Companies are starting to place big bets on Africa, but many of them are still figuring out what it takes to win on the continent, according to a new report by The Boston Consulting Group (BCG).
The continent is a dizzying collection of emerging markets, each with its own unique business environment, risk profile, and potential. Companies frequently do not know what to expect, where to start, and how to prosper.
“In the past, multinationals treated Africa as a trading post, extracting unfinished natural resources and shipping goods for a small group of Westernized elite consumers located in the continent's large coastal cities,” says Patrick Dupoux, a BCG partner and coauthor of the report, titled Winning in Africa: From Trading Posts to Ecosystems.
Dupoux notes that, to succeed in the new, more diversified Africa, companies will need to change their approach.
"They will need to actively engage with the continent by building local teams and networks of suppliers, partners, communities, and public and private stakeholders. We call this the ‘ecosystem mindset',” says Dupoux.
With other emerging markets slowing down, the stakes are high for global companies in Africa, which is on an upswing. Winning in Africa outlines a series of macroeconomic shifts that are changing the fortunes of a continent that analysts and journalists once called “hopeless.”
• The equivalent of 11 percent of GDP is flowing into the continent in net capital flows.
• By 2040, Africa will have a larger working-age population than China or India.
• Mobile penetration has jumped from less than 2 percent in 2000 to more than 60 percent in 2011.
• In 2011, for the first time in history, a majority of African nations were governed by democratically elected leaders.
• By 2017, there will likely be 257 million consumers with discretionary income.
Collectively, these forces have promoted the development of more diversified and sustainable national economies. “Africans have good reason to be optimistic and enthusiastic about their future,” said Stefano Niavas, a BCG partner and another report coauthor. “The continent has undergone a revival that few people were predicting 15 years ago.”
“Success in places like China or India will not necessarily translate into success in Africa,” said Tenbite Ermias, a BCG partner and coauthor. “But companies that figure out how to build deep and lasting businesses in Africa will be handsomely rewarded because the barriers to entry remain formidable.”