Cracking The Next Growth MarketAFRICA

ByMutsa Chironga, Acha Leke, Susan Lund,

and Arend van WamelenHarvard Business Review, June 2011

Presented by Praveenkumar A. P

Workers at a cocoa cooperative in the Ivory CoastThat African nation is the world’s biggest producer of

cocoa

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Highlights in brief

In Africa the infrastructure is still poor; talent is scarce; and poverty, famine, and disease afflict many nations

Most Western executives, unsure of the size of Africa’s consumer markets, prefer to invest in Asia’s dragon and tiger economies rather than in Africa’s economic lions

In 2008, Africans spent $860 billion on goods and services - 35% more than Indians spent

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Highlights in brief

Over the past decade, Africa’s real GDP grew by 4.7% a year, on average—twice the pace of its growth in the 1980s and 1990s

By 2009, Africa’s collective GDP of $1.6 trillion was roughly equal to Brazil’s or Russia’s

As Africa’s economies progress, opportunities are opening in sectors such as retailing, telecommunications, banking, infrastructure-related industries, resource-related businesses, and all along the agricultural value chain

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Highlights in brief

The continent is among the fastest-expanding economic regions today

Telecom companies in Africa have added 316 million subscribers—more than the entire U.S. population—since 2000

Africa offers a higher return on investment than any other emerging market

Reasons: Competition is less intense and few foreign companies have a presence there, and consumer demand is strong

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The Growth Ahead

Several African countries, such as Angola and Mozambique, halted deadly hostilities, creating the political stability necessary for growth

Economies became healthier as governments shrank budget deficits, trimmed foreign debt, and brought down inflation

Since 2000, African countries have cut their combined foreign debt from 82% of GDP to 59% and reduced budget deficits from 4.6% of GDP to 1.8%, which sent inflation rates tumbling from 22% to 8%

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The Growth Ahead

Several governments adopted market-friendly policies

Privatized state-owned enterprises, reduced trade barriers, cut corporate taxes, and strengthened regulatory and legal systems

Nigeria, for example, privatized more than 116 enterprises between 1999 and 2006

Morocco Egypt struck free-trade agreements with their main export partners

Rwanda established courts to settle business disputes

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The Growth Ahead

Africa will continue to profit from the rising global demand for oil, natural gas, minerals, food, and other natural resources

The continent has an abundance of riches, including 10% of the world’s oil reserves, 40% of its gold ore, and 80% to 90% of its deposits of chromium and platinum group

metals The population is young, growing, and

migrating to the metropolitan centers

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Trend in GDP Growth

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Categorizing the Opportunities

Group countries by income level or geography Or by their economic diversification and level

of exports Exports are the means by which emerging

economies earn hard currency to pay for imports of capital goods

In most African countries, capital goods imports account for roughly half of investment, making exports a critical enabler of growth

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Keys to Success

Bring midlevel expatriates

Educate the worker, build skills

Setup extensive training programs

Fill the skill gap

Build partnerships

Put the stakeholders on the board

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