Displaying items by tag: Other

Nigeria, Zambia, Ghana, Ethiopia, Tanzania, Uganda and Mozambique, once among Africa’s poorest and most politically challenged states, are now among the best performers on the continent, with some of the highest growth rates and measures of gross domestic product (GDP) in the world.

This sea change in Africa’s fortunes has seen growing interest in the continent’s bounty from resource-hungry emerging markets – China and India key among them – for more than a decade. Standard Bank predicts that China’s investment could rise by 70 per cent from its 2009 figure to $50  billion by 2015 and that the volume of bilateral trade between China and Africa might rise to $300 billion by 2015.

China has been a key driver of the global commodities ‘super cycle’ that has been turning since the dawn of the new century. The heightened demand for Africa’s oil and minerals, due in part to China’s resource-intensive growth over the past decade, has been a trigger not just for growth, but for large investments in infrastructure as part of offset agreements for acquisition of those resources. New emerging market interest in Africa has also provided a catalyst for global investors to pay attention to what Africa has to offer. Executives who have been sitting on the fence are taking a closer look at the investment opportunities.

Since 2008, emerging market performance has stood in sharp relief to the relative decline of developed world economies following the global financial crisis that pushed investors to look for frontier markets with better potential. Africa, which has experienced average growth of more than four per cent for a decade, seems to fit the bill.

One clear signal of the way the world has changed is reflected in the appeal in 2011 by a former colonial master, Portugal, to its former colony, Angola, for investment to boost the eurozone country’s ailing economy. Angola has been one of the fastest growing economies in the world, with double-digit growth between 2004 and 2008, touching nearly 20 per cent in 2005. Angolan companies have already made significant investments into Portugal in the banking sector, telecommunications and energy and this appears set to rise as Portugal faces further GDP contraction.

Africa’s high population growth, of major concern to development experts a decade ago, is now regarded by some as a key driver of growth and new investment. It is seen as a ‘demographic dividend’ on the back of sustained economic growth across the continent – rather than as a crisis waiting to happen. The African Development Bank in 2011 stated that the size of Africa’s middle class, which it measures as being people of higher than the average income among Africans, but with a lower average than elsewhere, has tripled over the last 30 years to 313 million people, or about 30 per cent of the continent’s population.

Standard Bank of South Africa estimates that more than half of Africa’s population will be living in urban areas by 2030 and 60 per cent by 2050 when the population is expected to be two billion. This trend will have particular significance in already heavily populated countries such as Nigeria, where the cities are likely to have 140 million more people living in them by 2050, and South Africa and Angola, which could see up to 80 per cent of their people living in cities.

Urbanisation, too, was viewed as a major threat to Africa’s progress a decade ago but is now seen as an inevitable part of growth, providing opportunities in a range of sectors because of economies of scale and easy access to infrastructure – which are now considered to be tools in the advancement of socio-economic well-being. Urban poverty rates in Africa are about 35 per cent, compared to 52 per cent for rural areas.

Underpinning this new economic order is greater relative political stability. Peaceful governing transitions through elections have become the norm in many countries. Although Africa experienced two coups d’etat in 2012, in Mali and Guinea Bissau, the continent has generally become more adept at taking action against blatantly undemocratic actions – even though it has failed to act effectively on the subversion of democracy through rigged elections and human rights abuses in countries such as Zimbabwe. Nonetheless, several ‘liberation era’ leaders, many with dubious political records, are moving on and the door is opening to younger leaders more in tune with the growing numbers of young people that make up Africa’s population of one billion.

New technology has played a positive role. The impact of mobile phones has been significant, driving economic growth by enabling business activity at a new level. By 2012 there were more than 700 million mobile phone users in Africa and it is predicted that by 2015 the continent will have the highest mobile subscription rate in the world. This phenomenon has unleashed a range of new opportunities for Africa’s inhabitants in trade, banking, information flows, consumer messaging and other areas. New sea cables connecting Africa to the world have pushed up the availability of bandwidth by more than 60 per cent since 2010, albeit off a low base. The highest increase was in sub-Saharan Africa – 82 per cent to reach 368 Gbps – and in North Africa, which increased by 45 per cent to reach 433 Gbps.

Global brands are jostling for centre stage in an increasingly crowded marketplace as the African consumer becomes a target for international companies, particularly from developed countries, but also from emerging markets and Africa itself. Marketing executives say the message to African consumers needs to expand outwards from traditional media to social networks and mobile phones as people on the continent become increasingly sophisticated.

Multinationals from developed countries are positioning themselves for increased competition from emerging markets. Standard Chartered Bank, brewer Diageo and manufacturers Unilever and Nestlé are among the firms that are ramping up their investments. Nestlé has invested $446 million in Nigeria alone since 2003 and planned another investment of more than $80 million in 2012, with a view to doubling the size of its Nigerian business by 2015. Standard Chartered, which makes ten per cent of its profit from African operations, planned to double its number of branches in Nigeria in 2012 and is looking at expansion elsewhere on the continent, while Diageo has been on the acquisition trail to boost African sales, which already account for 14 per cent of total group sales and have shown annual growth of 15 per cent since 2007.

African companies, too, are growing and expanding. Corporate entities from South Africa, which has been a serious investor on the continent for almost two decades, retain a strong foothold in most sectors and a new wave of top executives from Africa’s biggest economy is rolling across the continent. In other large markets, the number of multinationals is growing as companies in Nigeria, Kenya and other places increasingly take a regional view and are setting up shop, both in their immediate hinterland and further afield.

These companies are mostly in a few sectors – financial services, agriculture and consumer goods. But there is also growth in oil and gas where, out of about 800 companies operating in the sector, more than 100 are African players – in addition to several dozen African state-owned oil companies.

Increasing amounts of private equity are chasing acquisitions and funds are seeing new interest from emerging markets as they exit thriving African companies. The growth of the African private sector has been one of the key changes over the past decade, with West and East African firms in banking, retail and manufacturing increasingly focusing on regional expansion.

Many governments have improved the operating environment for private investors. The World Bank’s Doing Business Index shows that African countries are among the fastest reformers in recent times, with 36 out of 46 countries measured between June 2010 and May 2011 having implemented reforms in at least one of the areas measured by this report. In the six years up to 2011, 43 sub-Saharan countries had made the regulatory environment more business friendly while steps had been taken to harmonise regional business regulation, for example with the 16 Francophone countries that are members of the Organisation for the Harmonisation of Business Law in Africa (OHADA).

African entrepreneurs have a new-found confidence, not least due to the ‘leap frog’ new technologies and media that have given them effective new business tools. Skilled Africans are returning to the continent to take up opportunities with both international and African companies, opportunities that are proliferating in an era of increasing pressure for local hire.

Howwemadeitinafrica – excerpt from Business in Africa: Corporate Insights

The battle of the brands is about to begin in Africa, predicts Rick de Kock, Director of Africa Operations for advertising company TBWA\Africa. As the word spreads about the consumer opportunity in a continent of a billion people with rising incomes and high economic growth levels, global brands from all over the world are rushing in.

With 54 diverse countries on the continent, even rigorous business plans can run aground on the unique and complex set of circumstances found in each country. Dianna Games, the CEO of Africa @ Work and a columnist for Business Day, has recently compiled a book, Business in Africa: Corporate Insights, that addresses these issues concerning doing business on the continent. Below is an extract reproduced in online newsletter Howwemadeitinafrica.

  The battle of the brands is about to begin in Africa, predicts Rick de Kock, Director of Africa Operations for advertising company TBWA\Africa. As the word spreads about the consumer opportunity in a continent of a billion people with rising incomes and high economic growth levels, global brands from all over the world are rushing in.

“The competition for consumer spend is keen and growing,” he says. “Some of the world’s fastest-growing economies are here and international brands want a piece of the action.”

The original driver for TBWA’s African expansion was the movement of South African multinationals into the rest of Africa. “But we started to find that more and more of our global clients wanted to go into the continent and wanted us to work for them in African markets.”

Interest in the consumer markets of Africa is coming from all over the world, he says. “We are seeing more brands from India coming down the east coast of Africa and there are a lot of new brands coming from Europe and America such as Walmart and Yum Brands, which is opening KFC outlets across the continent. There are very few coming from China at this stage but that may change in time. And there are also the African brands. Many of the big African brands have traditionally come out of South Africa but that is also changing as African companies spread their wings out of their traditional local markets.”

Talking to customers

“Consumers are starting to understand that everybody wants to talk to them. With the explosion of new technology, African consumers are more connected to the world than ever before so they have more choice and they know what is good and what isn’t. If you try to sell them rubbish, they’ll know.”

This rapid penetration of technology into Africa has implications for the way business operates. The landing of numerous submarine cables on African shores since 2009 has given the continent vastly increased access to international fibre bandwidth and the numbers of internet users is rising as the technology becomes more affordable. The number of internet users rose from 4.5 million in 2000 to nearly 140 million by 2012 – with 45 million in Nigeria alone. But internet penetration still has not reached beyond seven per cent of the population, so the potential for growth is huge.

The GSM Association, a body that represents the interests of mobile operators worldwide, predicted that the number of mobile phone users in Africa would reach 735 million by the end of 2012.

“We are dealing with a mostly young, dynamic target market that is becoming globally connected through the internet and mobile phones and they are understanding brands a lot more,” says De Kock. “The way we communicate with this market will have to change dramatically. Everyone will have to up their game.”

“With the massive competition for audiences and consumer spend, advertising messages are starting to fade into each other; they are becoming wallpaper. So advertising has to move from being literal to more conceptual in order to stand out.”

“Traditional media such as radio, television and billboard are still key delivery platforms in Africa and they will be for a while. But millions of Africans are now getting their messages from a variety of places. We can’t just run a television advert anymore. We have to ask how we can also start tapping into consumers’ social networks. The model being used in Africa is changing rapidly.”

De Kock says the biggest spenders in African advertising are, by far, the mobile companies, followed by financial services providers and the producers of alcohol products and fast-moving consumer goods (FMCG). The fastest growing spend is in the alcohol and FMCG industries.

As more and more multinationals arrive in Africa they will challenge local brands, De Kock predicts. “The challenge for African marketers is to build local brands to the point where they become pan-African and even global brands. There are very few pan-African brands currently that don’t come from South Africa.”

The advertising industry in South Africa is far more advanced than it is elsewhere in Africa. “We have a long tradition of advertising here and this country worked hard to box above its weight in the rest of the world.” He cites the example of Hunt Lascaris, which, from small beginnings, became not only a top agency in South Africa but internationally.

But, he says, the advertising environment in other African countries is changing. “Over the past few years, advertising in Africa has gathered momentum, the messaging is getting sharper and the production quality is getting a whole lot better. I have seen real strides being made in the industry. Some countries are much more sophisticated than others, for example Kenya where there has been a long tradition of advertising; whereas West Africa is now playing catch up. But it can be difficult to draw skilled people into the industry because it is quite intangible. It’s not like becoming a lawyer or a doctor,” notes De Kock.

Thinking locally

“You are not dealing with homogenous societies within regions, or even within countries. Foreigners have tended to regard Africa as one country rather than acknowledging the many differences in nationalities, cultures, religion and languages. The worst thing you can do when you are trying to sell something to people is to offend them by being culturally insensitive.”

The advertising industry reflects, in part, the society in which it operates. “This means you can’t adopt a one-size-fits-all approach,” says De Kock. “If you want to be relevant, you have to spend money making adverts that are particular to a market and that means you cannot re-use material that has been made for other markets. You have to invest in understanding your consumers to know what drives them and what visual language would appeal to them.”

“You need to pay attention to the cultural differences between North, East, West and Southern Africa. There are also local differences that need to be taken into account, even within countries, when developing advertising campaigns. Nigeria, for example, has more than 250 ethnic groups while in East Africa, where Swahili is widely spoken, there are variations of the language between countries such as Kenya and Tanzania.”

“You can speak to people in official languages such as English but if you really want to resonate with markets you should try to build in the local languages and regional peculiarities. Humour is something that needs to be handled carefully – what is funny in one market may not be funny in another.”

“Religious sensitivities also have to be taken into account. In many countries we would think nothing of showing men and women in bathing costumes on a beach together. But this would be a real problem in countries in North Africa for example. And even within countries you need to consider these issues because of religious diversity.”

De Kock says such factors make it crucial that multinationals operating in Africa truly understand the markets they are trying to reach. In the past, market information has been difficult to find. However, recently market research firms have proliferated, servicing companies that are competing for advantage in a crowded marketplace. “But, at the end of the day, it really helps to have a presence on the ground. No one knows a market better than someone who lives in it.”

Although he believes South African companies have a big role to play on the continent, “people from the rest of Africa have a lot to teach us about entrepreneurship. If you drive through African cities late at night, you will see many entrepreneurs hard at work, with their workplaces lit only by candles or torchlight. The sense of energy across the continent is massive, particularly in East and West Africa. Nobody stands still. They are always finding ways to make money.”

“There is no doubt things are moving and, with the developed world in trouble, investors no longer regard Africa as being so risky. There is almost a sense that if you can lose your shirt on Wall Street, Africa seems quite tame. In fact, if you’re not doing business in Africa already, you’ve possibly missed the boat.”

This article is an extract from Dianna Games’s book, Business in Africa: Corporate Insights (published by Penguin Books, September 2012).

Available at all leading book stores – R260 (US$31.60).

Dianna Games is the CEO of Africa @ Work, a South African-based company that aims to facilitate and improve business in Africa through the provision of research, information and networking opportunities. She is also a columnist for Business Day.

ZIMBABWEAN Finance Minister Tendai Biti was forced to hold a rally in a clearing in the bush earlier this month after being driven out of the chosen venue, a stadium near President Robert Mugabe’s home area, by busloads of Zanu (PF)-aligned youths and soldiers. About a dozen people from the Movement for Democratic Change (MDC) were beaten as the crowd drove MDC supporters into the bush, setting the grass on fire as they went.

This is just one of a number of attacks on political parties and their supporters by Zanu (PF) in a rising tide of violence in Zimbabwe. Election talk is in the air with the completion of the draft of a new constitution and a directive by the courts for by-elections to be held in 38 vacant parliamentary seats by the end of August — an election that might change the balance of power in the legislature.

Biti, a top MDC-T official, has never been Zanu (PF)’s favourite person. Not only does he control the purse strings in the unity government, but he has also been making a lot of noise about the diamond-mining companies’ failure to direct the required revenue to the national fiscus. In his recent midterm budget, Biti cut the budget by 15% and reduced projected economic growth from 9,4% to 5,6%.

Zanu (PF) moved quickly to establish itself in the diamond industry, seeing a new patronage opportunity.

The companies operating in the rich diamond fields of Chiadzwa have strong links to “securocrats” — serving and retired military officials who have worked their way into key political and business positions in Zimbabwe. The mining companies in the area are under scrutiny by the MDC and international nongovernmental organisations because of concern that Zanu (PF) is using profits to fund its own agenda. Anjin Investments, for example, is a consortium of Chinese and Zimbabwe military interests, while Mugabe’s wife, Grace, is said to be a shareholder in Mbada Diamonds. This is chaired by close Mugabe associate Robert Mhlanga, who made the headlines in South Africa a few weeks ago over his extensive property interests here.

State-owned Marange Resources is chaired by retired colonel Tshinga Dube, a top party official and former head of an arms firm controlled by the defence ministry.

The securocrats are also running parastatals and hold other key economic and political posts. They have been pivotal in keeping the party — and the president — in power.

Civil society organisations have claimed that thousands of youth militia, war veterans and army commanders have been recently deployed across the country to revive the party’s structures in anticipation of another, probably violent, election campaign. Top military officers have abandoned the pretence of being impartial and have openly declared their allegiance to Mugabe. Earlier this month, army chief Maj-Gen Martin Chedondo told soldiers that Zanu (PF) was the only party that had the country’s interests at heart.

The threat of a military backlash in the event of an MDC presidential victory is not idle. It was, after all, the wave of violence unleashed against the MDC after the president lost the first round of votes in 2008 that led Tsvangirai to pull out of the race, allowing Mugabe to win the poll unopposed.

Reform of the security sector is a key part of the roadmap to free and fair elections being facilitated by South Africa. The draft of the new constitution provides for the military to become more politically neutral. But it will be difficult to turn around the culture of impunity that has invaded a large part of the security forces over a decade. As one Zimbabwean analyst said recently, the army, air force, police and the intelligence agency have failed to provide security, have actively preyed upon the population and have become synonymous with human rights violations.

The MDC-T is confident a new political climate in Zimbabwe will see the security forces and their bosses back in barracks and under civilian control. But the securocrats are deeply entrenched in power and in feeding from the trough of patronage. They are unlikely to give up easily — they have nowhere to go.

THE death this month of Malawi’s p resident Bingu wa Mutharika in a private clinic in Johannesburg brings to mind other African leaders whose lives ended in hospitals far from the public health systems of their home countries. Malawi’s first post-independence president, Hastings Banda, died at a private clinic in SA in 1997. Africa’s longest-serving president, Omar Bongo of Gabon, died in a Spanish hospital, while Togo’s former leader, Gnassingbe Eyadema, died in an aircraft in 2005 while being evacuated for emergency treatment abroad. Nigeria’s Umaru Yar’Adua was admitted to hospitals in Germany and Saudi Arabia, while Tanzania’s Julius Nyerere died in a London hospital.

Most of the continent’s current leaders also prefer to be sick in foreign hospitals and private clinics. Angolan President Eduardo Dos Santos has been treated in Spain and Brazil and plenty of Angolans will bet he hasn’t seen the inside of a local health facility. The same applies to Zimbabwe’s Robert Mugabe, who frequents hospitals in Malaysia and Singapore.

Cost is not an issue for Africa’s political elite, who prefer to pour taxpayers’ money into overseas medical facilities rather than spending it on improving health systems at home.

Getting ill in most African countries is not for the faint-hearted. But as incomes improve, Africans return from abroad and expatriate numbers grow, healthcare is becoming a major investment opportunity — private healthcare, that is.

McKinsey research suggests that healthcare spending in sub-Saharan Africa will more than double its 2006 levels to reach about R245bn a year by 2016, 60% of which will go to private healthcare. To meet increased demand, it says, total investment of up to R200bn will be required.

 But most Africans cannot afford private healthcare facilities and most don’t have access to medical insurance. Even public healthcare is seldom entirely free for patients.

 Africans battle a range of communicable and parasitical diseases. The continent bears 66% of the world’s HIV/AIDS burden, which swallows up resources in public healthcare systems. Now the continent faces a dramatic increase in lifestyle-related diseases, such as diabetes, hypertension and cancer. The experts say that probably 85% of diabetes cases are undiagnosed and the incidence may be higher than HIV in 20 years’ time.

 Rising health costs in developed countries have resulted in a shift in focus to promoting health rather than treating sickness. In the UK, primary health interventions saved about 80000 people from dying of cardiovascular disease over a decade. H ealthcare experts will tell you how difficult it is to change people’s behaviour. In Africa, fighting the battle from a prevention perspective will be even harder. The basic tools of prevention, such as sanitation, clean water and nutrition, are generally not in place.

Countries have become dependent on donors to foot the bill for health spending but this assistance is declining with financial problems in donor countries. Governments have to now think about more strategic and sustainable interventions.

 In 2001, 53 African countries signed the Abuja Declaration pledging to dedicate 15% of national budgets to improving healthcare. The World Health Organisation reports that only SA and Rwanda have met the target in the decade since then. Seven states have cut spending. Poor management systems, a lack of maintenance and hygiene in facilities, poor municipal services, inadequate equipment and fraud in tendering and procurement processes also deter progress.

Healthcare issues are complex but two issues seem clear. Government funding is well below what is needed to sustain a basic healthcare system and what exists is not being used efficiently. The other is that if political leaders who influence policy and funding choices were forced to use public health systems, they would find a way to address many of the challenges they blame for the condition of systems that force them to flee to other countries when they feel a bit poorly.