Behind the Scenes, Berlin and Beijing Are Forging a New World Order

Geopolitics are on the move with a possibly violent upheaval in the offing. Earlier this month, at the World Economic Forum in Davos, President Xi Jinping of China donned the mantle of globalism – promising to carry the torch about to be dropped by the United States. Whilst President Jinping seems an unlikely advocate of global free trade, his words caused an impact that is only now becoming clear.

Concerned about the effects on German industry of the protectionist mood taking hold in the White House, German Chancellor Angela Merkel last Wednesday called Chinese Prime Minister Li Keqiang on the phone to suggest joint action to confront the “elements of uncertainty” rocking the global economy. Chancellor Merkel was unusually frank: “China and Germany should send signals of stability to the global markets and safeguard the international system together via the liberalisation of trade and investment.” The Chinese are listening: a Berlin-Beijing pact (axis?) is in the making.

German Foreign Minister Sigmar Gabriel confirmed that his country, and the wider European Union, is looking to hedge its exposure to nascent US mercantilism by turning to Asia in general and China in particular: “Europe should quickly begin working on a new Asian strategy and take advantage of the space that America is freeing up.” Referring to the restrictions faced by German investors in China, Mr Gabriel admitted that China “isn’t yet ready to be an equal partner.” However, the minister also signalled that if the Chinese improve access to their markets, Germany is ready to strike a deal. An aide to Mr Gabriel put it more succinctly: “President Jinping’s speech in Davos made it perfectly clear that the Chinese are ready to do business. We will take him at his word.”

“China and Germany should send signals of stability to the global markets and safeguard the international system together via the liberalisation of trade and investment.”

That, in any case, seems a safer bet than to try and sway the Trump Administration. Whilst the US president has thus far not targeted Germany, directing his angry tweets to Mexico and China instead, economist Carl Christian von Weizsäcker of the Max Planck Institute in Berlin thinks it is only a matter of time before President Trump unleashes his ire on the Germans. Mr Weizsäcker has urged the government to take pre-emptive action by reducing the country’s massive current account surplus and thus lower Germany’s profile. To accomplish this, Mr Weizsäcker proposes measures to increase domestic consumption such as lowering – aggressively – value added taxes: “This current account balance brake would be a strong weapon to use against newly growing protectionism that represents a threat to Germany’s prosperity.”

With an end to globalisation already in sight, the surplus is expected to shrink significantly in any case. In a recently published report, economists at Credit Suisse conclude that “globalisation has now come to an end and is slowly being replaced by a world where very distinct poles are forming – economically, socially, ethically, and politically.” Professor Thomas Straubhaar of the Economic Department of the University of Hamburg – home to the Wirtschaftswunder – agrees: “At the moment, globalisation is crumbling with a reordering of the global division of labour. Germany and Europe need to find their place in this new order.”

In Berlin, developments are met with disbelief and, increasingly, with a determination to find new markets and partners. Considered the litmus test of the Trump Administration’s trade policy, events surrounding the North American Free Trade Agreement (NAFTA) are closely watched. The 1994 deal, known to represent one of President Trump’s many bugbears, has lowered or eliminated both tariff and regulatory barriers between the United States, Canada, and Mexico. For now, conventional wisdom has it that the new US administration will shy away from tearing up the agreement as it would severely disrupt US business and cause crucial supply chains to break.

However, conventional wisdom is not what it used to be and, in the case of Mr Trump, has thus far proven wrong time and again. Car manufacturer BMW already had a brush with the new administration when it pressed ahead with plans to build a $1bn facility in San Luis Potosí to produce its Series 3 sedans. President Trump cautioned BMW not to waste its time and money building a plant in Mexico to sell cars in the US without facing a 35% import tax: “It’s not gonna happen.”

The Munich automaker remains unfazed and said – twice in a week – that it will build the plant regardless of what President Trump says and plans to export its Mexican-made cars the world over. BMW management also reminded the administration that the company’s largest facility is located in Spartanburg, South Carolina, where over 8,800 workers last year assembled more than 400,000 X Series crossover vehicles of which 70% were exported. In fact, BMW is the largest exporter of cars in the United States.

Contrary to American car manufacturers such as Ford and General Motors, German carmakers experience little trouble finding eager buyers and are not likely to be easily intimidated by angry tweets emanating from the White House. Not so Ford, which two weeks ago pulled the plug on a $1.6bn plant in Mexico, deciding to expand its production capacity in Michigan instead.

Germany, flush with cash and not lacking self-confidence as its resilient economy rides high, considers moving closer to Asia and, perhaps, guide Europe towards replacing the Americans after they abruptly cancelled the Trans-Pacific Partnership (TPP), leaving their allies in the lurch – and, crucially, leaving a vacuum that will be filled either by China or Europe, or possibly both. The government in Berlin is anxious to explore the possibilities and to speed up the European Union’s own free trade agreements currently in the making – some sixty as of last count.

European Trade Commissioner Cecilia Malmström, unusually combative, on Tuesday said: “Trump or no Trump, we have a long list of countries willing to deal with the EU.” First in line is Japan, the world’s third largest economy, with Prime Minister Shinzo Abe arriving next March in Brussels for talks on a deal that has been in the pipeline since 2013. A treaty with Vietnam has already been completed and is in line for fast-track ratification whilst Mexico has been offered a new and comprehensive FTA. A delegation from the European Parliament, enhanced with heavy-weight commissioners, is set to go on a tour (roadshow?) of Latin America in order to present the EU – the world’s largest market even after the UK has exited – as a valid alternative to the United States.

“An entirely new dynamic in the negotiations can suddenly be felt,” says Bernd Lange, head of the International Trade Committee in Brussels. In fact, Washington’s turn inwards – and President Trump’s well-advertised dislike of the EU – can provide the catalyst that the now moribund European project needs to rediscover its self-worth. Professor Straubhaar: “Moreover, we do not necessarily need to revamp our entire business model since 56% of German exports still go to our oldest and closest partners: France, The Netherlands, Austria, and Italy.” The economist thinks Germany – and Europe – need to get their priorities straight: “Even more than before, we are dependent on a prosperous Europe. The internal market is more important than ever before and this is why, in the face of Brexit and the Trump White House, we need to safeguard that market – protect it from assailants and broaden it to fill the space left by a US administration retreating from the world stage.”

Doing Business in Nigeria

Doing business in Nigeria

Despite Nigeria’s recent economic woes now may be a good time to consider doing business in Nigeria. A currency that has lost half its value has brought unexpected benefits for business including cheaper production costs and a growing local market. The country is making significant efforts to tackle corruption under President Buhari and according to global benchmarks the environment for doing business is gradually improving.

Keys to Doing Business in Nigeria

Awareness of the cultural values and behaviours of those you wish to do business with is important anywhere. Nigeria has some unique cultural features which you should be responsive to ensure success in your business ventures. Read on to find out more including how to negotiate in Nigeria.

Sensitivity to the Nigerian Context

Whenever you are doing business in Nigeria it is important to remember that Nigeria is a country of wide diversity with regards to both language and ethnicity. More than 500 languages are spoken among 250 different cultural groups and many Nigerians speak several languages in addition to English. This also means that daily customs can differ significantly in various parts of Nigeria and being aware of them can help towards doing business successfully.

Three main regions and associated ethnic groups predominate the Nigerian cultural profile. In the north the Hausa/Fulani (29%) are the principal ethnic group, while the Yoruba (21%) can be found mainly in the south west and the Igbo (18%) in the south east. Roughly half of Nigeria’s population are Muslim while another 40% are Christian. It has been observed that Nigerian people are more likely to identify with their religion and ethnicity first and their nationality second.

Doing business in Nigeria languages

Although women in Nigeria benefit from similar rights to men and are treated much the same in the workplace, be aware that in social situations men and women may be treated differently. Particularly in the north it is possible that women are not be directly greeted when someone enters a room, rather respect is shown through acknowledgement of male relatives. In certain situations it may also be advisable not to initiate contact with the opposite sex in greetings, such as the shaking of hands, but wait for the other party to initiate contact and smile and nod instead.

Bear in mind that many Nigerian businessmen and women may not necessarily have been exposed to the way business is conducted in other cultures and can expect business to be done in “their way”.

Relationship-Building

Doing business in Nigeria is fundamentally rooted in the building of long-term and trust-filled relationships and there is no short-cut through this process. Nigerians generally desire to do business with those they know, trust and like and can distrust those unwilling to make the effort to build relations. Therefore adopt a long-term perspective and be prepared to put the time in to developing key business relationships. Do not push for serious business discussions until your counterparts are comfortable with you.

Doing business in Nigeria relationships

Also note that business relationships here are perceived to exist between people and not necessarily among companies.  This means that personal trust built up in you does not automatically transfer to trust in your company or other company representatives. Therefore it is of critical importance that company interfaces and team line-ups are left unchanged, as adjustments may entail starting the relationship-building process all over again.

Importance of Hierarchy & Respect

In Nigerian business culture hierarchy and respect for senior staff is deep-seated, reflecting wider cultural norms in which respect for elders and those with status and responsibility in society are esteemed. Be aware that hierarchical ways of working are deeply embedded. It is therefore not considered appropriate either in the workplace or outside to question or criticise superiors and those doing business with Nigerians should refrain from voicing open disapproval. This also means that when providing feedback, especially to senior staff, be careful not to offend with direct or harsh comments but rather be diplomatic, constructive and indirect.  Expect that junior staff may sometimes be seen but not heard.

Be sure to always address and refer to individuals using their full and correct titles, as status is highly important in Nigerian society. In written communications enumerate the exact job title with any prefixes.

First ImpressionsDoing business in Nigeria impressions

First impressions are crucial when doing business in Nigeria and will strongly influence the way prospective business partners respond to you. Nigerians are highly image conscious therefore wearing a dark, well-fitting business suit is recommended to make a good impression. Expect that national dress may be worn in business meetings and on Fridays.

Approach to Time

Anyone doing business in Nigeria will need to be conscious that a last minute approach and delays within both planning and implementation are commonplace, though not universal.  Nigerian business culture often works to a different rhythm than Western, for example, with much more in-built flexibility in planning and an elastic approach to deadlines. It is therefore good practice to adopt clear milestones for different phases of longer projects, and be prepared for business meetings and appointments to begin behind schedule.

Personal Interaction

Approaching Conversation

Communication and daily conversation in Nigeria can be a loud affair and greetings are polite, friendly and cheerful and are considered of high value. People in Nigeria are passionate and highly expressive, displaying their emotions openly. However speaking loudly with a serious expression does not necessarily imply that someone is angry, although conversely silence can signify displeasure. Never lose your patience or show anger, even when facing delays or unpunctuality, as this will be perceived to reflect badly on you.  Communication can be straightforward and direct in Nigeria, especially among trusted business associates and friends, however people in Nigeria do not like to say no out of respect for the other person and requests and proposals may receive a “yes” when in fact it is “maybe”.

Doing business in Nigeria greetings

Nigerians also have a more informal concept of personal space and when conversing it is usual for Nigerian people to stand close to one another, sometimes closer than the personal comfort zones of foreign visitors. Resist the temptation to back away, as this could be taken as a sign of discomfort or uneasiness.

When making conversation safe topics include family and hometown, and showing interest in Nigerian culture can reap dividends in opening up pathways for conversation as Nigerians are usually happy to inform you and impart their stories. Family is important and finding out more about your counterpart’s family can also be a good way to begin forming relationships. Expect personal questions and be patient, allowing the other side to establish the pace.

Also be aware that the left hand in much of Nigerian and Muslim culture is considered unclean, therefore never shake hands with your left hand and always use your right hand to pass something to someone and to eat. Always cover your mouth when you yawn as not doing so is considered insulting.

Meetings & Business Cards

Meetings can frequently begin late although foreign visitors will be expected to arrive on time. It may be wise to schedule important meetings well in advance and to call the day before to confirm. When entering a meeting always be sure to greet everyone in the room and accompany introductions with a handshake. You will need to understand that it is acceptable in traditional Nigerian business culture that meetings may not always be private and can be interrupted, either by phone calls or personal visits, and patience is therefore needed.

Doing business in Nigeria business cards

Although business cards may not be given in return, always have to hand a good stock of your own to present to new contacts. Be sure to include clearly any professional titles and advanced degrees on the card. When presenting your business card, do so with your right hand, and only accept other cards with the same hand. Make eye contact and smile when exchanging cards and do not forget to examine the card and treat it with respect.

As building relationships are so central to doing business in Nigeria, expect that initial meetings will mainly focus on getting to know each other and do not push forward a particular agenda prematurely, although business can be discussed. Small talk may be extensive, and humour is valued if not cynical or sarcastic. Although meetings can be quite informal, it might be best to remain slightly more formal in early discussions.

Presentations

When delivering presentations, attractiveness and clear, quality visuals are key. Wherever possible use visual aids such as pictures and diagrams and avoiding complicated expressions to ensure that your presentation is understood by all different language speakers.

Entertainment

Social engagement and entertainment are an essential part of doing business in Nigeria, given the importance of growing relationships and trust. Accept invitations, as many business transactions will continue in a more social atmosphere in a restaurant, in the host’s home or over drinks. Even if you are not thirsty or hungry do accept offers of hospitality as to refuse may be considered rude.

doing-business-nigeria-entertainment

Closing the Deal

It is important to remember that although the building of relationships is vital, Nigerians generally expect that business deals and relationships will yield benefits in the short to medium term. When engaging in negotiations a cooperative style is generally adopted, however often Nigerians will favour a distributed bargaining approach, which may not necessarily lead to a win-win situation and where you may find inferior terms and conditions being offered. However do not express frustration or negative emotions as this may count against you.

Nigerian negotiating style is also highly non-linear, frequently adopting a holistic approach and moving back and forth among negotiating topics in a non-sequential manner. This reflects a wider polychronic and multi-tasking work style and could confuse representatives from more linear and monochronic cultures such as that of northern European countries and the United States.

Expect negotiations to be slow and extensive, as building relationships, gathering information, bargaining and decision-making are all processes which will take time. It may be that several trips will be needed to close the deal.

Techniques of Negotiation

Doing business in Nigeria bargaining

Bargaining and haggling is deeply embedded in Nigerian culture so expect this to be a feature of any negotiations. When in business meetings, even at boardroom level, assume that you will be challenged, as bargaining is an acceptable and expected part of negotiations. Enter into the spirit of negotiations as many Nigerian businesspeople may be offended if you do not. The bargaining stage of any negotiations can be protracted and price movements can be extensive before final amounts are agreed.

A range of other techniques may commonly be used in negotiations:

  • Techniques based on mild deception include the transmission of false non-verbal messages such as feigned disinterest, the misrepresentation of value and the making of false demands or concessions.
  • Pressure techniques may be applied including displaying inflexibility or making final offers which may not, in fact, be final
  • As in other relationship-based cultures emotional techniques can sometimes be employed in negotiations such as attempts to make counterparts feel guilty, attitudinal bargaining, or calling on personal relationships

Doing business in Nigeria negotiating

Counter Tactics

Giving a discount is a traditional way of developing a business relationship in Nigeria and can be used in negotiations to “make you my customer”, as it is known locally.

Remember to always leave plenty of room for negotiation and concessions in any pricing proposed.

The leveraging of personal relationships could play an important role in resolving any disputes in negotiations.

Ensure you keep track at all times of negotiations as they progress.

Silence could be an effective tactic and is rarely used by Nigerian counterparts.

Do not bring a lawyer to the negotiating table as this could be misinterpreted as a sign of mistrust.

For more information on doing business in Nigeria go here

East African Economy: Thriving amid Increased FDI

East African economy is positive in the case of Kenya

The East African economy is flourishing with 8.3% regional annual economic growth in 2013/15. In 2014 FDI in the region increased 11% to $6.8 billion. With a population approaching 300 million East Africa is a dynamic and politically stable area for business. Key investment sectors are services (especially finance), infrastructure and manufacturing.

east african economy

Nearly every East African economy is experiencing significant growth

East African economy is positive in the case of Kenya
Continued growth of 6% is forecast for Kenya

KENYA is the region’s largest and most developed economy. Annual GDP growth has exceeded 6% over the past decade. Medium term growth forecasts project around 6%. Key growth sectors are services (61% of GDP), especially tourism, finance and higher education; infrastructure (boosted by government investment, fast urbanisation); telecommunications (following privatisation of Kenya Posts & Telecommunications), and tea/coffee.

ETHIOPIA,  Africa’s second most populous country (102 million), was Africa’s fastest growing non-oil dependent economy and one of the world’s five fastest growing economies between 1993/2013 (10.8% annual growth). Annual growth between 2016/2021 is forecast at 11%, an expansion rooted in Government-led infrastructure development, manufacturing and exports.  This last has traditionally been dominated by coffee, maize and livestock.  However, significant FDI in textile/clothing production is generating growing exports from this sector.

TANZANIA has also performed well economically, with plus 7% annual growth in 2013/15. The medium term forecast is over 7%, based on infrastructure development (especially gas distribution and gas-fired power station development), tourism, manufacturing and telecommunications (60% of the 52 million population are mobile telephone subscribers).

Coffee dominates the East African economy of Uganda
Coffee continues to dominate Uganda’s economy

UGANDA’s economy, though smaller than Kenya’s and Tanzania’s, is expanding fast (5.6% in 2014/15). Traditional exports continue to be coffee (plus $500 million), tea and fish. The service sector (52% of GDP) is growing fast, especially finance and tourism. The telecommunications sector remains dynamic (over 60% of the population are mobile telephone subscribers). The Government forecasts annual growth of 6.3% in 2016/20. Key drivers will be infrastructure development (new and upgrading), especially in water and sanitation; service sector growth (especially finance and tourism),  FDI and domestic consumption. Notably Uganda will begin its first oil production in 2018 which could have a significant effect on long-term economic growth.

Exports are fundamental in the East African economy of Somalia
Exports are increasingly fundamental to Somalia’s growth

SOMALIA Progress on stabilising and reconstructing national government is being sustained. Much of the economy remains in the informal sector but the formal sector is developing rapidly. Exports including fish, charcoal, bananas and meat/livestock (to the Middle East) are expanding. The Government is implementing its National Development Plan, largely funded by the international aid donor community.  This remains the main source of opportunities for international business.

ERITREA  Economic growth here has been more modest than that of its larger neighbour Ethiopia.  Opportunities for international business are accordingly more limited. The Government is focusing on mining and infrastructure development.

CONCLUSIONS

The regions offers many attractions for business and investment, including sustained medium term high economic growth, political stability, and various programmes of economic reforms aimed at improving the climate for FDI. Tanzania and Kenya, for example, are both seeking to create greater transparency through “open Government partnership” and “road maps” for improvement of their investment and business environments. The opportunities are varied and many.  Infrastructure, finance, tourism, telecommunications and manufacturing are key sectors to watch. The long term trends and prospects are looking positive.

Stop Press

The recent AU meeting in Addis Ababa, has agreed under the ENERGY AFRICA (EA) initiative,  a 5 year $12 billion affordable off-grid renewable energy investment programme. Ethiopia has already signed up.

Africa Rising: Business Opportunities in Africa

Africa is a rising star, with key business opportunities in services, infrastructure and transport, communications, mining and energy

Business opportunities in Africa are rising
Despite negative media perceptions business opportunities in Africa abound