Along with rapid urbanization, new service industries and a steady shift from agriculture to manufacturing, a rising generation of educated, tech-savvy and entrepreneurially minded Africans represent a little-known source of wealth that will eventually drive more profits than any of the continent’s natural resources.
When I hear people talking about doing business in Africa, the myths and prejudices surrounding the subject never cease to amaze me. Anyone who actually does business in the vibrant region that is Africa or has looked into it knows what I’m talking about. But instead of going down the myth list, let me remind you of a real and interesting business case. In 1999, when Ebenezer Essoka went to the Ivory Coast to expand the business of Standard Chartered Bank, the odds were stacked heavily against him. Days after he arrived, the country was shaken by a coup d’état. Despite the instability that followed, 18 months later Standard Chartered’s business in the Côte d’Ivoire was breaking even.
As far as I’m concerned, the Ivory Coast exemplifies the paradox of Africa. Although the country was caught up in a violent civil war as recently as 2011, it remains a land of great opportunity. After all, it’s the world’s 15th fastest growing economy in terms of GDP per capita. “The myth is not around the reality of political instability in Africa,” says Essok. “The myth is around people saying you cannot operate in a country with such instability.” I couldn’t agree more.
An exciting developing region
Doing business in Africa is different than anywhere else on the planet. Larger than China, India, the United States, Europe, and Japan combined, Africa’s sheer size can itself be an intimidating obstacle. Add the continent’s reputation for poor infrastructure, corruption, unreliable power supplies, instable political systems and opaque business regulations, and the hurdles appear insurmountable. The truth is: these hurdles can be overcome. The trick is to really understand the actual extent of the barriers and start taking a practical approach. Once you do that, penetrating African markets becomes a real and exhilarating possibility.
I truly believe Africa is the world’s most exciting developing region right now. We’re seeing rapid urbanization, a steady shift from agriculture to manufacturing and service industries as well as a surging population of working-age adults and middle-income earners.
Democracy is winning
Yet when you turn on CNN the news from Africa is likely to be about ethnic clashes or civil wars. But the quiet, steady growth of economic opportunities is the real story. If you want some insight into what the media is missing, read Emerging Africa: How 17 Countries Are Leading the Way, written by Steven Radelet, a former advisor to Hillary Clinton.
Democracy has spread across the continent, fostering a rise in public accountability and favorable business conditions. And democratic traditions have been rooted in some parts of the continent for the better part of a century. Senegal is a great example. Mauritius, the continent’s highest ranking democracy in the Economist Intelligence Unit’ 2012 Democracy Index, is becoming the Singapore of Africa – a modern import and export hub.
You may not know it, but African governments have also fought diligently to lower inflation, cut foreign debt and rein in budget deficits. And despite the global economic crisis, GDP in Africa has grown since 2000 at an average of almost 5% a year.
Lagging infrastructure remains a challenge
While I enjoy writing about all the great things happening in Africa, the continent still faces a serious challenge. Infrastructure, including electricity and transportation, continues to lag behind. But there are plans for substantial increases in investment, which McKinsey forecasts to grow to approximately $200 billion per year by 2020. There is a real need for action, as shown by the investments focusing on transport and utilities in the four largest economies of South Africa, Nigeria, Algeria, and Angola. We are already seeing the possibilities when existing infrastructure is transformed. For instance, Tanzania’s Dar es Salaam port improved its operational efficiency by 40% between 2009 and 2011, reducing container clearance time from 24 to 8 days.
Young African wealth
Much more important than anything else is the rising generation of educated, technology-savvy, entrepreneurially minded Africans. This is the future of Africa, reinforced by the young African businessmen and women, educated abroad, who are coming back home. By 2030, Africa’s labor force is expected to reach 1.1 billion, exceeding India or China and representing almost a quarter of the world’s potential workforce. Today some 40% of African workers have at least some form of secondary education, and a 2010 McKinsey report sees that figure rising to 48% by 2020.
McKinsey also predicts that consumer spending on the continent will reach $1.4 trillion by 2020 when there will be more than 128 million African households with discretionary income.
The race for Africa
I am happy to report that companies from around the world are racing to get into Africa’s four main growth industries: agriculture, natural resources, infrastructure, and consumer-facing markets like retail, telecommunications and banking. And there is plenty of room for more. If you are still waiting hesitantly in the wings, there is still time to take the plunge. But don’t wait too long. First-mover advantages in Africa have not been completely tapped, but they will not last forever. The time for businesses to move is now. Companies like DHL, which has been in Africa for more than 30 years, are paving the way for other international firms. DHL is the only logistics company operating on the continent with its own airline. And our footprint covers the entire continent, coupled with in-depth local knowledge and the experience of more than 11,000 logistics specialists ready to help customers navigate the complexities of doing business on the continent.
We can connect goods from Dubai and Leipzig to any place in Togo or Gabon in 48 to 72 hours, and we have infrastructure that works. I think that if you decide to invest here you will find Africa less foreign than expected. But don’t just take my word for it. The best way to get to know a market is hop on a plane and go there – to spend time on the ground and feel its pulse. In Africa, you’ll find a strong heartbeat that is getting stronger.