Tackling the African market and leveraging tech on the continent can be hard but very successful if done effectively. Our Africa Now event, had the pleasure of welcoming Georges Desvaux, Senior Partner at McKinsey, who shared his opinions and expertise on “how to win your business strategy in Africa”. He was followed by Marc Rennard, CEO of Orange Digital Ventures, who added his “keys to success” and important mistakes to avoid when investing in Africa.
How to win your business strategy in Africa — Keynote by Georges Desvaux, Senior Partner at McKinsey
Before anything, we have to reset our mental map of the world.
Firstly, regarding scale. How big is Africa compared to the rest of the world? To put it into context, the African continent is larger than the US, China, Japan, India, and all of Europe combined. And with scale, you have power.
Secondly, growth. Out of the 10 fasting growing economies, 6 of them are in Africa (2018).
Next, the notion of reformers. How many of the top ten reformers on the World Bank Ease of Doing Business index this year are in Africa? 5 out of the top 10, a sign that there is a real wave of trying to lift the continent towards a better competitive arena.
Lastly, economy. How important is Africa as an economy base for international companies? How many earn more than $1 billion in annual revenues? A staggering 438 business. The majority of them are African as well with only about 70 of them being multinationals.
In short, Africa is a healthy place to do business if you know what you are doing. The continent is a place where things are happening and will continue to happen. It’s important to have this mental map, an overview of the scale, the reforming nature and the already significant making of a powerhouse for businesses.
So what’s the investment thesis?
I see it as the big 5.
- Consumer demand. Africa’s population is young, fast growing and urbanizing, creating big unmet needs. Africa will account for ⅓ of world’s population by the end of the century and more than half are currently under 30 years old. Regarding urbanization, a massive 30 million Africans move to cities each year.
- Industrial revolution in the making. The industry will double and even triple in the next ten years. More international players are building a presence on the continent. Notably, 10,000 Chinese entrepreneurs are present in Africa, looking at the markets, setting up factories and producing products: industrializing the continent.
- Infrastructure gap and the big push to close it.
- Untapped resource wealth and new innovations to unleash it. Resources are extremely important today but people don’t see Africa’s long term potential and crucial role in providing them. Take agriculture for example, a lot of people are looking to bring technology to it — Africa could become the bread basket for most of the world if this happens.
- Rapid adoption of digital and mobile technologies, creating a leapfrog opportunity. Africa adopts technology like no other places.
Why is it so difficult, how do you win?
We interviewed over 40 CEOs, senior executives and development leaders to answer this question: what does it take to be successful on the continent? It’s not rocket science but requires good execution.
- Map your Africa strategy — Set a clear aspiration for growth, prioritise the markets that matter the most, define how you’ll achieve scale and relevance and build the ecosystem you need to thrive.
- Innovation — Innovate your business model, for example; Kelloggs invested $420M in West Africa and $450M for a whole African expansion — operations, logistics and product
- Build resilience for the long term — Take a long term view, and rideout short term volatility, diversify to build a balanced portfolio, integrate up and down your value chain and understand local context and engage with governments.
- Talent — Unleash Africa’s talent, there’s an incredible reservoir of untapped talent. Africa is set to have a larger working age population than China. Therefore, build vocational skills for frontline workers, create robust processes to grow talent from within and harness the power of inclusion- particularly women’s advancement. The talent is there, you just have to nurture it so it can grow and develop.
Conclusively, do well by doing good. You need to bring purpose, people want to make a difference on the continent. This was what stood out among those we interviewed: If you bring life and vibrancy to the continent, you’re much more likely to win.
Marc Rennard, Chairman and CEO Orange Digital Ventures
The percentage of the population connected to the internet will move to roughly 90% in 2025, creating around 2% growth in GDP per year.
This transition to a totally connected world is indicated by 3 clear signals:
- The number of tech hubs is booming — +40% tech hubs in 2 years.
- The tech ecosystem is getting more structured. There are currently more than 350 ecosystem players from incubation, accelerators to VCs. VC is growing ridiculously fast in Africa, still not close to that of India and China but the funds are starting to gain serious traction.
- African tech investments are thriving — You only have to look at the growing amount invested on the continent year on year: $1.2 Billion
Keys to success
- Invest early — With a long term perspective. Each time an investor comes with a short term exit strategy, it will damage the business. Orange, for example. has been active for over a decade in Africa: In 2004, we were present in 9 countries with 6M customers. Now in 2019, 22 countries, 120M customers, 18k employees and a Venture arm, Orange Digital Ventures. We have built up trust within the continent.
- Francophone Africa has all the assets to be the next booming region — Like other investors, we focus a lot on Western Africa where all the signs are appearing signalling the birth of large business powerhouses
- Diversify the approach — Focussing only on one project creates risk.
- Be local — Working with local partners, investing in innovation and investing in talent on the ground is the most difficult but important thing. For example, our partnership with Jumia. We dedicated a team to manage the cooperation with local teams in Africa.
- Align interest your interest with startups — When investing in African startups, you may not always be ‘speaking the same language’ but your interests should always overlap.
You can’t make a mistake when you decide to invest in Africa. It’s all about execution, more than ever due to the increasing maturity of the ecosystem. Stick to the customer needs, invest in local talents and focus on innovation.
Check out our other wrap-ups of the #AfricaNow event:
- #AfricaNow #1 : How tech is driving Africa’s growth, with Tidjane Dème’s insights and his interview with Cina Lawson, Minister of Posts, Digital Economy and Tech Innovation for Togo;
- #AfricaNow #3: Tech, talent and social impact: hands-on feedback from the Africa continent.
- #AfricaNow #4: How Google is bringing Internet access to emerging markets
- #AfricaNow #5: The vital role of AI & tech in transforming Africa, with Moustapha Cissé
Any comments? Tell us below or join the conversation on Twitter, and stay up to date with upcoming news.