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Book of the month: Keys to growth in the African market

Book of the month: Keys to growth in the African market

In this month’s book review, Stephen Williams reviews ‘Keys to growth in the African market’, which maps out how to build large, profitable businesses on the continent.

This book follows a well-established trend of celebrating Africa’s recent economic trajectory through the prism of the continent’s successful businesses. This trend began with the publication more than a decade ago of Africa Rising: How 900 Million African Consumers Offer More Than You Think by the Indian academic Vijay Mahajan. Mahajan’s work was met with considerable, but not universal, acclaim. There were a number of critics who alleged that the arguments put forward in this book were nothing new, but what made Mahajan’s book so credible was that he had travelled the length and breadth of Africa to interview many of the entrepreneurs he profiled.

The next milestone in the narrative of Africa’s “coming of age” was the Lions on the Move report, published in 2010 by the McKinsey Global Institute, which pointed to the progress and potential of Africa’s economies. The authors sought to examine the causes of Africa’s economic growth acceleration since 2000 and analyse the prospects for future growth, identifying some of the most compelling business opportunities and how they would differ for Africa’s individual countries. The report was greeted with enthusiasm by those who viewed Africa with confidence and saw beyond misconceptions that the continent was solely about poverty, disease, despair and conflict.

Two of the collaborators on Lions on the Move were Acha Leke and Mutsa Chironga. Chironga has since joined Nedbank, but the two teamed up with Georges Desvaux – who was involved with authoring the 2016 follow-up Lions on the Move II – to jointly author Africa’s Business Revolution. Indeed, this book could well have been titled Lions on the Move III as it carries many of the report’s hallmarks, including an easy reading style, flowing narrative and excellent explanatory figures and diagrams.

It is structured in two major parts – “Why Africa, Why Now?” and “How to Win in Africa”. The first part is perhaps the weaker, as it tends to “sell” Africa, overlooking the continent’s international context. For example, it considers the case of Nigeria’s Dangote Group, one of Africa’s foremost industrial firms. Yet Dangote’s annual revenues at $4bn are dwarfed by many US corporates. It remains a giant in Africa, but a relative middleweight in global terms.

Refresh your mental map

When the authors invite the readers to “reset their mental map of Africa and take a fresh look at the opportunities presented by the continent’s growing markets,” it is less about Africa’s actual current economic status and more about the economic potential waiting to be unlocked. That is not to say that there are not a number of businesses already operating at scale in Africa and recording spectacular growth – Dangote, Kenya’s Equity Bank and South Africa’s MTN are examples. As the authors make clear, what Africa’s most successful companies have in common is “the imagination to see Africa’s unmet needs as opportunities for entrepreneurship, and the long term commitment required to build businesses of meaningful scale”.

There are a number of African businesses that have set out on this journey. To test our perceptions, the authors ask us to estimate how many companies in Africa earn annual revenues of $1bn or more. When the question was posed to delegates at the World Economic Forum, 50 was the number most respondents chose. Aliko Dangote was the only executive to correctly guess that Africa has no less than 400 billion-dollar companies.

Let battle commence

Indeed, there is every indication that African companies are out to exploit the very real opportunities that their own markets represent – not least a domestic market of at least 1bn consumers with $1.4 trillion spending power. But those African companies must be aware that they are not the only ones pursuing the African market. Even as global, mature developed markets slow, the continent has been identified as a lucrative final frontier. According to McKinsey’s analysis, 88 large multinationals have “built pan-African businesses with operations in more than 10 countries. Nearly a third of them are present in more than 20 countries, and on average, the firms with the widest footprints have the largest revenues.”

So, in a sense, the barbarians are at the gates. The question is whether African companies can hope to compete. The authors believe that African companies can succeed in competing with the multinationals, but that they need to follow a number of guidelines. “You need to map out your African strategy,” they state. “If your map is to serve as a meaningful guide on your journey of business growth, it will have to be fact-based and granular – at the 100ft, not 10,000ft scale.”

It is undeniable that African companies have a much better grasp of their own indigenous markets than those companies seeking to enter the African space. And they are far better able to execute what the authors call “key innovative practices” that are central to any African strategy. These are to create products and services that fulfil Africa’s unmet needs; to rethink business models to truly engage with customers; to get lean to drive down cost and price points; and harness technologies to unleash the next wave of innovation.

Challenges

As the authors comment, Africa has great “unfilled potential”, but also faces major challenges, including increasing sustainable urbanisation, accelerating infrastructure development and deepening regional integration. “A failure to achieve any of these could stall growth,” they comment. Nevertheless, there are solid reasons that Africa is experiencing a business revolution, and that is welcome news for the continent.

Stephen Williams

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