Africa: The Next Frontier

by Dirk Knemeyer

This series on technology in Africa is written by Involution friends and emerging markets experts Niti Bhan and Muchiri Nyaggah.

2011 is the Year of Africa

The Economist kicked off 2011 with an in-depth look at the latest reports from The World Bank and the International Monetary Fund (IMF) and concluded this is to be the year of Africa. Their analysis of GDP performance over the past decade shows that the fastest growth is coming from African nations and is expected to average 6-7% over the next five years. This time though the figures aren't simply based on development funding and aid parcels but from a variety of sources including manufacturing, telecommunications, consumer products and packaged goods.

India's most profitable mobile service provider, Bharti Airtel, committed itself to Africa's future with the acquisition of Zain's operations in 16 countries. Rebranding itself globally as Airtel (Bharti comes from the India's name for itself, Bharat, and means "Indian") they have already begun to disrupt the pricing structure, first for voice then for text services, in the Kenyan and Ugandan markets. Where the Indians have focused on their knowledge of consumer marketing and fast moving packaged goods to make inroads in Africa - Airtel's prepaid starter kit is branded Sachet in India - the Chinese are leveraging their strengths in low cost, high-tech manufacturing with the equipment makers Huawei and ZTE taking the lead. Indian brand-name consumer goods manufacturers such as Godrej and Marico are snapping up local African brands and gaining prominence in retail showrooms. Himalaya Pharmaceuticals, makers of quality skin care products, are as familiar at Nakumatt stores in Nairobi as they are at Shop 'n Save in Singapore.

All of this economic activity has been "under the radar" as the Western media portrayals of Africa and Africans tend to paint a picture of charity and developmental aid. Such imagery has never been the norm in the Indian and Chinese media, perhaps because - until recently - they were considered to be in the same boat. Long seen as short-term exploitative opportunists, India and China's committed investments in this now-visible emerging market have garnered the appreciation of their African partners. Where they were hailed as neocolonists seeking to extract natural resources for their own rapidly growing needs just 2 or 3 years ago, today they are the brands shaping the market tastes by leveraging their experience in successfully operating in challenging environments and reaching the most demanding consumers.

New frontiers mean new rules of engagement

What kind of opportunities are there? Who are these new customers? Where are they and what do they want? Is it possible to step away long enough from the overriding concerns of chaos, poverty, alleviation and humanitarianism to consider a long term business strategy in a sustainable manner? Certainly, yes. Google, for example, has been investing in a significant African presence with offices in Ghana, Senegal, Nigeria, Kenya, Uganda and South Africa. Needless to say they see the potential of this burgeoning - and no longer dark - continent. Acumen Fund's East African Manager Biju Mohandas was recently quoted as saying:

“This whole region is growing dramatically. The nature of conversations is changing from that of a continent in shambles, and that requires aid, to a continent that is becoming the next big growth area in terms of economic interest.”

This economic revolution can be traced to the rapid proliferation of mobile devices. The Independent's recent overview of the scale, scope and impact of the GSM cellular phone captures the flavour of this immense shift: the world has arrived at the fingertips of your average African. The resultant optimism is felt in areas as diverse as agriculture, manufacturing and financial services.

There are places across the continent with the potential to be a next generation Silicon Valley but little is known about what will will work and what won't in the African context. There is little reliable consumer information and population demographics are highly complicated and diverse. Putting tools in local hands and becoming part of the local innovation process is one strategy that a first mover like Google is using to succeed in this new frontier, while the rest of the world is still scratching their heads.

Where does this leave the rest of us in the search for new horizons or investment opportunities - is there a frontier yet to be won? How can you win it?

This series will takes a closer look at some the ways businesses will have to rethink their existing systems and formulate winning strategies in order to successfully compete in the African markets of tomorrow.

Niti Bhan and Muchiri Nyaggah collaborate to offer real world expertise and a holistic understanding of the emerging markets of Africa. Semacraft Consulting Group focuses on understanding the mindset and customer behaviour, market segmentation and archetypes that drive effective product and service concept design as well as the supporting business and transaction models.

Topics: africa, emerging markets, research, Analysis, Blog, mobile