On November 20, 2018, Nyakundi Report notes that a new McKinsey book argues Africa is entering a phase of economic acceleration that could reward companies willing to move early and stay committed. The authors say firms that align with African champions and build the right strategies can sustain double-digit profit growth for years.
In Africa’s Business Revolution: How to Succeed in the World’s Next Big Growth Market, published by Harvard Business Review Press, Acha Leke, Mutsa Chironga and Georges Desvaux set out findings drawn from 3,000 McKinsey client engagements, proprietary research and interviews with 40 leading African business and development figures. Their central message is that the continent’s market is large, complex and commercially attractive for businesses that understand local realities.
The book points to Africa’s fast-growing and rapidly urbanising population, along with major unmet needs in housing, infrastructure, energy, consumer goods and services. It says governments and private investors are pushing to close infrastructure gaps, while agriculture, mining, oil and gas continue to offer room for expansion. The authors also argue that mobile and digital technology could help African markets skip some of the barriers that slowed growth elsewhere.
According to Leke and Desvaux, both Senior McKinsey Partners, and Chironga, who works at Nedbank, one of South Africa’s largest banking groups, more than 400 African companies now earn annual revenues of US$1 billion or more. They say the strongest performers tend to share a willingness to take risk, adapt products and distribution to local consumers, and keep investing over the long term. The authors add that many of the most successful firms are African, though some were founded by entrepreneurs from Western, Indian or Chinese backgrounds.
The book highlights several companies as examples of what has worked. Dangote Industries in Nigeria is cited for industrialising around regional demand through import substitution and vertical integration. Shoprite, the South African retail group, is presented as having adjusted its supply chain and distribution centres to fit local logistics. SABMiller is described as having tailored products to regional tastes while investing in multiple markets and skills transfer. Kenya’s M-Kopa is also featured for using mobile money to finance off-grid solar energy kits. The authors further point to long-running success by multinational groups including Coca-Cola, GE and Total.
Leke, Chironga and Desvaux say sustainable growth in Africa depends on four broad disciplines: mapping a clear Africa strategy, innovating business models, building resilience for the long term and unleashing talent. They define that approach as setting priorities market by market, designing products around unmet needs, absorbing volatility, and developing workers and women’s advancement as part of business growth.
Leke says the approach is rooted in “doing well by doing good.” He says many business leaders they met were motivated by Africa’s poverty, infrastructure gaps, weak education and healthcare systems, and governance problems, but saw those challenges as human issues they could help solve. In his view, contributing to social and economic development creates value for both shareholders and stakeholders.
