Resources needed to make Africa world’s next big growth market, by McKinsey
A new book by McKinsey (https://www.McKinsey.com/) confirms that Africa is poised for economic acceleration, akin to the Asian boom. While other geographies are seeing incremental growth, global companies that get in early and join the African champions shaping the right strategies, can sustain double-digit profit growth over the next few decades.
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In Africa’s Business Revolution: How to Succeed in the World’s Next Big Growth Market (Harvard Business Review Press, November 20, 2018) Acha Leke, Mutsa Chironga, and Georges Desvaux detail the research that McKinsey & Company has done and share insights into Africa’s future growth prospects. The conclusions they draw are distilled from 3,000 McKinsey client engagements, in-depth proprietary research and interviews with 40 of Africa’s most prominent business and development leaders. The authors reveal how companies can better understand the African market and seize the opportunities for building profitable, sustainable businesses.
Major trends indicate Africa is poised for explosive growth
Africa has a fast-growing, rapidly urbanizing population with big unmet needs. This means there is a trillion-dollar opportunity to industrialize Africa, to meet rising domestic demand and create a bridge-head in global export markets. In addition, there has been a big push by governments and the private sector to close infrastructure gaps. There is a continued resource abundance in agriculture, mining, and oil and gas, with innovation and investment in these sectors unlocking new production on the continent. The rapid adoption of mobile and digital technologies could leapfrog Africa past many obstacles to growth.
Leke and Desvaux, both Senior McKinsey Partners and Chironga, an executive at Nedbank, one of South Africa’s largest banking groups, say:
“With over 400 African companies earning annual revenues of US$1 billion or more, we can identify what works. The highly successful businesses are often African companies, but many are entrepreneurial firms with Western, Indian, or Chinese founders. The most consistently profitable businesses demonstrate a higher tolerance for risk, are eager to adapt their products, production and distribution for African consumers, and commit to investing and building their businesses for the long-term.”
African success stories
The book examines several examples of African businesses that have translated opportunities into enduring business value. For instance, it shows how Nigerian conglomerate, Dangote Industries, industrialised to serve regional markets through import substitution and improved margins through vertical integration. South African retail giant, Shoprite, adapted its supply chain and distribution centres for local logistics. SABMiller created products for regional tastes and invested heavily in multiple markets and skills transfer. Technology driven start-up, Kenya’s M-Kopa, is providing mobile money financed off-grid solar energy kits. The authors also study global companies which have succeeded in Africa for decades, like Coca-Cola, GE, and Total.
Four imperatives to achieve long-term sustainable growth
Leke, Chironga and Desvaux believe that building a successful business in Africa requires a long-term approach and four essential practices:
- Mapping an Africa strategy – setting a clear aspiration, prioritising markets, defining how to achieve scale and relevance and creating an ecosystem to thrive.
- Innovating business models– truly engaging with customers, creating products and services to fulfill unmet needs, getting lean to drive down costs and price points, and harnessing technology.
- Build resilience for the long term – riding out short-term volatility, diversifying portfolios, integrating up and down the value chain, understanding local context and engaging with governments.
- Unleashing talent – developing skills in frontline workers, creating robust talent development processes and harnessing the power of women’s advancement.
Acha Leke says:
“At the heart of these four imperatives is a commitment to doing well by doing good. We have had the privilege of meeting and working with many remarkable business leaders from around the world. What has struck us time and again is how many of them are driven by a deeper purpose. They look closely at Africa’s high levels of poverty; its gaps in infrastructure, education and healthcare, and its governance problems. But they don’t just see barriers to business – they see human issues they feel responsible for solving. They show us that contributing to the social and economic development of the countries within which their thriving businesses operate creates value for both shareholders and stakeholders.”
Acha Leke is a Senior Partner and Chairman of McKinsey’s Africa office (https://www.McKinsey.com/). He joined McKinsey in 1999 and went on to establish the firm’s Nigeria office in 2010. He has been at the forefront of McKinsey’s expansion across Africa, working in over 20 countries. He holds several leadership roles at McKinsey, including senior partner in charge of global recruiting, council member of the McKinsey Global Institute (MGI), and leader of the firm’s private equity, public sector, and social sector practices in Africa. Acha co-founded the African Leadership Group, which includes the African Leadership Academy and the African Leadership Network. He has worked to ease travel restrictions in Africa, which has led many countries to drop visa requirements for fellow Africans. He serves on a committee to reform the African Union, chaired by President Paul Kagame of Rwanda. Acha has received many awards and recognitions, has authored dozens of articles for publications including Harvard Business Review and the McKinsey Quarterly, and is co-author of MGI’s widely recognized “Lions on the Move” reports on the progress and potential of Africa’s economies.
Mutsa Chironga is divisional executive for consumer banking at Nedbank, one of South Africa’s largest banking groups, where his focus is on growing the customer base and deepening relationships with more than seven million existing customers. Mutsa was previously a Partner in McKinsey’s Johannesburg office. In that role he worked with banks in over a dozen African countries, on topics including strategy, expansion and performance transformation. Mutsa is an Archbishop Desmond Tutu Leadership Fellow, one of approximately two hundred young leaders from across Africa. He has published widely. He was the lead author of the McKinsey reports, “Roaring to Life: Growth and Innovation in African Retail Banking” and “Mobile Financial Services in Africa: Winning the Battle for the Customer.” He co-authored MGI’s “Lions on the Move” reports on Africa’s economies and a related article in Harvard Business Review, “Cracking the Next Growth Market: Africa”.
Georges Desvaux is a senior partner at McKinsey & Company, a former managing partner of the firm’s African and Japanese offices, and a member of McKinsey’s shareholders’ council, the firm’s governing body. In his three decades with McKinsey he has been based in Brussels, Paris, Beijing, Tokyo, and Johannesburg. He is now based in Hong Kong, where his focus includes advising Asian companies on their African expansion strategies. Georges has supported retailers, financial institutions, and technology companies on international growth, post-merger integration, marketing, operations, and organizational design. As a leader of McKinsey’s global marketing practice, he has helped build the firm’s consumer insights and analytics capabilities and has coauthored numerous reports and articles on consumer and macroeconomic trends—including the MGI report “Lions on the Move II: Realizing the Potential of Africa’s Economies.” Since 2007 Georges has co-led McKinsey’s Women Matter research initiative on women’s advancement in business. He has co-authored several reports and articles on the topic, including “Women Matter Africa”.
Reactions to Africa’s Business Revolution
“A truly disruptive book, suggesting that today’s ambitious entrepreneurs look not to space or silicon but to the savannah.”
“A powerful and compelling guide that captures practical know-how for doing profitable and socially impactful business in Africa.”
─Aliko Dangote, President and Chief Executive, Dangote Industries Limited
“This is a must-read for any global business leader looking for opportunities to deliver outsize returns to stakeholders while also meeting Africa’s huge unmet demands for goods and services.”
─Penny Pritzker, Founder and Chairman, PSP Partners; former United States Secretary of Commerce
“The last great emerging market is Africa. For those investors interested in learning why the market offers enormous opportunities over the coming decade, Africa’s Business Revolution is an indispensable guidebook.”
─David M. Rubenstein, Co-Founder and Co-Executive Chairman, The Carlyle Group