Whither Africa.....?
These days, there is a lot being said and written about
Africa. Over the last decade, the perception of the continent has changed from
one of a billion beggars, to one of a billion potential new consumers.
Countries that were not so long ago deemed “third world” or "LDC’s" (least
developed countries) are now referred to in corporate circles as hi-growth
markets. Indeed some African markets such as Ethiopia have been demonstrating GDP
growth that rivals China.
CNN and BBC both now dedicate prime time to various types of
coverage aimed at familiarizing the West (and the rest of the world) with
African politics, culture and business. It is clear that the eyes of the
western world are now on Africa. For those of us with a history of working
there, it is interesting to note the change.
Why the change in focus? There are a couple of major reasons
and they are both economic in origin. As always, follow the cash.
Firstly, Africa is arguably the last commercial frontier for
many global companies looking for growth. The U.S.A. and Europe are mature
markets, and have been beset by economic difficulties for half a decade. Growth
is an imperative. Most large companies have already staked out positions in
Asia, Latin America; which leaves Africa as the last frontier. Companies such
as Diageo have recognized this and have begun to acquire local breweries and
brands; competitor SABMiller is making similar overtures.
Secondly, Africa was traditionally viewed as the commercial
turf of the Western powers, and specific countries seemed to have assumed
certain responsibilities that were clearly agreed, i.e. witness French
intervention in Mali – supported by the U.S.A. and warily applauded by most
African heads of state.
Things have changed dramatically over the last decade. The
post-colonial hegemony has been fractured by global requirements for raw materials and natural resources. The share of African markets in the
hands of Western companies has decreased by over 20% in ten years, and China is now the
continent’s largest trading power. Further, this Sino-African relationship is
set to grow as Chinese investment increases. A Chinese company now manufactures
shoes in Ethiopia for export directly to the U.S.A.
Indian companies are
also expanding their traditional presence and influence in key African regions
and markets such as East Africa and Nigeria. Some seem to be more recently targeting Ethiopia.
Is the West losing the commercial battle in Africa?
The battle for African resources and consumers is clearly
engaged, and recent skirmishes seem to favor Asian interests. It can be argued
that the new level of competition is healthy for African markets – but only if
exploited properly.
So where does this leave smaller domestic African companies
as the majors scramble for bits of the African pie?? Is it all doom and gloom
for local entrepreneurs?
One thing that local companies almost always have in their
favor is knowledge of the local market. In markets where personal influence and
social connections often count more than performance per se, this is a crucial
advantage. This is often enough of a strategic lever to guarantee survival.
Look at the Saudi example. If you finally really can’t compete, try at least to
leverage that intangible into your sales price.
Strong local brands also provide market leverage, but
smaller companies will need to move quickly to expand or risk being smothered.
There are few, if any internationally recognized brands from Africa, and for
many large African companies, real marketing is in its infancy still. Very few
African products cross African borders. If African consumers do not have
African brands to buy, they will buy foreign and consumers sometimes develop
long term preferences for their favorite brands.
Many of the current crop of young African managers and intelligentsia
have been western educated. Further, as markets increasingly open, these younger
“technocrats” are coming into their own. These are people who have often learned
to play the game by Western rules, but have, with savvy, adapted practice to
local realities. Shoe manufacturers, security firms, street vendors, telecom
providers - are all blending local and imported into market success.
Africa clearly offers enormous opportunities to those who
learn to deal effectively in what can sometimes be somewhat convoluted markets.
But if the past is some guide to the future, the next decade will see huge
developments in African economies, and much of that growth will come from
domestic consumption.
Maybe its time for some of us to start thinking think of what was
the “dark continent” as the land of Sunny Start-Ups?
