Historically the region, which is the continent’s biggest territory in terms of size, has lagged behind the rest of Africa. Its countries have been considered enclaves of political instability with weak economies and poor populations. This has not been helped by weak private sectors, the high cost of business, poor corporate governance and perceptions of high levels of corruption. These countries have been slow to adapt and held back by the paternalistic attitude of their former colonial powers.
Things are now changing and the region is projected to grow economically in the range of 5-6% a year, though political risk remains. Much of the growth in French-speaking Africa is being driven by agribusiness and services, rather than the traditional drivers of growth, oil and minerals.
Of the five African economies to watch in 2017, all are francophone countries and four of them are in sub-Saharan Africa: Benin, Côte d’Ivoire, Morocco, Senegal and Togo. Cameroon and Côte d’Ivoire act as gateways to broader regions.
Côte d’Ivoire, for instance, is on the rebound after a decade of war. The country is diversifying, with investments in ports, highways and bridges. The African Development Bank has returned to Abidjan after having relocated to Tunisia during the civil war.
Francophone Africa is no longer the exclusive backyard of France and Belgium. More and more firms are exploring these untapped markets. Australians are investing in mining; Middle East and South East Asian firms are investing in manufacturing and agribusiness; and Nigerians (including Nigerian multi-national group Dangote) are investing in in Senegal, Gabon and the Congo.
Francophone countries have an acute shortage of infrastructure, meaning there are many opportunities for public-private partnerships (PPPs). French companies are making inroads into infrastructure, while Turkish firms are also starting to get involved. The new Dakar airport in Senegal, for example, is being completed by Turkish construction firms Limak and Summa.
The financial sector, historically dominated by top French Banks such as Société Générale and BNP Paribas, has changed since new European regulations post 2008 crisis impacted these banks’ ability to invest in the small and medium enterprise sector. Moroccan banks such as Attijariwafa, Bank of Africa and BCP, together with local sub-Saharan groups like Ecobank, Orabank and BGFI, have filled the gap in the market.
Standard Bank acquired a full banking licence and opened an office in Abidjan in 2014, and is planning to use the local market to launch its expansion across West Africa. Other international banks including Citibank and Standard Chartered PLC are looking at opportunities in Francophone Africa.
From a demographic perspective, the region has a young, fast growing population with high growth potential. Today there are 90 million Francophones in Africa out of a total population of 220 million; the number is set to rise to approximately 550 million (out of 700 million) by 2050.
The region has an integrated, stable currency, which is attractive to foreign investors. The CFA Franc is a single regional currency covering eight countries in the West African Economic and Monetary Union (WAEMU) and six countries in the Central African Economic and Monetary Community (CEMAC). It is pegged to the Euro and guaranteed by the French treasury. However, you cannot use the West African CFA in CEMAC or the Central African CFA in WAEMU, although they represent the same value.
Some argue that the CFA Franc is a symbol of France’s “exploitation and pillaging” in Africa, but it is also seen as a guarantee of stability and development. It has been among the continent’s most stable currencies with low inflation over the past ten years.
Together with a centralised monetary system, West Africa has an integrated legal system for business law known as the OHADA law or the "Organisation for the Harmonization of Business Law in Africa". This operates across 17 mostly French speaking countries: Benin, Burkina-Faso, Cameroon, Central African Republic, Chad, Côte d'Ivoire, Congo, Comoros, Democratic Republic of Congo, Equatorial Guinea, Gabon, Guinea, Guinea-Bissau, Mali, Niger, Senegal and Togo.
OHADA law was created with the objective of building a better investment climate to attract investment and foster economic development in West and Central Africa. The OHADA organisation has adopted nine uniform acts directly applicable in the member states and covers commercial law, corporate law, security law, cooperative companies, carriage of goods by road, insolvency proceedings, debt recovery, accounting and arbitration.
Though primarily based on French and civil law concepts, OHADA law is on some subjects more advanced than French law. Once mastered, it makes it easier to operate through multiple African jurisdictions.
Investors facing weak economic conditions and the unpredictability of doing business in South Africa, Nigeria and Zambia, are looking for opportunities beyond their usual markets. South African firms have barely even begun tapping Francophone markets. South Africa makes up 20% of Democratic Republic of Congo imports but only 1% for Côte d’Ivoire and Cameroon.
Although the perception is that the French dominate these countries, according to some of the region’s experts, South Africa’s biggest competitor in Francophone Africa is Nigeria, not France.
Language is said to be a key factor keeping South African businesses out. They are also put off by a different legal system and the lack of knowledge about opportunities and the overall environment in these countries.
These should not prevent them from entering these markets. Similarly, the language and legal system are different in Mozambique, yet many South African companies are involved there.
As elsewhere, partnerships are key to enter these markets. Companies should look for a local partner when entering the region, together with a strong legal advisor, and commit to long term strategies, taking a regional approach to investment rather than looking only at one country. Although these countries are united by their French or Belgian colonial pasts, they have distinct cultures and languages (besides French) and different ways of doing business.
OHADA business law and the CFA Franc provide stability for companies willing to do business on a regional scale in West Africa. The language issue can be overcome. Many local entrepreneurs are fluent in French and English, having graduated from US, UK, Canadian or French universities.
South Africa hosts a number of French and Belgium companies, and financial and legal advisors who use South Africa as a platform for regional business. The national delegations and the local chambers of commerce are a good starting point to make contact with Francophones in South Africa. A vast network of entrepreneurs from the Democratic Republic of Congo, Cameroon and other French-speaking African countries live in South Africa and invest in their home countries. Tapping into these networks can prove invaluable when deciding to venture out of the chartered waters of the Southern African Development Community and the East African Community.
Alexandre Vaillant - Alexandre is a Senior Associate at Fasken Martineau and a member of the Board of directors of the French South African Chamber of Commerce and Industry.