Monday, November 23, 2015

Why Africa is the Next Big Thing


By Andreas Schühly:

Africa has seen a tremendous growth in the recent past, hosting the most flourishing markets. In this article we will take a closer look at the growth and the opportunities created by giving some case examples of highly successful companies as well as zooming into some major opportunity markets.

 The globalization has created vast opportunities and challenges not only for multinational companies but also for small start-ups. Frontier Markets in Africa, Asia, Eastern Europe and Latin America have risen to power in the last decades. They have become provider of sophisticated products and attracted foreign investments as their markets are appealing. In developed markets it is due to high competition very hard to find comparable opportunities. As the Frontier Markets steadily participate in international trade, they immensely develop their markets. Consequently political, social and economic risks are progressively reduced which makes them more attractive for foreign investors.

 When talking about Frontier Markets, media often talks about the Brazil, Russia, India and China (BRIC). Today, all of them face serious economic and political problems. So, while the growth of BRIC is struggling, Sub-Saharan Africa provides a substantial and steady economic growth. In the past, the economic performance of Sub-Saharan Africa has been really low in comparison with other growth regions, like South-East and East Asia. However, there is a huge change that provides vast opportunities.

According to The World Bank the economic growth in Sub-Saharan Africa has been above 4% since 2000. This growth improved the economic development that changes the lives of people tremendously. In Africa this means that the population has increasing incomes. Further the economies are transforming from an agricultural to a service-oriented society. While Africa’s share in the export of manufactured products in the developing world has declined from around 5% in the 1970s to less than 2% nowadays, Africa offers vast opportunities in the Internet sector.
 
 

In Africa, the spread of mobile phones is seen as growth engine that can increase welfare of the population quickly. Especially as Africa is the world’s most youthful continent. The population aged between 15 and 25 which can be seen as techy savvy is more than 200 million people big.

Mobile phones impact economic activities, e.g. by facilitating and improving payment systems, as mobile money like M-Pesa or MTN MobileMoney are commonly used in Africa but not yet in Europe or the USA.
Also the the agriculture sector, which is  still a major source of employment in Africa benefits tremendously through phone and web applications, like iCow or Mobile Agribiz.

Various domains of daily life are affected. You want to shop online? Just go to Kaymu or Jumia and your purchase will be delivered quickly. The laundry service app Yoza helps you to find casual laborers to do your laundry. The mobile app SafeBoda improved the safety of public transport in Uganda tremendously. Planning a trip? Jovago offers you tons of accommodations.  Even job hunters and career makers can find their dream job today easily by signing up on everjobs, the first Pan-African job portal and find new career opportunities within minutes.

And this growth is likely to continue. The international well-known consulting firm McKinsey & Company estimates that by 2025 the annual e-commerce sales will be around $75 billion in Africa. Also the Internet to the contribution to the African GDP is estimated to be around $300 billion.

The main challenge in Africa is that Africa is not a homogenous mass, it is rather highly diverse in many dimensions including the number of languages, religions, political systems, climate zones and availability of natural resources. The highly diverse Sub-Saharan population of around 875 million people speaks more than 2000 languages which makes marketing more challenging.

 Another issues is the skill gap. According to everjobs Uganda Country Manager Julian Schulz, in Uganda, the skill gap between the educational system and the real work environment is increasing. However, it is not just the educational system. Schulz also pulls companies and people in responsibilities. While companies should make their efforts to decrease the gap by training people, students and graduates should seize all opportunities available to get first-hand experience, e.g. through volunteer work.

 Let’s take a closer look at some of the most promising markets in Africa:

  • Uganda was recently listed as the most entrepreneurial country in the world with 28 % of the adult Ugandan population having started businesses in the last 42 months. This success is caused by the recent improvements in the communication infrastructure, that connect the different parts of Uganda as well as it links up uganda with the rest of the world. Further, Uganda is also known as a hub for e-health businesses with projects like Text to Change.
  • Kenya is now a recognized as the major IT hub in Africa. Through the widespread use of mobile money, the tech incubator model and a genuine government commitment to ICT policy, Kenya received its nickname “Africa's Silicon Savannah” referring to the Silicon Valley in California.
  • Nigeria is not only Africa’s largest economy, it also holds one of the largest e-commerce markets on the continent, with companies like Jumia,  which was worth $ 1 billion in 2014 with a strong growth. Consequently a lot of venture capitalists have noticed this success and are actively seeking for investment opportunities there.
  • Senegal is not among the largest economies on the continent. However, it as emerged as one of the leaders in Africa regarding the relative economic contribution of the Internet, there are also big plans and potential to build up an own Business Planning Outsourcing sector.
  • Cameroon’s is hosting one of the most attractive startup incubators: ActivSpaces.
Despite some challenges that might make business tough, Africa offers many opportunities in different regions and in different areas of business. A young population that is highly tech-savvy and rising incomes make it worthwhile to consider the potential of Africa.

 About the author:
Andreas Schühly is a Strategic Partnership Manager at everjobs Uganda (www.everjobs.ug) , the fastest growing job portal in Emerging Markets. He is further a Master’s student of International Business with focus on Africa. He has gained educational and work experience in Germany, Switzerland, Australia, New Zealand and Uganda. Further he will study from January 2016 on at the prestigious University of Cape Town Post-Graduate School.

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