Africa's Growth Opportunity
Posted on Harvard Business Review: October 4, 2011 9:18 AM
In March 2000, The Economist featured what we consider to be one of the most shocking covers of our times. It had a child soldier framed in a map of Africa, with the headline “The Hopeless Continent.” A decade on, in January 2011, The Economist has revised its dark vision, calling Africa’s countries “The Lion Kings.”
This volte face reflects a remarkable transformation in Africa’s business landscape. Fueled by Asia’s resource needs, Africa has seen rapid compounded real growth — rates exceeding 5% a year (per IMF data) — over the past decade. But the interesting point here is that this growth is not confined to the natural resource sector; the increased economic activity has led to the development of complementary sectors.
And this is the interesting opportunity that is emerging: By 2020, 128 million households (600 million people) will have reached the consumer class, according to McKinsey’s estimates. It won’t be global middle class level with incomes of over $70,000, but still above subsistence living, buying health care, food, education, transportation, and entertainment.
Consequently, big multinationals have started looking at Africa in a new light. If there had been a tendency in the past to dismiss these markets as strategically unimportant and simply to serve them with sunset technologies, many companies are now using these markets as sources of growth and innovation.
One such is General Electric. In early 2000, at a time when most would have been afraid to place a bet on the region, GE decided to create a strategy for Africa, and the company tasked Yibrah Tesfazghi, a national from Eritrea, to come up with it. To do this he and his colleague Swaady Martin-Leke (one of the authors of this blog) developed what became known as the AFRICA framework:
Assembling the resources: Creating a “Dream Team” of African corporate entrepreneurs who had the passion, relevant leadership traits, and necessary skills.
Feeling the ground: Scouting the market and going into the most unexpected places to identify and quantify opportunities, evaluate commercial and political risks, understand market dynamics, and make strategic connections. Being on the ground was essential for making the leap from a detached recognition of economic potential to an objective assessment of business opportunities.
Realizing the winning strategy: Translating the data into “digestible” information for headquarters and defining the relevant winning go-to-market strategy (compelling value proposition, key differentiators, field-based market prioritization including timing, urgency, best bets)
Influencing stakeholders both internal and external by developing detailed engagement plans
Committing to systematic execution: Turning ideas into action and executing relentlessly.
Accelerating GE’s Africa “commercial IQ”: Going a level deeper in understanding customers (need-based segmentation, pricing, innovation) to better address their needs.
By applying this framework GE has become a vital part of Africa’s growth story. Once present only in the oil and gas sector, all of GE’s businesses are now represented throughout the continent, and their activities include manufacturing and training.
Does your company have its African strategy yet?
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