The Spanish SME has a place on the African continent

Africa is a chessboard where today not two, but four contenders measure their forces. The most disadvantaged continent, ignored and plundered over time, has become a game in which the European Union (EU), the United States (USA), China and Russia compete for the political support and economic resources of its 54 states. “The West has lost the influence it historically had on this continent: African countries have felt neglected by the United States and Europe’s colonial past weighs negatively on their relations,” says Lidia Candal, country risk analyst at Cesce, who will participate in the webinar Strategic diplomacy: Africa, a game boardorganized through Banco Sabadell’s HUB Empresa.

If there is so much talk about Africa today “it is because it is the last frontier; in many ways,” explains Katia Martínez Garbaye, professor at OBS Business School. “Africa is where there is more to do, more natural resources to take advantage of and where we also know that the demographic explosion will create a consumer market that Spanish small and medium-sized businesses (SMEs) cannot miss.”

The African continent needs to catch up “in aspects as essential as infrastructure, the progressive urbanization of Africa and the gradual connectivity of the population,” says Carlos Dalmau, director of International at Banco Sabadell. “All these aspects make it a land of opportunities, both for international powers and obviously for Spanish companies,” adds this expert who will also participate in the webinar.

Furthermore, in the words of Martínez Garbaye, Spanish SMEs are in an unbeatable moment to look towards “certain African countries, not all of them, because we have a good image by not dragging a dubious colonial past there; We like each other because of our idiosyncrasies; As Europeans, they see us with an aura of quality; and since we belong to the south of the Old Continent, they perceive us to be cheaper than companies from the north.”

Juan Millán, founding partner of the consultancy to open new markets, Gedeth Network, also speaks of this “extractive” British, French, Belgian colonization… “which has generated a lot of suspicion towards them.” “On the contrary, in addition to a clean image in this sense, Spain has a competitive position with respect to third parties, in which geography benefits us: areas such as the Canary Islands, Algeciras or Valencia assure us priority and less expensive access to huge portions of Africa, which, for example, other European countries would like.”

Treating Africa as a uniform entity means betraying its immensity and diversity, although there are transversal problems that affect a good part of its nations: political authoritarianism, economic debt, terrorist insecurity… So, as world powers compete for resources, political influence and strategic control, the African continent faces challenges that require a responsible approach.

Ana de Vicente, deputy director general for Africa and the Middle East of the Secretary of State for Commerce, points out that the enormous potential of the continent for the Spanish company can be deafened because the risk perceived by the SME is much higher than the real one. “The moment companies overcome that barrier, and see that it’s not that big of a deal, they stay; because the growth prospects more than compensate for the effort made.” And according to Candal, “Russia’s way of operating in Africa is contributing to increasing political instability, in a continent where poverty, the fragility of democracies and the rise of terrorism are catalysts of this instability.”

No analyst denies these problems, but current, and especially future, possibilities provide this land with opportunities of interest to Spanish companies that De Vicente confirms as “almost constant and growing day by day. Every time an African leader sets foot on Spanish soil we have a waiting list for the bilateral meetings that are organized ad hoc. The same as when the President of the Government of Spain has traveled to Senegal, Kenya, South Africa…”.

This interest has caused the Secretary of State for Commerce to review its Horizon Africa Strategy three years ago, to align it with the strategy Global Gatewaya program endowed with 300,000 million euros to finance, between now and 2027, the infrastructure of the EU partner countries on the African continent, explains De Vicente: “It will be through the mobilization of the private sector, hence “We are counting on the comments and suggestions of the companies.”

North Africa: natural market for Spain

María Ángeles Ruiz Ezpeleta, professor at EAE Business School, shows that, despite its proximity, Spain has never highlighted the clear cultural and commercial similarities with the Mediterranean countries of North Africa; specifically, with Morocco, a neighboring and border country. While, with other neighboring markets, such as France and Portugal, “our trade relations have always been fluid and growing—France receives 15% of our exports and Portugal more than 7%—on the other hand, Morocco only receives 2. 5% of our sales abroad.”

Even so, Morocco represents almost 50% of Spanish exports to the African continent. Overall figures that clearly could be improved: with 21,000 million euros exported last year, Spain occupies a discreet position, below France (60,000 million), Germany (37,400), Portugal (32,000) or Italy (31,400), according to data from ICEX Spain Exports and Investments. Of course, in recent years, the volume of exports from the countries of the euro zone has grown by more than 20% annually, to exceed 214,000 million euros in 2022; figure much higher than that of any other continent.

What to sell and where to do it

Being a continent rich in natural resources, there is a deficit in industry and manufacturing, which is why it is open to imports, argues Ruiz Ezpeleta. “It is essential to determine the niche and the exact place for the expansion of our business, since geography determines a high percentage of the needs of each region, but in general terms the most demanded is material and equipment for construction, followed by products related to the cleaning, channeling and potability of water, consumer goods, food and drink and renewable energies.”

As for which areas or countries may be more interesting, “it’s time to customize based on the value proposition of each company,” says Millán. “I recommend looking for local partners who can provide us with their knowledge of the current state and help us adapt our product or service. “That they bet on our business as much as we do.” This expert suggests starting with the Maghreb (which corresponds almost completely to the northern region of the continent), due to proximity. “And because there is already a critical mass of Spanish investments that help provide traction. Above all, in the case of Morocco, where we already have a leadership position.”

Also the west-sub-Saharan coast, “a destination where we have the advantage of a unique platform for business management: the Canary Islands. And markets like Nigeria, with spectacular demographic growth, if our company is in consumer goods or infrastructure. Finally, there are countries with interest in their own right, such as Egypt, due to location and demographics, or South Africa, with an installed base of foreign companies that gives it enormous dynamism.”

The key to entering is good planning, recommends Dalmau, from Banco Sabadell. To do this, it is essential to inform yourself and have expert advice, such as the International Business Directors of Banco Sabadell, who can advise on what should be analyzed beforehand and what financial support is needed to facilitate companies’ entry into new markets. Companies interested in making the leap abroad can go to the regional Chambers of Commerce, the ICEX Spain Exportation and Investment or the commercial offices of the embassies that offer information and support. on site. You can also count on the help of the banking entity, says Dalmau, since it has initiatives to promote an Internationalization Plan. It is the case of Sabadell International Business Programwhich addresses aspects such as logistics, taxation and the particularities of negotiations, determining factors in any internationalization process.