Is Africa Your Company’s Next Growth Engine? Finding balance between high-growth potential and risk exposure across a diverse continent.
Rethinking the Hype The conversation about Africa is finally shifting from one of “deficits and risk” to one about opportunities, ventures, creativity and innovation. For companies that have paid close attention to the continent and have already made active investments, this is old news. For those who are less familiar, powerful demographic and urbanization trends and other developments have driven over half a century of YOY growth. Some, however, will point to 2016 economic deceleration in Sub-Sharan African as cause for concern. In helping our clients understand the portfolio of risks and opportunities at high level, we wanted to offer our views on both sides with the goal of answering a common question – can Africa fuel growth for my company?
The 21st century has an unprecedented challenge – one where every continent will face large-scale aging and slowing demographic growth. With one exception, Africa. Africa is Not a Country When assessing strengths and weaknesses across a global portfolio we realize the benefit of thinking small, and looking not only at regions, but also sub-regions and city-by-city investment strategies. Africa is no different; we don’t think of Africa in monolithic terms nor do we assess the opportunities and risks as such. Africa is a diverse continent home to 54 countries, 1.2 billion people and 1,500 languages. Each of its countries, and cities for that matter, offers a unique set of growth opportunities for exploration.
© Market Strategy Group, 2017
May 2017 www. mkt-strat.com
Determining What’s at Stake It’s not to say that challenges aren’t real or that there aren’t serious threats to investments – political instability, disease, poverty, etc. Even the most sophisticated and experienced companies fail under a significant and different issue and risk set. Take for instance, Nestlé, a $92B international category leader. Last year it announced a 15% cut in its workforce across 21 African countries. Lesson learned, being big and having a global infrastructure isn’t enough to win in Africa. Rigorous upfront and continuous assessment is critical in getting your Africa Expansion Strategy and Operational Plan set. We’ve highlighted some of the most important consideration factors below.
A CASE FOR INVESTMENT
CONSIDERING ISSUES & RISKS
• Falling Trade Barriers – Both to/from Africa and within Africa, a 54-national continental free trade area has been established • High Population Growth – 864M more people will live in its urban areas in 2050 than 2010, Africa will soon be the only “young” continent • Rapid Urbanization Rates – The UN has counted 71 African cities with a population higher than 750,000. Soon, Africa will be home to scores of “mega” cities, dense population centers
• New Customer Preferences – Changing expectations and emerging needs of a growing middle class, opportunities beyond CPG for large customer base • Digital Transformation – Africa leads the world in pace of mobile adoption, pioneered mobile payment platforms • Economic Diversification – Countries are finding growth beyond commodities and are appealing to a broader set of investors
• Infrastructure Deficit – There simply aren’t enough airports, roads, rails, ports and power grids to support business operations and lift African economies. Governments have been slow to respond and keep up with demand • Operating Environment – Access to financing has not improved quickly enough, as well as challenges from political instability and corruption • Variance in Currency Risks – Beyond normal volatility risk, a broad set of currency risks emerge with liquidity, exchange control, jump and trend risks, and vary from country to country • Longer Time Horizons – Greater patience is required of investors to see investment return; however, relatively high returns have been achieved • Weak Data and Information Infrastructure – The continent has been making progress, but still does not yet have a competitive IT backbone
This assessment is meant to offer globally-diversified and globally-minded companies a balanced spring board for assessing their global expansion and operating plans, or perhaps for even developing their own. With any questions you have on how to better optimize your Africa portfolio or plan, we welcome a conversation. Could Africa be the next engine of your company’s growth strategy?
© Market Strategy Group, 2017
May 2017 www. mkt-strat.com
Getting Global Expansion Right MSG understands both the diverse opportunities and the extreme complexities of the global market. Growth in developed nations is as such the leaders of technology companies can no longer count on growth from markets at home. Instead, it is time to look strategically at international options to achieve growth goals. We know that doing this is hard, and have a team of seasoned experts who get it. We answer your hardest global expansion questions.
Target Market Selection WHERE?
WHEN & HOW?
• Detailed market analysis with overview of market size and growth potential, competition, channel analysis, economic drivers and political climate, conducted by region, country or sub-country levels • Country- and region-specific feasibility analysis to determine viability of expansion and universe of strategic and operational risks
Market Entry Strategy • Develop value prop, positioning, target customer, price levers and channel strategy specific to region, country or micro-geo • Assess potential partners and formulate partnership strategy • Determine roadmap for immediate-term launch & post-launch stabilization • Design and implement custom operating model to achieve strategy
Value From Our Services WHY?
• We support company leadership in developing data-driven market penetration strategies and getting the most out of their global expansion investments. We have done this across industries, business types and geos • We help executives to be better equipped to allocate limited resources across a domestic and international portfolio of growth opportunities
Global Expansion Service Line Leadership With a focus on international markets since the beginning of her career, Alex Kruzel has been assisting companies and public sector organizations to develop and execute their strategies for more than 10 years.
ALEX KRUZEL Partner
Alex has served clients across a variety of industries, including CPG/Retail, Technology, Energy, Travel, Hospitality & Leisure, Life Sciences & Healthcare, Financial & Professional Services and Public Sector. She specializes in helping clients identify opportunities for growth via global expansion and then implementing strategic initiatives by translating them into tactical, measurable and self-sustaining programs.
About Market Strategy Group Market Strategy Group sees business differently. To us, winning isn't about going from Point A to Point B. It's about aligning three distinct dimensions — business direction, people & process, and markets & customers — to drive growth. Getting this right is critical to your bottom line. And it’s more than an operational challenge, it is often a strategic issue. We have helped organizations get to an answer custom to your unique situation. We should chat if this is an issue: Alex Kruzel (alex.kruzel@mkt-strat.com).
© Market Strategy Group, 2017
http://mkt-strat.com/
May 2017 www. mkt-strat.com