Africa the world’s next Hypergrowth business

INtheKNOW

AFRICA THE WORLD’S NEXT HYPERGROWTH BUSINESS

COULD AFRICA BE THE WORLD’S NEXT HYPERGROWTH BUSINESS? THAT’S THE THOUGHT THAT STRUCK ME THE OTHER DAY AS I WAS DOING SOME RESEARCH FOR A PROJECT I AM WORKING ON. FACT IS, ALL THE INGREDIENTS ARE IN PLACE. NOW WE NEED TO FIND A WAY TO IGNITE THEM.

LEE NAIK

TRANSUNION AFRICA CEO

The hypergrowth business is every venture capitalist and investor’s dream. It’s the fabled unicorn that goes from nowhere to disrupting and transforming their entire sector. It’s Uber, which took three years from being founded in 2009 to reach a valuation of $18.2 billion. Or Amazon, which went from being an online bookseller to a behemoth with interests in everything from cloud computing to groceries, entertainment and pharmaceuticals, and a market capitalisation of nearly $2 trillion.

So why can’t Africa do the same? After all, hypergrowth isn’t necessarily limited to young, ambitious FinTechs. Any company, country or even continent can become a hypergrowth business. It just needs the right raw materials, the vision to do something with them, and the savvy to use technology to not just leapfrog, but catapult yourself into another league.

So, what makes Africa ready to soar?

Let’s start with the people. There are a lot of them – and there are about to be a whole lot more. According to the United Nations, in 2019, the population of Sub-Saharan Africa was 1.1 billion, with an average age of 18.7 years, and 54.6% of the population in the economically productive 15 to 64 age group. By 2100, this will boom to 3.7 billion, with an average age of 34.2 and 64.7% of the population in the economically productive age group.

Compare this to Europe, where the population is shrinking and aging. From 747 million last year, with an average age of 42.5 years and 65.2% of the population in an economically productive age group, it will decline to 629 million in 2100, with an average age of 48.2 years, and 55.2% of the population in the economically productive age group.

Bottom line: Africa’s got a younger, bigger, more dynamic population – 17% of the world’s population, to be exact. But only about 3% of the global GDP by most accounts. That’s changing: according to World Bank data, Sub Saharan Africa’s GDP growth rate has outstripped the rest of the world (except China) for the past 20 years.

The consumers of the future

More importantly, we’ve got increasingly active consumers, who are willing to spend more. The number of consumers in Africa stands at nearly 1.2 billion, and this will rise to 1.7 billion by 2030. Think about it: more than a billion wannabe consumers in 250 million households in a region whose economy is outpacing that of Europe, the US and Asia.

Seven countries – Nigeria, Ethiopia, the Democratic Republic of Congo, Egypt, Tanzania, Kenya, and South Africa – will soon hold half of the continent’s population, and 43% of Africans across the continent will belong to the middle or upper classes. Having more people living in cities than India and China combined over the next century will correlate to significant increases in household consumption and business spending. Household consumption is predicted to reach $2.5 trillion by 2030.

Most importantly, as Trendtype points out, the consumer economy in Africa will be driven by young consumers. They’re half the age of consumers in Europe and North America. By 2050, the average African consumers will still be under the age of 25.

Where are the opportunities?

Rising income levels and increasing demand for goods and services means that Africa’s emerging economies present exciting opportunities to global businesses for expansion in retail and distribution, says Brookings:

Fast-moving consumer goods: This speaks directly to lower-income and middle-class households. Food, beverages, hygiene products, home care, and appliances have all grown rapidly in the past decade.

Luxury goods: One in five of the world’s consumers will live in Africa between 2030 and 2040 with most of these people falling in the category of affluent or middle-class. Growth in GDP will lead to even greater purchasing power.

Online retail and ecommerce: Now we’re talking. Africa’s currently the fastestgrowing mobile telecom market in the world, with more than half of all Africans going online daily. Covid-19 has reshaped consumer behaviour, and accelerated ecommerce exponentially.

What do we have to do to ride the hypergrowth wave?

For a start, we have to get our leaders to drop the barriers that hold us back from partnering with developed nations and companies. Ensure greater transparency and accountability. Improve governance. The leading nations in world are reading same research about our growth potential. We need to make it easier to do business in and with Africa.

We’ve got to uplift our people. That doesn’t just mean ending poverty and improving healthcare systems. It means educating our youth, and getting all African businesses on board to upskill our youth to be able to take advantage of the opportunities that are presenting themselves to be the world’s next workforce.

And then, we’ve got to get smart with technology, which gives us the ability to disrupt and innovate like never before. The opportunities are boundless. We’ve got the chance to access global markets and unlock investments on a global scale. It’s up to us to drive this new reality.

BY LEE NAIK - CEO TRANSUNION AFRICA

“I am excited about Africa’s potential

Lee Naik, CEO