En Marche: 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. Tom Collins reports.

For decades, French commercial interest in Africa has been characterised by a special relationship known as ‘la Françafrique’ between Paris and its former colonies. Popularised in the media by stories of powerful close-knit relationships, often with hidden agendas, French businesses have enjoyed prevalence throughout much of Francophone Africa. Yet 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.

En marche

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. Major French groups to have recently established a presence in the country, include Accor, Peugeot, Décathlon, Société Générale, Air France and France 24. Last year, French exports to Kenya increased by 11.7% compared to 2016, reaching €171.2m ($194.4m). France is now the third greatest investor in East Africa’s most developed market.

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 slowdown in the continent’s largest Anglophone economies – South Africa and Nigeria – has caused many to search for a more stable English-speaking foothold, she says. Kenya is also drawing interest from French companies working in Africa with no previous interest in Anglophone markets, and, she argues, even companies with no prior experience in Africa at all.

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, Rwanda’s minister in charge of the Rwandan 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. The cabinet minister expects collaboration in the ICT, hospitality and agriculture sectors, while French companies Canal Plus and Golden Tulip Hotels have already moved in.

Greener pastures

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. Xavier Chatte-Ruols, managing director for East Africa Business France, a public-led entity encouraging French companies to explore new markets, points out that the GDP of Kenya is higher than that of of Côte d’Ivoire and Cameroon combined – the two main Francophone markets for French companies. “East Africa has been the most dynamic region in Africa for the past five years and hence is currently the most interesting market for French companies,” he concludes.

This helps explain the recent French foray into East Africa. The region recorded the continent’s best economic performance last year at an average of 5.9% – compared to the continental average of 3.6%. 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. West African markets, by contrast, are often seen as riskier and more prone to economic or political shock due to the export-orientated nature of their economies, where growth is often driven by a single resource or sector.

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. De Guerre comments that even during last year’s troubled election period in Kenya, which witnessed a rerun after a disputed vote, 10 French companies approached the Chamber looking to do business. “Some companies were putting the brakes on and waiting to see what happened,” she says. “But I also saw companies coming despite the election because Kenya has a reputation as a very resilient economy.” 

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.  

Government encouragement

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.

French President Emmanuel Macron has shown a strong commitment to East Africa. The previously frosty relationship between Rwanda and France is undergoing a thaw following Rwandan President Paul Kagame’s visit to the Élysée Palace in May. The two countries were at a diplomatic impasse for years after Rwanda accused France of playing a role in the 1994 genocide. Yet after Kagame’s visit, the French President said he would support Rwanda’s foreign affairs minister Louise Mushikiwabo in her successful bid to become the secretary-general of the Organisation Internationale de la Francophonie (OIF), which unites French-speaking countries across the globe. This marks a significant improvement in the relationship, and Kagame left Paris describing how his counterpart had a brought a “freshness” to world politics, expressing his hope for an increase in economic ties.

French businesses have been historically active in Rwanda, only to have their potential thwarted by the poor relations between the two countries. But French commerce has been regaining a hold in Rwanda’s markets for quite some time, reveals Akamanzi.

“There was a steady growth of French interest even before Mushikiwabo was appointed,” she says. In January, 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. This summer, 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.

In Kenya, many French companies are seeking opportunities in green energy and smart cities, both earmarked by the Macron administration as key sectors of investment. As French and European pressure to stem the number of refugees arriving from Africa has increased, Paris has prioritised job-creation, with a focus on youth employment and SMEs. De Guerre reveals that Macron is set to visit Kenya next year and will bring a business delegation to collaborate in areas of mutual interest.

Meanwhile, Ethiopia is being eyed closely by French companies as the government mulls the privatisation of previously state-dominated sectors like telecoms, banking and aviation. French telecoms giant Orange is reportedly considering investing in state-owned Ethio Telecom.

The government support has encouraged many French companies to look more closely at East Africa. According to Chatte-Ruols, East Africa Business France is in conversation with 400 companies who are currently looking to enter the Kenyan market and have requested market surveys. Although unable to give names, next year will see entrances from companies in the automotive, tourism, energy, water and engineering sectors, he says. The opportunities are being talked up in the French media, with a journalist at TV station France 2 memorably referring to Kenya as “the new Eldorado”.

Cultural adjustment

Nevertheless, East Africa’s markets are different from France’s historical markets. De Guerre was surprised, when setting up the Chamber in 2016, to find language a continuing problem for new French arrivals. “It was difficult to admit at first, but I found that some executives were arriving without speaking English.”

This she attributes to an older generation of executives who are not as linguistically savvy as their younger counterparts. Aside from traditionally Francophone Rwanda and Burundi, business will be conducted in English. French companies should conduct thorough market research before entering new markets in a bid to understand their unique quirks, which extend beyond language to often distinct business cultures and social norms.

Finally, de Guerre suggests that French executives should not get carried away by the “Eldorado” promise of the Eastern market. As with West Africa, she says, the East is a diversified region with over and underperforming economies and distinct systems of governance. She says that some French companies are currently weary of Tanzania due to increasing protectionism and the policies of President John Magufuli.

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.