Africa is often referred to as an emerging market by economists and the western world. But what does that mean to young people from the continent? Well, it can be interpreted differently depending on an individual. Personally, as a young person from the largest slum in Africa, Kibera, Africa as an emerging market reminds me of the abundant opportunities that have not been tapped into.
Gaps in the education and health systems, infrastructure, and electric power sectors bring with them huge opportunities for future Africa business owners.
Not to mention that between now and 2050, Africa’s urban population is projected to triple with an average of 24 million people moving to cities for the next twenty years; that means that ⅔ of Africa’s urban space is yet to be built. This provides a lucrative opportunity for someone who owns some land or a construction company.
I recently read Africa’s Business Revolution by Acha Leke, Georges Desvaux, and Mutsa Chironga, and it helped exfoliate a new layer in my understanding of Africa’s underlying opportunities.
As an aspiring pan-Africanist entrepreneur, it’s critically important for me to deeply understand Africa’s business landscape. The book helped me to achieve just that. Filled with research facts and stories from Africa’s entrepreneurs and businesspeople — such as Aliko Dangote (Dangote Group) and James Mwangi (Equity Bank) — it’s the kind of book that an aspiring or established African entrepreneur wants to read.
It’s 14 years since Safaricom PLC, Kenya’s largest telco company by market margin, launched M-PESA. The mobile money transfer service has grown over the years; it now accounts for 34% of its parent company’s total revenue, with Kshs 84.4 billion in revenue. Due to its terrific growth, Kenya’s government recently attempted to raise a parliamentary bill to spin out the service as a stand-alone business.
Currently, there are 122 million active users of mobile financial services in Africa and the number of smartphone connections in the continent is forecasted to reach 636 million by next year. Over the same period, mobile data traffic is expected to increase sevenfold.
What does the above-projected growth mean? Well, I don’t think it’s arguable whether there is more growth in this sector. I believe buying Safaricom equities as a long-term investment is a great idea.
Why to first buy Safaricom equities, you might be wondering. Just start a new telco company to disrupt the entire market, you might be saying. I just don’t see myself directly venturing into starting a telco company nor do I have the capacity. But that shouldn’t prevent me from putting my money into the market, and that’s the beauty of equity ownership.
Talking of starting companies, it’s worth noting that the common factor in successful companies in Africa is the imagination to see the continent’s many unmet needs as opportunities for entrepreneurship, and the long-term commitment required to build businesses of meaningful scale.
Long-term commitment can be linked to the youthfulness of the market and the challenges that founders have to face to master their respective markets.
As the popular saying goes, the future belongs to those who can learn, unlearn, and relearn, the future of doing business in Africa belongs to those who are willing to stay grounded for long enough to overcome the tough challenges associated with operating business in the region.
Also, investing in research and development assists businesses to identify promising trends and execute bold strategic moves as far as the trends are concerned.
Among the challenges that must be looked at keenly by those doing business in Africa include bookkeeping and tax payment. Poor bookkeeping and tax avoidance can bring huge burdens and hindrances for businesses in the region.
However, the challenges shouldn’t scare anyone with a great idea and passion for Africa. The upside outweighs the downside by a landslide. Consider, Africa is a 1.2 billion-person market on the cusp of transformative growth. It contains a major share of the world’s agricultural land and mineral reserves. The promising sectors include:
- Financial services
Buying land near urban centres has a great potential for making the buyer a huge dividend in the long term. Hopefully, governments put in place strong laws and protective measures against land grabs.
To withstand the sandstorms of the Sahara and thunderstorms of Southern Africa a business has to be built on the cornerstones of:
- Taking a long-term view and riding out short-term volatility.
- Diversifying by building a balanced portfolio across countries or sectors.
- Integrating up and down the value chain.
- Understanding the local context and claiming a place at the table with governments.
In 2015, 70% of Africa’s annual revenue came from non-resource sectors such as:
- Health care
- Financial services
There is plenty of arable land in Africa. Interested parties can enter the agro-processing sector by venturing into groundnuts, maize, coffee, cocoa, or cotton farming. Always remember to invite land surveyors to find out the cash crop or food crop that can do well in your locality.
Starting as a small scale farmer is highly recommended. By doing so, you reduce the risk of losing huge chunks of money all at once. Also, you get to learn valuable insights along the way.
Coincidentally, SMEs are responsible for 77% of all jobs in Africa, according to the World Bank. Basically, as a small scale farmer, you create job opportunities in your locality and improve the livelihoods of your community while earning money.
As a business works its way to profitability and expansion, it’s important to remember Africa’s Business Revolution’s highlighted strategic map for profitable growth. The map includes:
- Setting clear aspirations to guide expansion strategy.
- Prioritizing the markets that matter most for the particular businesses.
- Defining how to achieve scale and relevance across the African map.
- Identifying — and helping to build — the ecosystem needed to thrive.
It’s also worth noting that sustainable growth is created by first developing a strong position in the home market. Master your local market first then proceed to the neighbouring markets and so forth.
Manufacturing and bulk processing companies require vertical integration. Many of the current successful African manufacturers — including the Dangote Group — started life as importers, but later realized that with their intimate knowledge of the market, the savings achievable by cutting out shipping and tariff costs would more than justify their investment in local manufacturing plants.
Unfortunately, Africa imports a large percentage of goods in many categories that could be produced easily and cheaply locally. The continent’s business analysts and manufacturing and processing companies have constantly complained about governments over-awarding contracts to foreign companies.
Lastly, did you know that more than 10% of Africa’s university-educated professionals live and work on other continents?