Why French companies are exploring East Africa

With its fast-expanding economies and business-friendly governments, the East African region is becoming an Eldorado for French companies in search of expansion. For decades, French commercial interest in Africa has been characterised by a special relationship known as ‘la Françafrique’ between Paris and its former colonies. French firms are beginning to venture out of their comfort zone in search of new growth stories. East Africa – especially Kenya and Rwanda – has recently seen an influx of French commercial activity and interest. There are clear signs that French companies are on the move throughout the East African region. In Kenya, Air France made a return to Jomo Kenyatta International Airport earlier this year after an 18-year hiatus. The airline’s senior vice president Frank Legré attributed the comeback to increased business between Kenya and France, and told reporters that some French companies “have made Kenya their regional hub”. Since 2012, the number of French companies in Kenya has increased dramatically from 30 to 110, according to the French Chamber of Commerce Kenya, an organisation which helps private enterprise establish operations in the country. Justine de Guerre, executive director of the Chamber, reveals how Kenya has overtaken South Africa as the prime location for French companies looking to tackle Anglophone markets A similar story has been unfolding in nearby Rwanda, where the resolution of a diplomatic impasse could presage an uptick in increased trade and investment, which has already been growing steadily for a number of years. “In 2010 we had only as little as $469,000 investment from France,” discloses Clare Akamanzi, the chief executive of Rwanda Development Board. “By 2015 that figure had grown to almost $13m, so the growth was big.” This figure is expected to grow and Akamanzi is confident that French businesses are beginning to take notice of Rwanda’s investment environment, which scores highly for ease of doing business and access to nearby markets. The fact that much of the population speaks both French and English is an added bonus, she says. Akamanzi expects collaboration in the ICT, hospitality and agriculture sectors, while French companies Canal Plus and Golden Tulip Hotels have already moved in. The arrival of French enterprises reflects an ever-globalised world in which business decisions are based less on historic and linguistic ties than by simple opportunity. The region recorded the continent’s best economic performance last year at an average of 5.9 per cent – compared to the continental average of 3.6 per cent. Ethiopia, Tanzania and Rwanda were forecast by the World Bank to be among the top 10 best performers in 2018, making a compelling case for French companies looking to tap into emerging market growth. As well as growth, countries in East Africa are generally lauded in comparison to West Africa for their ease of doing business, market access, diversified economies and bulging middle classes. In contrast, East Africa’s markets are viewed by the French private sector as relatively stable. Rwanda and Kenya were ranked second and fourth respectively throughout Africa in the World Bank’s 2018 Doing Business index, whereas not one West African country made the top 10. Additionally, many investors argue that East African countries are far better connected to neighbouring markets, citing the East African Community (EAC) regional bloc and the Common Market for Eastern and Southern African (COMESA), which links markets from Cairo to Maputo along the east coast. This provides access to a great diversity of markets, many of which are becoming known for an ever-growing and affluent middle class. These positive indicators are attracting interest from French companies who are beginning to take notice of opportunities which fall outside their Francophone strongholds. Besides the private sector’s natural search for greener pastures, interest in East Africa is being spurred on by the French government. France, along with other major European players like the UK and Germany, have begun to rejig their relationship with Africa from aid to investment. Amid the backdrop of disruption to global trade, France is encouraging its private sector to deepen and expand commercial links with non-traditional partners. In January 2018, former president Sarkozy led a business delegation to Kigali, including Cyril Bolloré, deputy CEO of French conglomerate Bolloré Group, and discussed opportunities in hospitality, transport, logistics, music and conference tourism. In 2018, the Compagnie Française de l’Afrique Occidentale (CFAO), a French multinational specialising in the goods distribution business whose name reflects its origins in shipping between France and West Africa, entered the market. The company has been contracted to work with German automobile maker Volkswagen in the country, following a similar tie-up between the firms in Kenya. They will manage the shipping of car parts used to assemble the vehicles, and handle sales and distribution. Nevertheless, as colonial and linguistic links gradually assume less importance and Macron continues his push, many of East Africa’s fast-reforming markets will naturally begin to attract a new generation of French companies and executives with wider horizons than their predecessors. This article was first run by African Business Magazine

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Why French companies are exploring East Africa