African growth strategies.

Africa’s 54 countries are diverse in terms of population, development levels, growth rates, and stability. 

While Nigeria has nearly 190 million people and Ethiopia and Egypt have over 90 million people each, most African nations have populations below 20 million. 

Likewise, nine countries make up three-quarters of Africa’s GDP, and in 2030 three countries will represent almost half of the household consumption on the continent: Nigeria (20 percent), Egypt (17 percent), and South Africa (11 percent). Many smaller countries, however, are growing quickly and increasing their share of continental GDP and consumption.

We expect East Africa and Francophone Central and West Africa to increase their share of Africa’s overall consumption significantly.

To serve a sizeable market, companies must therefore shape a coherent geographic portfolio with prioritized countries and cities of operation. 

Three distinct groups of countries emerge from each accounting for around a third of Africa’s GDP:

Stable growers. These economies are relatively less dependent on resources for growth and are progressing with economic reforms and increasing their competitiveness.

Vulnerable growers. These countries each have at least one of three types of vulnerability. Some, such as Angola and Nigeria, are heavily dependent on resource exports. 

Other countries, such as the Democratic Republic of the Congo, face security or governance challenges. Finally, countries such as Mozambique are vulnerable to macroeconomic difficulties. 

For investors, vulnerable growers offer promising growth potential, but they also pose risks that need to be properly assessed and understood.

Slow growers. This group includes Libya and Tunisia, countries affected by the Arab Spring, and Africa’s second-largest economy, South Africa. Investors will need to assess growth opportunities at the sector level or use their activities as a base from which to expand into other parts of the region.

We also encourage investors to think about Africa’s cities, not just its countries, as they construct their African portfolios. By the end of the next decade, Africa will have nearly 90 cities with at least a million inhabitants.

Rapid urbanization is one good reason why companies should make cities a central focus of their African growth strategies. Just as important, though, is the fact that per capita consumption in Africa’s large cities is nearly double the average of these cities’ host countries.

WINNING IN AFRICA

Although Africa’s successful firms differ widely in their geographic and sector focus, what they have in common is the imagination to see the continent’s unmet needs as opportunities for entrepreneurship, and the long-term commitment required to build businesses of meaningful scale. 

Indeed, the fastest growing and most profitable businesses in Africa typically see challenges as a spur for innovation.

Successful African innovators are also deeply conscious of the barriers to their businesses’ success, and careful to build long-term resilience into their business models. 

Consider the example of Nigeria-based Dangote Industries, which manufactures commodities in massive volumes, and has made founder Aliko Dangote Africa’s richest person. 

Dangote has built a shock-proof manufacturing model through vertical integration of the supply chain, on-site power generation, robust engagement with government, and an internal manufacturing academy.

For entrepreneurs ready to solve problems and innovate to meet Africa’s unmet needs there is tremendous opportunity for growth.

African innovators are often driven by a deeper purpose. They look at Africa’s high levels of poverty and its gaps in infrastructure, education, and healthcare, and they do not see barriers to business, but human issues they feel responsible for solving. 

Africa is a continent with extraordinary challenges, and it’s a copout just to wait for governments to deal with them. If you see a problem, then think about how you can solve a piece of it.

For entrepreneurs ready to solve problems and innovate to meet Africa’s unmet needs there is tremendous opportunity for growth. 

Africa has room for many more such entrepreneurs and investors. We hope you will be one of them.