Over the past few decades, there has been a boom in interest from foreign firms in Africa, typically regarded as the final frontier for global economic progress. Multinational corporations looking for expansion and new opportunities have been drawn to the continent by its abundant natural resources, developing middle class, and unexplored markets. However, many of these businesses have chosen to leave the African market despite the hope and promise. This phenomenon calls into question the difficulties and complications of running a business in this vibrant and diverse region.

International companies' withdrawal from Africa is a larger indicator of the complex obstacles they encounter than a reflection of specific corporate failures. These difficulties include socioeconomic instability, insufficient infrastructure, and political unpredictability and regulatory uncertainty. Furthermore, cultural disparities and regional market characteristics frequently provide formidable challenges that could jeopardize corporate plans for more steady and predictable contexts.

For example, the business community was shocked when Shoprite, the biggest grocery chain in Africa, left Nigeria in 2020. Shoprite encountered many difficulties despite having a solid beginning, such as supply chain interruptions, challenging regulatory frameworks, and notable economic downturns that reduced consumer purchasing power. Similarly, TotalEnergies, the massive French oil company, declared in 2021 that it was selling off its holdings in Kenya and Uganda due to strategic realignment and the need to concentrate on other international objectives. These well-publicized departures highlight how difficult and dangerous it can be to conduct business in Africa.

A comprehensive analysis of internal and external issues is necessary to understand why these organizations withdrew. Internal problems frequently have a significant impact, including a mismatch between company expectations and reality, poor risk management, and poorly thought-out strategic moves. External variables that might undermine operational sustainability and profitability include volatile currency exchange rates, strict local content regulations, and shifting commodity costs.

This analysis explores the causes of notable foreign corporations' departure from the African market. We may learn a great deal about the advantages and disadvantages of conducting business in Africa by examining case studies and identifying common patterns. Understanding these exit plans can also teach other organizations wanting to enter or grow within the continent important lessons about the value of comprehensive operational frameworks, flexible tactics, and in-depth market analysis. Through this research, we aim to clarify the complex interplay between opportunities and difficulties that characterize the business environment in Africa.

We answer three questions:

1. What economic and operational challenges prompt international companies to exit African markets?
2. Which international companies have exited the African market, and why did they leave?
3. What strategies can African countries implement to retain and attract international businesses?

What economic and operational challenges prompt international companies to exit African markets?

International companies often face various economic and operational challenges that can prompt them to exit African markets. These challenges include:

Economic Challenges:
Currency Instability: Fluctuations in local currencies can significantly affect profitability. Currency depreciation can lead to higher costs for imported goods and erode profit margins.
Economic Downturns: Economic recessions or slowdowns can reduce consumer spending power, affecting sales and revenues. The reliance on commodity exports also makes some African economies vulnerable to global market changes.
High Inflation Rates: Persistent inflation can increase business costs, making it difficult to maintain stable pricing strategies and profit margins.
Limited Capital Access: Limited access to local financing and high borrowing costs can hinder expansion plans and operational sustainability.

Operational Challenges:
Regulatory and Bureaucratic Hurdles: Complex and often changing regulatory environments can create uncertainties and additional compliance costs. Corruption and bureaucratic inefficiencies can further complicate operations.
Infrastructure Deficiencies: Inadequate infrastructure, such as unreliable electricity supply, poor road networks, and limited internet connectivity, can disrupt operations and increase operational costs.
Supply Chain Issues: Challenges in sourcing raw materials, transportation logistics, and import/export restrictions can affect the efficiency and reliability of supply chains.
Political Instability: Political unrest, changes in government policies, and security concerns can pose significant risks to business continuity and investment.
Cultural and Market Differences: Understanding and adapting to local cultural norms and consumer behaviors is crucial. Alignment with local market dynamics can result in effective marketing strategies and better customer engagement.
Local Competition: Strong competition from established local companies, which may have better market knowledge and adaptability, can make it difficult for international firms to gain a foothold.

Which international companies have exited the African market, and why did they leave?

The genesis of the exit of multinationals from the African market began in 2007 when Michelin shut down its operation, followed by Dunlop, which left in 2008 and completed the sale of its assets in 2014. Many industry watchers have been asking how the country got here. Many analysts have said that several factors have contributed to the exit of some of the multinational companies. One of the many factors is the consistent economic instability. Many African countries have experienced financial challenges for many years, including fluctuating oil prices, inflation, and currency depreciation, which have created an uncertain business environment and affected the profitability of multinational companies. Using Nigeria as a case study, some multinationals exited the market between 2023 and 2024.

Unilever
In 2021, Unilever began discontinuing product lines in its tea division. With these actions, unprofitable lines were terminated. Before Unilever Nigeria’s recent withdrawal from both markets, the company disclosed a decrease in earnings and a rise in deficits. The revenue experienced a 45.1 percent year-on-year decline, dropping from N23.92 billion from January to December 2022 to N16.48 billion in 2023. Additionally, losses surged to N3.72 billion last year, contrasting with the prior year’s N1.49 billion. Currently, the announcement by Unilever Nigeria to quit the production of homecare and skin cleansing brands of its business did not come as a surprise to many.

GSK
After charting a similar move in Kenya last year, GSK pulled the plug on its Nigerian operations, ceasing commercialization of its prescription medicines and vaccines in Nigeria, intending to switch to a third-party direct distribution model. According to Business Insider Africa, the company has operated in Nigeria for more than 51 years. The publication notes that GSK exited Nigeria—and similarly left Kenya—due to complexities in foreign exchange rates, security concerns, rising operational expenses, and policy uncertainties. Fidson was named GSK's local partner when it revealed its intentions to restructure and exit the manufacturing sector in 2019.

Equinor
Equinor sold because their Nigerian assets were losing output. Agbami production dropped from 36,000 boepd to 29,000 between 2019 and 2020, which is unfortunate since Nigeria needs to invest more capital in new fields and revitalize old ones. The sale plan was initiated in January 2023. According to sources, the field's production has been steadily decreasing recently, from 36,000 barrels of oil equivalent per day (boepd) in 2019 to 29,000 boepd in 2020. Additionally, the company's efforts to concentrate on more recent and lucrative assets are a reason for its departure.

Bolt
Bolt decided to stop meal deliveries due to insufficient outcomes. The market for meal delivery expanded spectacularly in 2023 despite challenges. However, after two years of operation, the company struggled to convert its large investments and well-established transportation networks into market share. Despite significant investments, the corporation has only managed to capture 5% of the Nigerian market. The corporation took this decision after carefully assessing its performance and coordinating with its overarching plan to concentrate on its more lucrative business units.
Additionally, it stated that the exit was unique to the Nigerian market and had no bearing on its plans for other African nations in which it conducts business. Bolt Food, however, announced a few days later that the company would close in South Africa on December 8, 2023. In recent years, economic downturns have occurred in South Africa and Nigeria. Strict regulations and currency devaluation have also occurred in both nations, further increasing the operational costs for many businesses. The devaluation has resulted in higher costs for goods and services, such as energy and fuel, essential for delivering services.

P&G
P&G closed its sanitary towel and diaper plant in Agbara in 2018 after Hayat Kimya, who joined the market in 2015 and increased volume by 844% in the first year after opening their plant in 2017, destroyed them and Kimberly Clark. Hayat Kimya was also predicted to become the industry leader by 2019 at this point.

Jumia
The CEO of Jumia Food claims that the company left because it could not compete. "We were competing very hard in a challenging and very competitive business with many competitors who were aggressive and had very deep pockets," in his own words. They applied this decision across seven African marketplaces. Their principal rivals are Chowdeck, Uber Eats, and Glovo. He went on to say that there are low barriers to entry in the food delivery business, which makes it an unappealing industry overall.

What strategies can African countries implement to retain and attract international businesses?

African countries can implement several strategies to retain and attract international businesses, addressing the economic, operational, and regulatory challenges that often prompt companies to exit. Here are some key strategies:

Enhancing Economic Stability
Macroeconomic Policies: Implementing sound macroeconomic policies to stabilize currency fluctuations, control inflation, and promote sustainable economic growth.
Incentives and Tax Relief: Offering tax incentives, subsidies, and other financial benefits to attract and retain international businesses, particularly in key industries.

Improving Infrastructure
Transport and Logistics: Investing in transportation infrastructure such as roads, ports, and airports to facilitate the efficient movement of goods and services.
Telecommunications and Technology: Enhancing digital infrastructure to support business operations, including high-speed internet and reliable telecommunications networks.
Energy Supply: Ensuring a stable and reliable energy supply to reduce operational disruptions and lower costs.

Streamlining Regulatory Frameworks
Simplifying Business Registration: Reducing bureaucratic hurdles for business registration and operation to create a more business-friendly environment.
Transparent Regulations: Ensuring that regulations are clear, transparent, and consistently enforced to build trust and predictability for international investors.
Facilitating Trade: Implementing policies that promote free trade, reduce tariffs, and streamline customs procedures to encourage international business operations.

Enhancing Human Capital
Education and Training: Investing in education and vocational training to develop a skilled workforce that meets the needs of international businesses.
Professional Development: Partnering with international companies to offer local employees professional development programs and on-the-job training.

Enhancing Market Access and Connectivity
Regional Integration: Promoting regional economic integration through trade agreements and financial partnerships to provide access to larger markets.
Trade Agreements: Negotiating favorable trade agreements with major global markets to enhance export opportunities for businesses operating in African countries.

Promoting Political Stability and Good Governance
Stable Political Environment: Ensuring political stability and reducing the risk of conflicts to create a secure environment for businesses.
Anti-Corruption Measures: Implement strict measures and promote transparency and accountability in government and business practices.

Providing Financial Support and Access to Capital
Investment Funds: Establishing government-backed investment funds and grants to support new and existing international businesses.
Access to Credit: Improving access to credit for businesses by developing robust financial institutions and credit facilities.

Strengthening Legal and Property Rights
Legal Framework: Ensuring that the legal framework protects intellectual property rights, contracts, and investments.
Dispute Resolution: Establishing efficient and fair dispute resolution mechanisms to resolve conflicts between businesses and local entities.

Promoting Positive Image and Marketing
Investment Promotion Agencies: Set up dedicated agencies to promote the country as a favorable business destination and assist investors.
International Marketing: Engaging in international marketing campaigns to highlight the country’s strengths and opportunities for investment.

Conclusion

As we look forward to retaining and attracting international businesses to the African market, we like to ask, "Where do we go from here?"

Africa's capacity to establish an environment favorable to foreign business activities will play a major role in determining its future economic development and integration into the global market. The first step in creating a robust and competitive market is addressing the causes of foreign companies leaving.

First, a more predictable and enticing business climate can be produced by strengthening economic stability through prudent macroeconomic policies and providing alluring financial incentives. Reducing operating costs and improving efficiency are critical for keeping current firms and drawing in new ones. They can only be achieved by ensuring strong infrastructure in energy, transportation, and telecommunications.

Then, regulatory frameworks should be streamlined to facilitate corporate operations, and enforcement procedures should be transparent and consistent to increase trust and predictability among international investors. Investing in human capital will ensure that local workers meet international standards and will further entice corporations to set up operations. This can be achieved through partnering with multinational enterprises to produce a competent workforce through education and training.

Political stability and sound governance are essential to have a safe and secure business environment. Strict anti-corruption policies and a dedication to openness would improve the business environment and lower risks. Businesses will prosper with financial support from grants, investment funds, and easier access to credit.

It is imperative to reinforce legal and property rights and provide effective channels for resolving disputes to safeguard investments and promote security among global firms. Ultimately, enhancing a favorable perception via specialized investment promotion organizations and global advertising initiatives will draw attention to the advantages and prospects in African markets.

In summary, overcoming the obstacles and seizing the potential in the African market calls for a diverse strategy. Through these tactics, African nations might establish a prosperous and alluring atmosphere for foreign enterprises, promoting consistent economic expansion and assimilation into the marketplace. The ability of foreign partners, the private sector, and governments to work together to create a strong and dynamic economic environment will determine how successful these initiatives are.