Distribution Risk Analysis West Africa

Topics: Africa, West Africa, Economic Community of West African States Pages: 6 (1271 words) Published: March 3, 2015


As a manager in United States distributing soft drinks, asked to prepare risk analyses for distribution in country on west coast of Africa, there are many risks to be outline and discuss considered. Informal arrangements often lead to misinterpretations, so care should be taken with drafting Distribution agreements. The process of crafting and negotiating a contract safeguards agreement on terms of the transaction. Equally important, where something does go wrong, a written agreement will usually help. It is crucial to settle which country’s laws will regulate. Moreover, risks and dispute resolution options should be identified within the agreement. Important risks to consider in the drafting of a distribution agreement include territorial constraints, stability of country, influence of culture, religion, politics, conflict of laws, and enforcement procedures. Identifying risks means asking certain questions. Which laws govern, and to what extent are geographic restrictions applicable? Should you be bound by international law? Is the relationship between parties worth keeping? Ultimately, is it worth your risk? Liberia, Nigeria, Benin, Togo, Ghana, Cote D’Ivoire, Sierra Leone, guinea, guinea Bissau, the Gambia, and Senegal are 12 of the 15 countries in the Economic Community of West African States (ECOWAS) bordering the western coast of Africa. Take into account African political realities and common commercial policy towards third parties. ECOWAS countries are politically unstable, as a large proportion of this region is highly underdeveloped, with unfavorable economic conditions such as low income, high poverty, and unemployment, to mention just a few. Proliferation and perpetuation of new political orders flourished simultaneously, with the resurgence of political coups, civil wars, power struggle, and ethnic and communal clashes. The likelihood of heightened violence on the West African coast, employs the ECOWAS as one of the more precarious regions of Africa (Edi, 2006). Political instability patterns in ECOWAS region, more than any other, have been a recurring theme since the 1960s, due to frequent military coups and interferences in politics. Political violence, civil wars, and ethno-religious crises have ravaged the region. Ethnic and religious crises appear to be common characteristics of ECOWAS countries as well, with a history of civil wars in Liberia, Sierra Leone, Guinea Bissau, and Cote D’Ivoire. Africa’s most populous and richest country, Nigeria, continues to contend with ethno-religious crises and Islamic terrorist groups (i.e. Boko Haram), signaling a highly politically unstable environment (Abu, Karim, & Aziz, 2014). Gambia and Ghana appear to be the least politically risky among ECOWAS countries, but Gambia may be heading towards becoming a high risk country (Abu, Karim, & Aziz, 2014). Given the high level of instability, pilferage is another real risk to be considered. It is ideal for the distributor to maintain control over the payment process, submission of payment documentation, taxation, and foreign exchange. Central banks have been implementing tighter monetary policies to curb inflation, yet exchange rate policies of the ECOWAS member region still fluctuate considerably (Désiré Adom, Mahbub Morshed, & Sharma, 2012). Foreign exchange rates have an effect on the amount of disputes between parties in distant countries. Preferably, any negotiated discounts, rebates, and commissions should be calculated, and mutually agreed upon, in USD. The distribution agreement should outline which country’s laws will be applied in reference to applicable taxes and fees. Cultural factors influence attitudes toward dispute resolution. Planning dispute resolution in advance is a good way to minimize transaction risk. In terms of rectifying discrepancies, has either party specified mediation, arbitration, or litigation as a means of resolution? Which legal rules are applicable to determine venue and...

References: Abu, N., Karim, M. Z., & Aziz, M. I. (2014, November). Low Savings Rates in the Economic Community of West African States (Ecowas): The Role of the Political Instability-Income Interaction. South East European Journal of Economics & Business, 8(2), 53-63. doi:10.2478/jeb-2013-0010
Désiré Adom, A., Mahbub Morshed, A., & Sharma, S. C. (2012, March). Sources of Real Exchange Rate Volatility in Africa: The Case of ECOWAS. African Development Review, 24(1), 79-92. doi:10.1111/j.1467-8268.2012.00306
Edi, E. (2006, March). Pan West Africanism and Political Instability in West Africa: Perspectives and Reflections. Journal of Pan African Studies, 1(3), 7-31.
McClure, R. (2014). "Can the Leopard Change its Spots?"--A Call for an African Dispute Resolution Mechanism. Ohio State Journal on Dispute Resolution, 29(2), 333-369.
Schaffer, R., Agusti, F., Dhooge, L., & Earle, B. (2012). International Business Law and Its Environment (8 ed.). South-Western.
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