Why Fortune Global 500 companies are still running African operations from London and Paris

Why Fortune Global 500 companies are still running African operations from London and Paris

Global Fortune 500 companies are still reluctant to open shop in the Middle East and Africa based on data which shows that only 196 of some of the world’s biggest companies in the world have offices in the region.

Specifically, Africa’s most attractive destination for regional headquarters is Johannesburg with up to 29 companies have Africa offices there. It may seem unsurprising that the commercial capital of Africa’s most advanced economy—and home to its biggest stock market—is most attractive to global companies. What’s less obvious is that the next two most popular destinations for running African operations are London and Paris. Fourteen major international companies base their Africa offices in Europe.

It’s easy to claim to be surprised but there are many practical reasons many of these companies find it easier to oversee their Africa-wide operations from an office outside the continent.

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The report’s authors at Infomineo point to several factors which make some global cities more popular than others. These include local market potential, competitive environment, political stability, laws and regulations, and business language in use. Then there’s quality of the employment market and local resources and infrastructure.

Most major African countries would struggle to get top marks if they were being assessed on all those factors. In fact, London, thanks to the finance and energy industries, is expanding as a center for companies opening offices to run their Middle East and African operations. The report didn’t explicitly mention logistics, but as we’ve noted several times, it is sometimes easier to navigate Africa from a European hub city like London or Paris than many African cities which have much fewer flights and limited cross-border road networks due to poor infrastructure investment.

But that doesn’t mean all hope is lost as far as African countries attracting Fortune 500 companies. In sub-regional terms, Casablanca, Nairobi and Lagos are increasingly attractive to international companies, says the report.

Ultimately, established businesses are going to make the same cold fact-based decisions that investors also have to make when it comes to deciding where to invest in Africa.

It comes down to the basics. If infrastructure development is moving in the right direction; laws and regulations are observed and respected alongside political stability and a workforce that promises as much quality and potential as enthusiasm, then that’s a good start.

Yinka Adegoke, Quartz Africa editor .via Newsleletter

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