Business
The allure of doing business in Africa
By Johan Burger
Multinational corporations have targeted Africa as a destination for their investments for quite a while.
The latest investments include American multinational food manufacturer Kellogg acquiring a 50 percent stake in Nigeria’s Multipro, whose core business is selling instant noodles. Other big corporations that have gone into Africa include SABMiller, the world’s second-largest beer brewer, Unilever, Procter & Gamble, Walmart, Carrefour, Toyota and Ford.
Singapore is also represented on the African continent, with almost 60 companies such as Olam, Tolaram and Wilmar (agricultural companies), Indorama (petrochemicals) and PIL (shipping) having a presence there.
For all of them, Africa represents a huge market of more than 1 billion consumers, with very few competitors, and these companies want to be among the first to venture onto the continent and grab the rapidly growing opportunities.
Africa is an immense continent. Geographically, the vast swathes of savannah, desert and rainforest encompass roughly the same surface area as the moon. China, the United States, India, Western Europe and Japan would all fit into Africa, with land to spare.
Encompassing 56 countries, the continent’s tapestry of languages, cultures, religions and political systems create a rich diversity that is unfortunately too often diluted by broad generalizations and stereotypes that still paint Africa as a dark and dangerous continent.
What makes Africa attractive to businesses now? The key is Africa’s rapid urbanization rate and growing middle class, which is creating huge demands for consumer goods and services.
Currently, about 40 percent of Africa is urbanized, and this figure is expected to grow to 50 percent over the next few years. The rise of African mega-cities such as Johannesburg, Lagos and Nairobi make for huge markets in their own right.
It is these cities that contain a significant portion of the middle class who are also driving up demand for luxury goods. For a lot of Africans, brands help define their identity.
At the same time, there is an underdeveloped formal retail sector, which makes the continent an important and new growth destination for multinational companies such as Kellogg and its competitors. Malls, conspicuously absent until quite recently, are now sprouting.
