: Taking the leap from Singapore to Africa
AFRICA may not be top of mind when Singapore companies look to venture abroad, but the potential of the continent is drawing more interest.
Enterprise Singapore (EnterpriseSG) declined to cite figures, but said that it had already run more projects in Africa as at the end of August than in the whole of last year. Its work there has included helping companies secure projects and setting up overseas offices.
Singapore businesses looking to set up or expand abroad typically look at South-east Asia; it is the top investment destination because of its proximity to home, and relative familiarity, noted G Jayakrishnan, executive director for South Asia, Middle East and Africa at EnterpriseSG.
The agency champions enterprise development and works with committed companies to build capabilities, innovate and go global.
Venturing to other regions enables these companies to reduce risk because they are spreading out their sources of revenue, and improving the flexibility of their supply chains, he added. “Over the years, we have seen more companies venture further afield, into markets like the US, Europe, Latin America, the Middle East and Africa.”
In particular, Africa’s appeal lies in its large, young population and its rich natural resources; it also has growth potential in sectors such as manufacturing, digital solutions and logistics – areas where Singapore companies can offer expertise, Jayakrishnan said.
EnterpriseSG now has three overseas centres on the continent – in Nairobi (in Kenya), Johannesburg (South Africa) and Accra (Ghana). At these centres, it offers access to in-market business contacts, and helps identify opportunities for Singapore companies.
More than 100 Singapore companies operate in 40 countries in Africa, in sectors ranging from manufacturing and logistics to agri-commodities and urban solutions.
One such company is engineering-solutions provider Nivesal, which develops industrial projects in developing countries. Most recently, at this August’s Africa Singapore Business Forum in Singapore, it signed a memorandum of understanding with the Kenya Investment Authority, following earlier introductions made by EnterpriseSG.
Under the agreement, Nivesal is to advise the Kenyan government on ways to boost the country’s manufacturing, its managing director Saikat Chowdhury told The Business Times.
One way it can do this is by import substitution – to identify popular, imported products that are “easy to manufacture” locally.
“You look at some food products – say those from Kellogg’s or Nestle. Most of it is imported. These kinds of products have a huge potential to be made domestically instead,” he said, adding that the rural masses often cannot afford the imported products, so producing them domestically could be a manufacturing segment to be promoted.
The company does not charge for its advisory work. Nivesal instead bills its small and medium-sized enterprise (SME) clients for what comes after – the design and construction of the manufacturing facilities, the supply of machinery and manpower.
By providing turnkey solutions instead of handling only parts of a larger project, Nivesal is able to capture a larger slice of the overall pie, Chowdhury said.
Describing the business model as “manufacturing-in-a-box”, he added: “We provide SMEs with the engineering, we supply and install the equipment, train their people, and ensure that they are able to produce the product.”
The company is in talks with interested SMEs in Kenya, and expects to start construction work on its first project by end-2023, he added.
“Kenya has one of the most developed manufacturing sectors in East Africa,” said EnterpriseSG’s Jayakrishnan. “Under its Vision 2030 plan, manufacturing has been identified as a priority sector to drive economic growth and development.”
While August’s signing marked Nivesal’s first foray into Kenya, it is not new to the continent. The company’s African operations made up 40 per cent of its S$40 million revenue in 2022, including completed projects in Uganda and Rwanda.
This year, Nivesal’s total revenue is projected to grow by 25 per cent to 30 per cent year on year; the company could have a hand in as many as 100 projects in Kenya in the next five years, Chowdhury said.
However, much of this will depend on the government’s political will and stability, he added. “When we look at sub-Saharan Africa in general, the biggest risks are basically stability; when there is turmoil, investment initiatives go on hold.”
The operating environment in Africa is also “more complex” than Singapore’s, and unpredictability is something that companies have to face, said Jayakrishnan.
“There could be unforeseen changes in regulations and policies, political landscape, fluctuation in foreign currency, as well as high inflation,” he added.
For Singaporean companies, the Kenya-Singapore Bilateral Investment Treaty, which entered into force on Aug 20, provides a hedge against some of the risk. “Singapore companies operating in Kenya enjoy protection on their investments, on top of that already accorded under Kenya’s domestic laws,” said Jayakrishnan.
Other benefits include non-discriminatory treatment, relative to other foreign investors, protection from illegal seizure of property, and the freedom to move capital and returns in and out of the country, he added.
In Chowdhury’s view, the ball is in the Kenyan government’s court: “They are the government authority in charge of all of it – the SMEs, regulations, approvals, finance. If they put it all together, I see them doing very, very well.”
Source: The Business Times © Singapore Press Holdings Limited. Reproduced with permission.