Insights

One or Many ´Africas´? Business Implications of Africa´s Diversity

By Enock Wandera – April 09, 2018

I start off on a light note – some 5 years ago, I was on a business trip to one of the South East Asia countries, as I left the airport in a taxi, and the first question the driver asked me was whether I was from Nigeria. When I said no, he went ahead to ask whether I was from ´Africa´! At that point, I immediately knew that I needed to do some quick Geography 101 – and for almost 20 minutes, I had to explain to my bewildered driver how Nigeria was only part of Africa and that I was from Kenya, just one of the over 50 countries in Africa. He then asked me to tell him the difference between me and the Nigerians and, reassure him that I have not come to ´charm´ their women! I was really tickled.

Just from the thirty or so minutes encounter with a foreign taxi driver gave me the impression of how Africa is possibly thought of out there – from one extreme, an ignorant assumption of Africa being one big country, to the semi informed notion that Africa, with its many countries, is the same (Africa is Africa) and finally to the other extreme that sees Africa as a diverse continent ready to throw surprises at those who hold the first and second assumptions above – and indeed, there are a number of examples of brands and businesses in general that have learnt the hard way coming into Africa with assumptions!. I am sure you can name a few yourself?

To start with the very basics, we may all know that geographically, it is argued that Africa's land area of approximately 30 million Square kilometers can easily fit in India, China, US and parts of Europe. This land mass, 25% under tropical forest and carries as at now, about 1.2 billion people majority of whom still reside in the rural areas. The continent also boasts of some of the most beautiful & breathtaking geographical features – from the Atlas Mountains, the Sahar desert, the Kalahari, the River Nile, Lake Victoria to the grand Mt. Kilimanjaro and to the world-famous Maasai Mara!

Next, if we go beyond the simple geographical profile, we start seeing how complex the continent is from several perspectives that have implications on business. The simplest dimensions for me to consider when discussing this are the famous 4; political, economic, social and technological factors.

Politically, we would imagine that we have undergone seasons of transformation – the first season being colonial days, mainly 18th century and before in which much of the business done within the continent mainly benefitted the colonialists – raw materials were shipped out of the continent, profits were re-invested in huge business empires abroad as the locals were limited to providing cheap labour as a factor of production to the foreign business owners.

Then came the 1940s- 1960s, a period in which is argued, the continent went through a wave of trying to liberate itself from the colonialists and gain political and to some extent, economic power. If you read ´State of Africa' by Martin Meredith, you get to see details of a 50-year journey through the continent – some of the details in the book cover this period that was characterized by a continent inspired by itself and rising against the colonial powers. Ghana set the pace with attaining independence in 1957 and inspired the rest of the continent – after that, there were several countries that became more aggressive in their pursuit of independence riding on the then Pan-African ideology pioneered by Kwame Nkrumah. The continent then went into a period of resetting its political structures – we know stories of self-entitled and brutal dictators that emerged in this period immediately after independence. To some extent, there was a bit of political instability as the owners of enterprise (colonialists) packed to leave – by then, we were heading into the famous cold war period – where states either leaned west or east. This period had its own economic impact on the continent that lingered on into the 1990s. In general, after independence in the 1960s and into 1990s, Africa was at crossroads!

End of the cold war in the 1990´s then ushered in a new era of some semblance of structures in politics, most notably, the clamour for ´western' style democracy – in this, the population then got some power to question and demand accountability from their governments. Regimes at that time then sort to ´correct' their policies to appeal to the people and hopefully be voted back in. In Kenya, we remember the clamour for multi-party democracy happened around this period – with the first multi-party election happening in 1992.

If we bring this back to business, we know that the political period we are in has the ´big boys of democracy´ wanting to support regimes that are thought to be progressing the ideals of democracy in the continent. Countries that are seen to be more democratic are then perceived to be more stable politically and thus more attractive for investment – both in terms of private investors or in terms of foreign aid flows. I don´t have the numbers, but I imagine that there is a strong correlation between FDI and level of perceived democracy? The hardcore economists would prove this relationship I am sure. I am not one.

So, the fact that in Africa, political stability is varied, the challenge for businesses is to keep a keen eye on political developments and the history of the markets they operate in – political changes, violent or peaceful, do come with business implications. In Tanzania for example, the anti-corruption measures by the current president have affected ´spending power' in the market as a common Tanzanian on the street once told me ´hamna hela´ – and when there is reduced money at hand, consumers do make changes to their purchase decisions. In Ivory Coast, the regime´s decision to ban some packaging materials for environmental reasons forced some businesses to cut down or shut streams of their businesses altogether. The most recent example in Kenya is where one political side in the last election asked its supporters to boycott products and services of companies they perceived to have supported the government. Whether the boycott call affected the selected businesses or not is a separate discussion – the point is that business and politics are very connected and in Africa with its volatility, it is never the same! It is not one!

Now to economic dynamics – most enthusiasts of investing in Africa argue that it is the next frontier – that Africa has countries that are growing faster than the global average, a huge combined GDP of almost 3 trillion dollars, a growing middle class that is exposed to premium goods and services and is ready to spend, huge infrastructural projects that are opening up the continent for regional trade and the list goes on and on – in fact, the very latest effort is what majority of African Union member countries signed off this March in Kigali – the AfcFTA – aiming to take the economic agenda of the AU to the next level by largely removing key trade barriers to Africa trading with itself, which as at 2014, was estimated at a paltry 18%. I am sure nothing much has changed, and all are waiting to see what this FTA will bring forth but from the onset, there are a few countries that are already jittery about the deal, including the giant Nigeria which was not represented at the deal signing conference in Kigali.

Over the years, we have seen how the African economies are volatile – and especially the commodity-dependent ones which coincidentally are also the biggest – Nigeria, Angola and South Africa are only starting to recover from recent economic slowdown. In Nigeria as an example, the slow down affected business, in general, starting from basic foreign exchange challenges due to the depreciation of the Naira to changes to consumer spending which directly and naturally impacted both absolute volume and value of several categories.

Zimbabwe is a classic example of how economic decisions and performance has had implications for marketing and business in general. For a long time, economic challenges in this country forced many businesses to shut down including those that were in the giant agricultural sector, hyperinflation made doing business extremely challenging and at some point in the latest years, due to foreign exchange controls, moving money out of the country became a serious challenge - exchange of goods and services became difficult and in some cases, inter-country contracts were discontinued.

As at 2016, Africa was estimated to be home to around 1.2 billion people – by any measure, a huge number of people and growing at an average of 2.3% every year. What is unique is its young population – with estimates at 40% of this population being under 15 years and just over half are up to 24years old. This relatively young population can provide an opportunity for many businesses in terms of getting young consumers early enough in their lives and staying with them through their stages of life as a source of revenue – and we know how many businesses and brands, in general, have set targets on youth – with products, services, and communication. The risk is the reality of high levels of youth unemployment means they would probably also not have much money to spend. Some businesses have taken this to the next level by coming up with youth empowerment initiatives.

Levels of literacy are improving across the continent, but the reality is that there is still a huge proportion of the population that is still in illiterate and would need to be communicated to in different languages - for the message to be relevant. Most of the population is still in the rural areas running subsistence farming to survive but the rapid movement of population into urban areas means that many countries will struggle if they are not already, with problems of the urban poor. Commercially speaking, it means that even in the urban areas, addressing affordability, providing the right pack sizes are part of success factors for some of these observations.

Then, there is the big debate of the African middle class and how it is growing – and the opportunities that have or will come with it. There are varied points of view but at least, we know that there is a rise of affluence in the continent. My point of view is that beyond the dollar measurement of who is a middle class, there is the need for deeper analysis of potentially varying lifestyle dimensions within the so-called middle class to identify the real marketing opportunities. Beyond this, middle class would also behave differently country by country – compare a monied Nigerian middle class versus a Kenyan middle class – very clearly, they would be different, and part of the difference would be driven by cultural differences, difference in what they perceive as success, what they are exposed to, availability of products, services, and channels. All these complex dynamics have implications on how we market when we say we want to market to the ´African middle class'. There are potential ´types of middle class´ – psycho-graphically speaking.

Finally, looking at technology, though lagging behind the rest of the world in terms of adoption of technology, the rate of growth is very rapid and in some obvious cases like use of mobile money, staying ahead of the world – MPESA is a global pride for Kenya as she leads the world in evolution of mobile money into mainstream e-commerce platform and possibly beyond – innovation expands possibilities!

Any Marketer would know that as technology & technology related innovations take their place in the new marketing world, the consumer is still generally the same – the only major change is the expansion of touchpoints making connecting with consumers more complicated than ever before. Taking note of this and the fact that digital maturity varies across the continent means that again, we can land a blanket digital strategy across markets in Africa – it is important to match digital engagement plans to country-specific digital profiles for better results. Obvious point though is that traditional media is still dominant in the continent – radio, TV and should always take the lead.

In the end, we may look at Africa as ONE – and yes, there may be a number of reasons to carry this notion – from the similarity in some cultural dimensions to the unbeaten spirit of resilience we see across the continent but in business terms, it would be worthwhile to remain sensitive to the small yet critical differences that have implications on commercial success in what one would by now, refer to as ´Many Africas´?

Enock Wandera is marketing research consultant in Nairobi with extensive working experience in Africa and the Middle East. You can commune with him on enockwandera@googlemail.com