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Africa is the world’s next big growth market – McKinsey

21 Nov 2018
Financial Nigeria

Summary

McKinsey said there is a trillion-dollar opportunity to industrialise Africa, meet rising domestic demand and create a bridgehead in global export markets.

South African President Cyril Ramaphosa and Nigerian President Muhammadu Buhari

McKinsey & Company, a leading global management consulting company, has said that Africa is positioned for an economic acceleration that will be similar to the Asian boom. In the book, Africa’s Business Revolution: How to Succeed in the World’s Next Big Growth Market, released on Tuesday, the authors detail McKinsey’s survey of 3,000 client engagements, in-depth proprietary research and interviews with 40 of Africa’s most prominent business and development leaders.

With more than 400 companies earning $1 billion or more in annual revenue, $1.4 trillion in consumer spending, and an average age of 19, McKinsey says Africa offers big business opportunities. The authors reveal how companies can better understand the African market and seize the opportunities for building profitable, sustainable businesses.

The book was written by Acha Leke, senior partner at McKinsey and chairman of the firm’s Africa office; Mutsa Chironga, an executive at Nedbank, one of South Africa’s largest banking groups; and Georges Desvaux, senior partner at McKinsey and former managing partner of its African and Japanese offices.

According to the authors, Africa has a fast-growing, rapidly-urbanising population with big unmet needs. This means there is a trillion-dollar opportunity to industrialise Africa, meet rising domestic demand and create a bridgehead in global export markets.

There has been a big push by governments and the private sector to close infrastructure gaps. There is a continued resource abundance in agriculture, mining, and oil and gas, with innovation and investment in these sectors unlocking new production on the continent. The rapid adoption of mobile and digital technologies could leapfrog Africa past the many obstacles to growth.

“The biggest theme that we found was that the companies that do well in Africa were the companies that address a fundamental societal need,” said Leke. “Companies that come in not only because they want to make money but also because they really want to help solve a real problem – whether it’s access to affordable electricity or that financial services are made available to a broader segment of the population. This mindset, this ethos, is critically important.”

The authors note that the most consistently profitable businesses demonstrate a higher tolerance for risk; they are eager to adapt their products, production and distribution for African consumers, and they commit to investing and building their businesses for the long-term. The trio maintain that building a successful business in Africa requires a long-term approach and four essential practices of mapping an Africa strategy, innovating business models, building resilience for the long term, and unleashing talent.

“At the heart of these four imperatives is a commitment to doing well by doing good. We’ve had the privilege of meeting and working with many remarkable business leaders from around the world. What has struck us time and again is how many of them are driven by a deeper purpose,” said Leke.


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