How to Successfully Invest in Africa Without Getting Scammed

A guide for foreign investors into Africa


The way to successfully invest in Africa without getting scammed is to make a lot of African friends and listen to them. Make a lot of friends who are living where you want to make the investment. Read on if you want to know more.

Africa is not a country

Africa is a continent with 54 countries. The continent has vast potentials and untapped resources. Europeans majorly took advantage of the continent in the past with brute force. But now, things are different. The old ways won’t work anymore.

Most African countries are underdeveloped. And contrary to the popular lingual, the countries are not developing. They are underdeveloped and fairly stagnant.

The stagnancy is not because there is no drive or desire to move forward. But the reason is that the factors to create success are complex. Lots of investments in Africa have failed because they do not understand this.

Unlike other countries, African countries have diverse tribes and interests. For example, Nigeria has over 300 tribes. And each of the tribes has its own different national interests. This makes the countries extremely difficult to govern.

Investments are the same way. You would be surprised at the number of stakeholders on an investment. But there is no denying the potentials on the continent. Lots of people outside Africa desire to invest in the continent. But the uncertainty and lack of know-how make them stay away.

A friend of mine contacted me that he met a businessman in Europe who wants to invest in Africa. So I wrote a small guide for him. This is an offshoot from the guide for anyone willing to invest in Africa.

There are 7 things I recommend any foreigner to go through before making an investment in Africa.

1. Make friends with people living where you want to invest

One of the biggest mistakes of foreigners is to make their intentions known and go straight into business. That may work in Europe, but it doesn’t work in Africa. The thinking in Africa is very different.

You need to first make friends with people who will show you the real process path of doing things. Africa is the headquarters of backroom negotiations. If you are going to use academic market research and online articles to make an investment, you are making a big mistake.

There are things you should know that you can only come by in private discussions. No one will openly mention it to you. Only the good friends you have made that understand the system can reveal those things to you.

2. Use an African to front your investment

African governments love working out big contracts with foreigners. However, you need at least one African on your side. This is because you need someone who speaks their language.

In African countries, language is very important. The people love to communicate in their own native languages. The official language of most African countries is either English or French. But don’t let that deceive you. The average African person speaks another language aside from the official language.

If you speak that other language, you have become siblings with the African. You can make attempts (which will be funny) from time to time, but you need someone on your team who can flow in it.

3. Do not pioneer anything

You are a foreign investor. If you don’t plan to waste your funds, then don’t pioneer anything. You need to trust me on this one.

If it has not been done before, there is a reason it has not been done. Don’t let anybody fool you that it will be a smooth and easy process. Let somebody test it out first before you commit.

On the other hand, if you have enough funds that you can afford to risk (losing everything), you can pioneer. You will learn some valuable lessons and get some good positioning that will be beneficial later. But I am 80% sure you will lose all (or the significant part) of your money if you pioneer.

4. Make friends with politicians but stay away from politics

If your investment is over $1M, you need to make friends with one or two key politicians pertaining to your industry. If your investment is over $100M, you need to be friends with a handful of politicians.

Why? This is because things can go crazy anytime. You need to plug yourself into the zone of information flow. Not doing things that can be classified as insider trading, but getting timely guidance on what is imminent and what is not.

However, stay away from politics. If you get involved in politics, your business can be collateral damage when politicians and political parties fight. Make friends in all top political parties.

5. Stay away from publicly traded companies

In my opinion, the African marketplace is not well developed to the extent of getting foreign investment in publicly traded companies. For one thing, I don’t trust such companies.

In Africa, control is everything. Most cultures take pride in control. This is why when people say they have yielded control to the public, it is often a puppet show.

If you have done your research and you feel you are confident in the public company, you can do as you wish. But I would not recommend it. Own your business or investment privately.

6. Have multiple sources of confirmation

There are a lot of scammers in Africa, sadly. But there are also real and truthful people. Many foreign investors often fall into the hands of the scammers first. And then they take it as a bad omen for doing business in Africa.

One of the ways to avoid being presented falsehood is to have multiple sources of confirmation. Even if you come to the country to see for yourself, make sure that you are not limiting yourself to what your host is telling you.

But you must also be careful. If you do facts finding by yourself and you are easily recognized as a foreigner, people might lie to you. You need natives doing the fact-finding for you. This is why you need to have lots of friends, to begin with.

Foreign investors get deceived and scammed because they isolated themselves from other information-circles. There is no such thing as the deal of a lifetime that you cannot get information about from another person.

If you know how to ask the right questions, you will get accurate answers.

7. Own your backward integration

If your business is in any way dependent on another business to function, make sure you own that other business. What that means is to own the company supplying your raw materials.

Let your functionality and success be dependent on you. If you take supplies from another business, you either own part of that other business or you own all of it. In Africa, your business must be connected to the grassroots as much as possible.

You may decide not to own the selling and marketing part of the business (if you wish). But you must own all the stages from the onset to the finished product.

For example, if you have an egg-producing company, you must own the chickens, own the buildings (where they are kept), own the real estate (that is, the land), own the machinery used to produce the chicken feed, and own the farm which the feed comes from. You can register each one as a separate business, but you must own everything.

If there is something they are telling you that you can’t own (at least) over 50% of (as a private company), that is a red flag. Stay away.

Some communities are just scared of being bought. This is why you should have a good number of indigenous representation on your team.

I hope you have gotten some insights. Cheers!

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