branding and communications goals.

WCD is the only global membership organization and community of women directors, with more than 1,350 members serving on more than 1,500 boards worldwide.

“The question is, what constitutes good governance in the world of social media?” asks Ms. Temin. “Is ‘noses in, fingers out’ the best framework for directors in this space?”

“I believe that the board’s role is to insist upon a thorough, frequently updated social media strategy and policy that the board reviews for direction and thoroughness on a continuing basis. The strategy must include monitoring, marketing, reputation management, crisis response, accountability, flexibility, insight, and leadership.

“Boards today must ask: ‘What are we saying about ourselves and our products that is authorized – and unauthorized? What do others say about us? What are the reputational risks and rewards we should be preparing for?’”

Ms. Temin argues that greater oversight of social media strategy is non-negotiable for boards today. “How boards respond to real life events and crises will play out more quickly and transparently in social media than they have ever seen before.”

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