Doing Business in Africa
Being aware of common pitfalls and logistics demands can ease the challenge of operating in Africa.
BY MICHAEL SEDGE, M.SAME
Local material resources are practically non-existent in Djibouti, which increases logistical requirements. Companies must acquire construction materials from Europe, the Middle East or even the United States. PHOTOS COURTESY MICHAEL-BRUNO LLC
“We could really use a good A/E firm,” he said.” Would you consider going to Djibouti?”
I looked at him and asked, “D-Ji-what?” Today, eight years later, I have been asked to head the American Chamber of Commerce in Djibouti because, according to U.S. Embassy personnel, my experience and knowledge of the U.S. government and East Africa business operations makes me a “perfect candidate.”
Since 2006, Michael-Bruno, has successfully completed more than 70 projects across Comoros, Djibouti, Ethiopia, Ghana, Kenya, Mauritius, Rwanda and Tanzania, including the $80 million design-build, Salt Investment Project, carried out in 120°F heat of Djibouti’s Lac Assal region. We currently maintain 13 contracts with five government agencies covering Africa.
We have seen numerous companies come and go seeking to expand their reach in what is becoming the “fertile land” for government contractors. While many possess experience and good past performance, they have misconceptions of how to practically and legally position themselves for government awards.
Several firms have bid and won MILCON contracts in Africa only to fail. One reason for this, quite often, is that they do not understand that the contingency construction they did in Afghanistan is not, for the most part, what Naval Facilities Engineering Command (NAVFAC) nor the U.S. Army Corps of Engineers (USACE) want, or need, here. This is particularly true at Camp Lemonnier, Djibouti.
Converted from an expeditionary operation to a long-term facility in 2007, today the base supports nearly 2,500 active-duty military, Department of Defense (DOD) civilians, and Base Operating Service contractors, and employs approximately 1,200 local nationals. With the “permanent” title of Camp Lemonnier also came construction requiring building codes and norms similar to those used on installations in Asia, Europe and United States, including, in some cases, requirements to achieve LEED Silver.
A UNIQUE ENVIRONMENT
I sat recently at an AFRICOM convention and heard a firm’s senior manager say, “That’s the business model we developed in Afghanistan and will implement in Djibouti.”
I thought to myself, “You can try, but it won’t work.”
He was describing how the firm brought 120 third-country nationals (TCN) to work USACE projects in Afghanistan, moving them from project-to-project as work was completed. While the concept was sound, the Djibouti government is not going to allow a flood of TCNs into their country to work on construction at Camp Lemonnier or anywhere else.
Part of the agreement to allow U.S. Forces into Djibouti is that it must create local jobs. Article V of the 2010 Status of Forces Agreement (SOFA) states that visas are not required for contractor personnel; current interpretation applies this to U.S. citizens. TCNs are being registered and must obtain visas at the airport upon arrival. This policy allows the Djibouti government to control how many a company brings in. Whenever they feel that number is excessive, they can stop allowing individuals from that company from entering the country or expel them.
Four years ago a NAVFAC Atlantic project manager asked, “Why can’t we complete East Africa projects on-time and in-budget?”
There are a number of reasons, I explained. Foremost is the domino effect: local material resources are practically non-existent, which, in turn, increases logistical demands. Companies must acquire construction materials from Europe, the Middle East or even the United States.
Additionally, despite international agreements, customs in Africa is a challenge. Systems, and individuals within them, are often corrupt. Waiving a SOFA at custom officials has no effect. The best advice is to ensure that you engage a reputable broker when bidding projects. They know the system, and for the most part, understand your needs and are able to implement them based on the local climate.
Cultural and environmental issues are often overlooked when one is putting together a proposal. Yet they, too, play a major role.
ADAPTING TO THE SITUATION
In 2007 and 2008, we managed a $10 million design-build project in East Africa. It did not take long to realize that making progress during Ramadan was futile. By the time labor entered the base, and went through prayer, they had to rest due to fatigue from not eating or drinking—the delays and risk of accidents out-weighed daily accomplishments. We were ultimately forced to stop work during this religious holiday, which had not been considered in our schedule.
Construction projects in Africa can encounter many challenges, including summer-time temperatures that routinely push 100°F and can reach as high as 120°F.
Summer-time temperatures in East Africa can reach 120°F. Even in higher altitudes, average temperatures push 100°F. Labor cannot safely work under such conditions and initiating early workdays can create security issues. Camp Lemonnier, for instance, is currently unable to accommodate the entry of hundreds of simultaneous labor. There is a balancing act between work progress and increasingly rigid base security.
Getting the work force onto the installation can sometimes take hours. Leaving can require a similar amount of time. Local subcontractors calculate this time into their pricing, increasing the prime’s cost.
In the past, laborers were allowed to enter and exit, for the most part, with a roster listing individuals and vehicles. This policy has changed. In fact, my firm was caught up when the “U.S. Escort Procedure” was implemented in late 2012. Companies that have worked in Qatar are familiar with this security requirement. A firm must employ one U.S. citizen escort for every 10 local or third-national laborers. Our structural study required five European engineers and three local workers. Because the work was in different locations, we needed three U.S. escorts. When material trucks came, we were required to have escorts for them as well. Deploying Americans to accompany non-U.S. labor consumed one-third the budget of this small project.
Another reason for missing deadlines, putting both government and contractors in difficulty, is turn-over of key personnel. Military and DOD employees traditionally remain in Africa for six to 12 months. This is just enough time to get their bearings, learn the mission, grasp the environment and move a project forward. With the turnover of each key government representative a project slips a few months. The same can be said for key contractor personnel.
Michael-Bruno, for example, was asked to re-design an Africa project three times because the new officers-in-charge lacked information on decisions made by their predecessors. The delay was only compounded by the fact they were managing several projects simultaneously.
It is a constant challenge to keep good project managers, engineers, quality control managers, safety managers and schedulers in Africa. The environment can be harsh; more frequently than not, leaders are just counting the days for their departure. Military members have fixed rotation dates. For contractors, the situation is worse. It is common for middle-management contractor personnel to go on rest-and-recuperation and simply not return.
The loss of each key individual is frequently a factor that was not calculated into the budget. And the cost of maintaining good people in Africa is often underestimated.
On the surface it may appear that most countries in which the U.S. government is active have banking systems that are integrated into the global economy. It would therefore appear that getting funds in and out of a country to pay subcontractors, to purchase equipment and supplies, and to support logistical needs is a simple matter of international wire transfers. Not so.
The U.S. Department of Homeland Security has implemented a rigid regime for transferring funds to Africa. It took us two months and a series of documents to pay one employee by wire transfer. Similarly, a transfer required to obtain critical soil borings and geological testing was held up by two intermediate banks until we were able to provide paperwork about the company receiving the funds as well as its owner. We ultimately opened our own bank account, wired funds to ourselves, and established a disbursing system for local expenses, invoices and payments.
UNDERSTANDING THE OPPORTUNITY
In Africa, one does not want to get too comfortable nor ally themselves with any particular political group or individuals. At one point there was talk of establishing a major command in Kenya. A turnover of political power quickly altered those plans, as riots and killing broke out in the streets.
Politics and crime go hand-in-hand across the continent. Tides, and loyalties, can turn quickly. Taking a distant approach is key to survival and success for U.S. contractors.
No matter where across African you plan to work, do your homework. Approach each country with an open-mind and a willingness to accept that what has worked elsewhere may not work here. Do not come with a “we know everything” attitude. Those willing to learn the cultures and business environments, with a keen eye of caution, will find this can indeed be the “fertile land.”