Where to open shop in Africa? In which countries should you invest? A fast-growing GDP may be a good measure in some countries, but how to rate the economic power of Africa’s informal markets? A new tool, the Global Markets Complexity Index (GMCI), may offer the answers you are looking for, with ratings of the complexity of the business environment of twelve African countries.
The GMCI helps decision-makers by introducing a newly developed index for business. The index assesses 83 countries across 31 measures of market, operational, and regulatory complexity. It puts each country into one of eight levels of complexity profiles. It rates the countries on market, operational, and regulatory complexity. These are the three most important dimensions of complexity that businesses encounter when operating in foreign countries.
Know what to expect
In partnership with The Wall Street Journal, Wilson Perumal (an international management consulting firm) developed country profiles based on the dimensions and classified countries into eight distinct groupings. With the GMCI, business leaders know what to expect expanding into each country and which countries share similar complexity profiles.
Complexity includes the number of products and services you offer, the number of steps in a process, the number of countries you operate in, the number of different store formats you may have, and so on. The launch report of GMCI states: “As complexity grows, the costs – and other impacts – of that complexity grow geometrically. With more complexity, service levels deteriorate, customers become overwhelmed by too many choices, and a company’s resources are spread too thin. As we add more complexity to a business, we also increase the potential number of interactions.”
Requires more guts
In short, the report does not say you should not invest in certain complex countries, like Mali, Zimbabwe. It does say: be aware that doing business in such countries requires more guts, attention, perseverance and, often, money. In Africa, the analysts rated twelve countries. All researched countries are rated as being complex and offering a challenging environment for business. The most important challenge, according to the report, is that they have either too much or too little regulation, which adds to the unpredictable character of doing business. Here is how these countries are performing in terms of complexity.
Group 5, ‘Upstream Paddlers’: Botswana and Namibia. These are countries actively working to make themselves more attractive to multinationals but fight against challenging complexity currents.
Group 6, ‘The Builders’: Kenya and South Africa. Countries on the march towards development.
Group 7, ‘The Spectators’: Benin, Côte d’Ivoire, Ghana, Senegal. These are countries that have not developed to a point where government regulation and market sophistication begin adding complexity. These countries are watching from the sidelines.
Group 8, ‘Only the Brave’: Mali, Nigeria, Zimbabwe, Togo. This category includes the most complex countries in the world. These countries have the highest market, operational, and regulatory complexity in the GMCI.