A recent conference on business and investment opportunities in Africa organized by the Czech Foreign Ministry, focused on innovative forms of investment and modern technologies. Titled “Creative, Innovative and Participative Africa” the event brought together ambassadors and business representatives, underlining Czech interest in establishing new partnerships and projects on the African continent. I spoke to Deputy Foreign Minister Martin Tlapa about the opportunities opening up, the risks involved and what the Czech government is doing to help Czech businesses establish themselves on African markets.
“This is not just about exporting products. It is more about how we can help invest in Africa; because establishing long-term businesses and looking for the potential there requires being innovative in finding ways how to be successful. So we are very proud that Skoda is assembling cars in Nigeria; that a factory for nonwoven fabrics was built in South Africa, near Cape Town –these are examples of the kind of projects we need. And in order to assist them the government should use traditional tools. Everybody needs financing, so we need to give efficient support in this area. State-owned banks can provide guarantees or loans. We are putting together these financial tools with the Development Corporation and that is why we have a guarantee scheme for commercial loans from banks which is a pilot project managed by Cesko-Moravska Rozvojová a Záruční Banka and we think this should really help Czech firms to establish long-term partnerships. So doing business in Africa is not easy; it takes time and there are a lot of risks involved, but on the other hand, there are a lot of opportunities opening up for Czech companies.”
The government is now sending out more economic diplomats, you are compiling a Map of Opportunities for Czech Investors and operating a Clients’ Centre to help Czech businesses – is that right?
“Yes, that’s correct. The first thing we decided to do in 2014 was to come back to Africa via a network of Czech representation offices, embassies and offices for promoting trade. We opened an embassy in Senegal in Ghana, we are now in Zambia, we have a Czech Trade office in Nigeria, we are in the North of Africa as well. We need a business network that will assist our businesses and also tourists who will visit these regions, to show the Czech Republic as a partner for future cooperation.
“We are trying to pool resources, to do things in a smart way. So we are not just considering which countries are good for investment, but in which sectors –based on analysis and market potential – Czech companies may be successful. So we are matching the needs of the given country with the competitive advantages of the Czech economy. And we are putting together businesses and NGOs which could facilitate the contacts. That’s behind the Map of Opportunities which is a market tool for putting things together, a presentation of the various sectors in Africa.”
Most people know what the traditional Czech export articles were – cars, beer, crystal glass… but today you need innovative technology, you have to offer know-how. So what can we offer? Where do our strengths lie today?
“Our strengths lie also in what we did in the past. So the contacts and relationships that Czech businesses established abroad in the past are very positive -our good reputation in delivering goods, training people in the Czech Republic and so on, that is something that works for us. But we cannot rely on that alone, we have to build on it. We have to identify the sectors that need growth. In the case of Africa I will mention two or three such areas. One is agriculture -the demography clearly points to a growing demand for an efficient agriculture. And this is exactly the sector in which the Czech Republic has a great deal to offer. So investing into increasing the efficiency of farms in Zambia – putting together the know-how of Mendel’s University and Czech businesses –in order to improve the technology, methodology, training of people, distribution of the products this is something we are trying to establish through businesses and the Development Corporation together. That is how we can meet the needs demanded by a given country. That is a tremendously important thing.
“The second sector in which we are strong – a relatively new one – is the health sector. We have a very wide variety of producers of health technologies and products. And if we are able to put them together under one integrator we are able to build or renovate parts of a hospital equipped with Czech technologies – which has already been done in several countries. So we need an integrator who is able to design the solution and we have companies – with very good references – which are able to deliver the products and train people. So companies like Linet are very well known in Africa and we put them together with MZ Liberec and others able to provide smart solutions. We are addressing broadly the needs and requirements of the given country. ”
We are big in the area of nanotechnology – is there a market for that?
“Yes, nanotechnology is a sector I didn’t mention that has considerable potential. By the way, our advance in this field is based on very good research by Czech experts and the challenge that the Czech textile industry faced in the past due to cheap labour elsewhere. So the country was pushed to be innovative in this field. Nanotechnology is an area where we have plenty to offer.
“Also, the circular economy, how to do waste management, how to put these things together. So in nanotechnology we can upgrade the competitiveness of many African countries. And it is on the list of priority sectors.”
“For that to work, we need to do two things. Many things, really, but I will mention the most important ones. First, we need to understand what is happening in Africa, to know about the different ethnic groups, the history of the continent –I mean its history before colonization – to understand the rich culture and the style of business, how important are different communities. These are things essential to doing business and finding a reliable partner.”
So we have to adapt to the local conditions?
“Yes, in every business you have to accept that and the better you understand it, the bigger your chance of success. And the business model and business style in Africa are different from those we know in Europe. To be successful you also have to pitch your offer well- to explain what your product is, why you are there and what you can do together. The important thing is not what you can sell, but to do business together, to build a partnership, to build trust, that is the important thing. Patience is also important, you have to accept that you need to wait, things may go slowly, red tape is an issue, as it is in Europe… all these things are a challenge, but they can be overcome – and the example set by the companies that are here today is positive – they did it.
“We could also have greater empathy regarding what Africa is demanding from Europe. We need to be more of a partner to them. In building trust it would be good to help them with tax collection from multi-national companies, with market access to developed countries through talks about free trade, we can help them with building an internal market which is a big success of European integration and it is something that is missing in Africa and we can also help with improving the functions of institutions, because the Czech Republic itself went through a radical transformation in every sphere after 1989 and this is something Africa wants us to share. So we have things to offer. ”
There is clearly huge potential in Africa, so what is holding Czech entrepreneurs back – is it a fear of the risks involved?
“We are doing a lot of business with European countries. We are deeply incorporated in business and value chains in Europe and most Czech companies see no reason for them to take risks in Africa. Secondly, we have a relatively low level of information and contacts there so we need to work harder on exploring the opportunities. And thirdly, we have to be smart both on a Czech and European level in how we do business there. There are some very aggressive models of doing business in Africa, but I think Europe and the Czech Republic would be smart to support the kind of cooperation that will help African countries as well. So it is not just about what we want to do in Africa, but how we are going to do it. And sooner or later, based on geography, based on development projects and growth rates, Africa will be more and more important for Czech business and European business. I am sure about that. And we have to be ready in order to be successful. The sooner we start exploring African markets, learning the way to do business there and learning from our mistakes, the better our chances of success in the future.”
The Czech Development Agency is supporting Czech firms that do business there in the fields where we are strong – in agriculture and forestry, water and sanitation projects – is there enough interest from Czech companies?
“We are ready to do more for Czech businesses and also for NGOs operating in Africa. We have Zambia and Ethiopia as priority markets, so there are bilateral programs managed by the Czech Development Agency – for example in agriculture, which may entail building a farm, although the ministry would like to support more integrated projects. Water sanitation is the second most important area. We started out by helping projects that are at the very beginning of the business cycle. The B2B program of the Czech Development Agency is worth looking at in this respect. It provides incentives for in-depth research about potential market partners, distribution channels, marketing tools and how to acquire information. So the Czech Development Agency is helping entrepreneurs in these first steps in discovering the market-which is essential for their success. And as long as there is a positive response we should continue in this endeavor with the Czech Development Agency.
“The second important tool is the guarantee scheme which is a new product and a really innovative one that provides state guarantees for commercial loans given to Czech companies doing business in Africa. I met with the commercial banks in the Czech Republic and they told me that this is a really good step to encourage financing in this challenging market, because these are risky markets, compared to other places. In order to succeed, we have to have a product that is competitive with the products of other countries.”
How happy are you with the role and work of the Czech Export bank in doing this and cooperating with the Czech Development Agency?
“The trend is to pool resources. So we need to put together the competencies of the Czech Export Bank, EGAP, the Trade Promotion Agency, experts on investment and tourism, the Ministry of Foreign Affairs and so on. We do not need to build one institution but to be more cooperative and have integrated “products” for our clients. To make it easier for them to get financing and marketing information and government services. We have to make these services easier to access in the regions, not just in Prague and to do things together in Africa. The more difficult the market, the stronger the demand for these services on the part of Czech businesses, and we have to deliver because the government is a service for Czech taxpayers and citizens. So we have to move in this direction quickly. ”
Is it difficult to get private businesses to invest in Africa?
“Generally we would like to see more investment from private businesses and also involvement by NGOs in various projects, because it would be helpful to train people with the help of NGOs following the building of a hospital or upgrading a production line. This perfectly comes together and we have to be smart in adopting such an approach. So I think that financial sources are available, but the cost is an issue – how to make the cost of projects in Africa more accessible for Czech companies.”