THE admission by Nestlé that it overestimated the size of Africa’s middle class has caused ripples in the "Africa rising" story. But it is also a much needed reality check for companies that have pinned their hopes — and their investments — on ambitious growth forecasts of the middle-class pot of gold, writes DIANNA GAMES
Pubished in Business Day SA, June 22 2015.
Last week, the multinational food producer said it was cutting 15% of its workforce across 21 African countries and reducing its product lines. In 2008, it decided to invest heavily in sub-Saharan Africa based on projections of rising middle-class demand. Last week, it said turnover was way short of growth forecasts.
Much new investment in Africa in recent years has been based on the potential of this rising middle class despite the fact that the size and actual spending capacity of this category of consumer is rather hazy.
The African Development Bank’s 2011 research estimated that 34% of Africa’s population — 313-million people — was middle class.
With low oil prices, it is time to either be brave or crazy in Africa. But if oil drops much further, marginal exploration and infrastructure projects in Africa's oil and gas states are likely to be shelved while companies ride out the cycle, writes Dianna Games (Published Business Day, South Africa, 11 November 2014)
DO SOUTH Africans truly believe theirs is just another African country? Twenty years after the advent of democracy, this question is still being asked and many critics believe the country does not fully understand — or embrace — its "Africanness".
South Africans often say they are "going to Africa", which highlights how many of them regard SA as being separate from the rest of the continent. Often used for convenience, this phrase nevertheless conveys a sense of the continent as being "over there". It is not something you hear used elsewhere in Africa.
ON ARRIVAL at my hotel in Abuja last week, I had to make my way past an armoured car, a bomb disposal truck, a mobile hospital, police cars and a dozen or so heavily armed soldiers. After a couple of days, this started to seem quite normal. The same scene was replicated at several other hotels across the city.
It also became normal to drive through empty streets as Nigerians stayed at home in accordance with a government directive for schools, businesses and government offices to shut down for three days to ensure no traffic jams and a smoother execution of the extensive security checks.
It paid off for the Nigerian government. About 1,000 people, mostly foreigners and including 11 heads of state, attended the World Economic Forum on Africa conference — with the notable exception of Brand SA, whose leader reportedly said they could not attend because they could not access security services and guarded transport and accommodation. (My hotel had many empty rooms.)
Their withdrawal spooked some South African executives who also cancelled at the last minute, diminishing an already small South African presence at the high-level event.
The Nigerian government, which had to move quickly to reassure participants after the death of dozens of Nigerians in car bombs leading up to the conference, pulled out all the stops to secure the event.
Nigerian President Goodluck Jonathan told delegates he saw their presence in Abuja as "moral support in the fight against terror".
Nigeria, rather than being on the back foot as a result of the security threat, enjoyed unprecedented attention from global investors, not only as the host of the high-level event, but as the newly-proclaimed biggest economy in Africa. As delegates got down to the business of discussing Africa’s challenges and progress, it was hard to avoid the wall-to-wall media coverage of the kidnapping of more than 200 schoolgirls in the remote northeast of the country by the Islamic fundamentalist group Boko Haram. T-shirts bearing the hashtag "Bring back our girls" were sold around the edges of the summit by enterprising Nigerians and a "safe schools initiative" was launched by the Nigerian government and business with an initial commitment of $20m.
In the past five years, Boko Haram has killed thousands of Muslims and Christians in attacks on schools, churches, buses and homes, but this has gone almost unnoticed by the world at large. Even the kidnapping of the more than 200 girls made the headlines only when there was a sudden drought in international news stories, plus the imminent Africa summit. But the most important factor that turned attention on the matters was the al Qaeda-like video of a maniacal terrorist leader bragging about his plans for the school girls.
When the video came to light it has sparked a level of international outcry that even Boko Haram itself could not even have imagined in its attempts to grab the headlines.
Many Nigerians hope this level of attention on the scourge could be a turning point, particularly given the presence of international troops who are assisting in the search for the girls. And it may well be, given the new commitment to fighting against poverty in areas such as northern Nigeria, partly to address just this sort of security challenge.
Nigeria has fought off many vigilante-type groups off in the past. But given its purported international links, the Boko Haram threat may not be so easy to cut down, and its continued existence will continue to undermine the country’s economic trajectory and growth prospects.
As several speakers said last week, the situation in Nigeria highlights the state of much of Africa — the combination of state failure and success that sit uneasily together in so many countries. Closing the gap is Africa’s real challenge.
• Games is CEO of consulting company Africa @ Work.