Multinational companies are still as interested as before in emerging market – and particularly African – expansion, but confusion regarding local bureaucracy and infrastructure provision is holding back investment and subsequent revenue generation.
Despite the global recession, 68% of multinationals see emerging markets such as Africa just as appealing as two years ago, research conducted on behalf of Cable&Wireless has found.
However, despite this continued interest, businesses are hesitant to make a firm commitment to expansion due to increasingly outdated perceptions about the continent's ability to foster international commerce.
This hesitation means that businesses risk missing out on the many benefits offered by expansion into the continent, says Nick Lambert, MD of global markets at Cable&Wireless Worldwide.
"Emerging territories can present huge opportunities for multinationals – in the same way, the investment they then deliver to that market can be significant," he says. "Africa's economy has been performing well; the continent recorded overall economic expansion at an average 5,9% annually between 2001 and 2008. That's
a strong return on investment for any firm and certainly not one to be overlooked in the current economic climate."
Respondents agreed, with interest in relocation to lower cost regions, particularly in an effort to counter current economic conditions, cited as a key driver by businesses considering the move.
More than 300 multinational companies were interviewed by Vanson Bourne for the research and in excess of three-quarters (81%) and 61% of these multinationals expressed an intention to move into south and sub-Saharan Africa respectively by mid-2011. However, 50% of those were concerned that the perceived lack of infrastructure would hamper their move.
"The perceived lack of infrastructure is a perfect example of investment being held back by an increasingly irrelevant concern", says Taj Onigbanjo, head of Middle East & Africa at Cable&Wireless Worldwide. "Companies such as Cable&Wireless have invested heavily in getting high-speed, high-capacity and cost effective telecoms networks into the region and today, the infrastructure is much more advanced than businesses are giving it credit for.
"Within the next two years around five under sea cable networks connecting the continent to the rest of the world are due to come into operation including the recently announced West Africa Cable System. These investments will build on the existing telecoms capability in the region and the combined international bandwidth capacity into sub-Saharan Africa will increase by 120 times by the end of 2011."