Publications
Partners
Africa's Business Revolution: How to Succeed in the World's Next Big Growth Market. By Acha Leke, Musta Chironga, et al.
You dismiss the African continent as an investment opportunity at your peril.
Here are some facts you should know. Africa has a population of 1.2 billion people and is undergoing an historic economic revitalisation. Hundreds of large companies have sprung up in Africa and significant numbers of international firms have already built successful businesses there. But most importantly, there is much room for more.
The continent has a massive, (and that is not to be taken lightly,) unfilled demand, which makes it an inviting arena for entrepreneurship and innovation at an equally massive scale. If you get both your strategy and execution right, you can be extraordinarily profitable.
The value of this book is that it both highlights the opportunities, as well as the dangers and provides valuable insight into how to navigate this potential. Two of the authors are, and one was, a senior partner at McKinsey, giving them both an international perspective on big business, and access to superb, quality information.
The first part of the book identifies five big and important trends that hold spectacular opportunities. At the same time each comes with significant challenges which will sabotage such attempts if they are not addressed.
Africa is a fast-growing continent which will have a staggering 1/5 of humanity by 2025! It has an expanding labour force which implies an expanding group of consumers. This demographic outstrips both India and China. Currently Africa has a huge agricultural population, but it is shifting to an urban population faster than any other region in the world. While one may intuitively think of an urban population as having significant spending power – even urban spending power is low in Africa. By western standards, there are and will still be high levels of economic inequality.
With Africa’s rising domestic demand both from their expanding population and urbanization, a trillion-dollar opportunity to industrialize Africa exists. Development of this size is required to respond to domestic demand, and at the same time would enable one to expand into global export markets.
However, this staggering opportunity will require that anyone taking it on overcome equally staggering barriers to success. These range from power outages, transportation, and water shortages, to trade barriers, and to a myriad of productivity challenges.
These challenges are not lost on either African governments or the private sector, both of which are making significant efforts to close the infrastructure gaps. But the massive backlog is a gargantuan challenge.
The colonialists invaded Africa for its abundant resources of agriculture, mining, oil and gas. There is the prospect of rising innovation and investment in these sectors, which will unlock much needed accelerated food production, as well as wealth for the continent. But as with manufacturing, the formidable barriers must be overcome for this inherent, readily available potential to stand a chance of success.
Exciting mobile and digital technologies have been shown to overcome some very real, previously insurmountable problems. They range from the enormous barriers to accessing finance, to accessing information on weather patterns, markets and exotic seed varieties. There are two big obstacles to the unleashing of this latent basket of solutions. One is getting the investment funding it will require, (the lesser of the two problems,) and finding the necessary technical talent to make it happen with very necessary localized nuances.
To my mind the most valuable part of this book lies in the second part, “How to Win in Africa”. Of course, your personal investment appetite might relegate this to only an interesting issue, but it cannot be insignificant for anyone in business.
Africa is huge, and therefore requires different approaches. It is bigger than the United States, China, Japan, India and much of Europe… combined! Yes, it has a few highly populated countries, such as Nigeria (190 million) Ethiopia (93 million) and Egypt (92 million), but most countries’ populations are below 20 million. Just nine countries account for ¾ of the continent’s GDP.
With this physical size, and diversity of population, combined with the range of economic strength and business sophistication, it is imperative to set clear aspirations for investing in Africa at the outset. The answer to this requirement will shape where, why and how you will need to focus, and equally, where to avoid.
Coca Cola chose the whole continent, as did Sanlam, however others, such as the mobile payment start-up, Paga, felt that Nigeria was big enough. You will clearly have to decide, and hopefully, decide again as you succeed in your chosen geographies. Setting clear aspirations will guide your expansion and aid a steady progression.
Prioritising the markets that matter most for your business is a must when the opportunities are large and your option set, wide. Coca Cola focused on big cities because many of their bottlers use returnable bottles. Where there are many Westerners, for example, the product offering would differ appropriately.
In Africa with the diversity of size and income, your decision of where to start or where to grow will inevitably focus on cities and not just countries. Within an underdeveloped economy there may well be cities where your product or service is needed and affordable.
Additionally, in developed countries you don’t have the opportunity to get in early and to ride the growth wave. That advantage was taken decades or even centuries ago. Not so in Africa: both its population and economic fortunes still have a long runway.
Recently a client mentioned having visited an African country where private security escorted him to the home of his host. The host was self-sufficient in every way, from water to electricity to personal safety. In Africa, he pointed out to me, you have to supply what the government should, but cannot.
Aliko Dangote’s expansion into the ecosystem for the goods he supplies, is based on this principle, but on a billion-dollar scale.
“Your strategic map of Africa should also highlight where you have strong partners who can help you succeed – and where you will need to invest in building out your business ecosystem,” the authors explain.
While the book’s focus is on very large businesses that can grow into another African billion-dollar success, there is much to be learned for the medium size business and how it can succeed. If you are not planning on expanding into Africa any time soon, you will nevertheless have several key perspectives changed by the time you finish reading this book.
Readability Light ----+- Serious
Insights High +---- Low
Practical High -+--- Low
*Ian Mann of Gateways consults internationally on strategy and implementation, is the author of ‘Strategy that Works’ and a keynote speaker. Views expressed are his own.
