By Tommy Lee
Over one thousand business executives from around the world were asked the question: "How many companies in Africa earn annual revenues of $1 billion or more?" Most respondents guessed there were 50 or fewer such companies. What would your guess be?
We often think of Africa as an unattractive market for business. But in reality, Africa is experiencing rapid modernization—the same economic shift we saw in Europe and North America during the 19th century and in Asia in the 20th century. While the rest of the world's population growth is slowing down, Africa's population, currently at 1.2 billion, is projected to double during the next 30 years. More than 80 percent of this population growth will occur in cities. Africa already equals North America in its number of cities with more than one million inhabitants.
The disposable income of Africans is also increasing. This is allowing more people in Africa to adopt the latest technology. While the continent has historically lagged in this area, smart phone connections in Africa are expected to double from the existing 315 million in 2015 to 636 million by 2022, nearly equaling that of Europe, and reaching twice what is projected for North America.
It is time for us to change our perceptions about business capabilities in Africa. There are now 50 companies in Africa earning revenues of $1 billion or more but 400 companies in Africa earning revenues of $1 billion or more, and nearly 700 companies that have revenue greater than $500 million!
The companies that are succeeding in Africa claim that success does not come easy. The geographic complexity, infrastructure gaps, and relative economic and political volatility make business on the continent challenging. However, for leaders with an entrepreneurial spirit, it is well worth the effort. Tidjane Thiam, the Ivorian-born CEO of Credit Suisse and former head of Prudential, knows firsthand what can happen when a company develops the right strategy and gets into an emerging market early. When building Prudential's business in Asia, one $50 million investment multiplied to $4 billion in a little over 15 years. Looking at African markets today, Thiam sees a similar opportunity. "You've got the demographic boom combined with GDP growth rates of 6, 7, or 8 percent," says Thiam. "There is an element of breaking ground, but the long-term rewards will be very high."
Executives around the world concur with Thiam's view of the market. The nearly 700 companies in Africa with revenue greater than $500 million have both grown faster than their peers in the rest of the world in local currency terms and have become more profitable than their global peers in most sectors. The income per capita of people in Africa's cities is currently more than double that of the continental average. Yet, when one thousand executives were surveyed, the majority predict that within the next 20 years, most of African households will be a part of the “consumer” class. As this happens, demand for certain products and services will grow. There are dozens of entrepreneurs who have already launched startups aimed specifically to address Africa's vast unmet needs and unfulfilled demands. Yet, there is still room for more competition.
So, what business strategies in Africa yield the greatest success? Companies that are able to piggyback on strong industry trends or use innovation to serve underserved markets increase their odds of outperforming other businesses. If you own a diaper company, for example, it would be worth your while to know that Nigerian women give birth to more babies every year than all the women in Western Europe combined. Gaining exposure in high-growth cities, countries, and regions is just as important as knowing where market opportunities exist. Twenty-four million Africans are moving to cities each year. Successful companies know which cities to focus their efforts on. Nurturing vocational and managerial skills among African workers is another great step toward ensuring success. Half of Africans are currently younger than 19. In 6,000 days, the continent will have the largest working population, even larger than China. Creating internal training processes will also ensure that there will be a new pool of talent, grown and groomed from within.
Resource Global is committed to discipling and mentoring these young marketplace leaders in Africa as well as different global cities around the world. We do this by resourcing mentors to come alongside key local city leaders. We believe that these leaders can be the catalysts to Gospel growth in their cities. We will see this impact in their work, homes, church, and cities.
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