Despite the continent’s strong economic growth over the past decade, the African renaissance is not here yet, says Hendrik Malan, operations director for Africa at Frost & Sullivan.
During a recent webcast Malan said that the African renaissance is probably another 10 to 15 years away. “Africa still has a fair amount of ground to cover before it reaches the point of no return with regards to economic development.”
He however advised companies looking to enter the African market to do so now. “You have to get in now to entrench yourself in this complex market. Getting to know Africa is a slow and challenging process. Be well entrenched when that renaissance hits – she will reward you well … The paradigm is shifting from ‘should we invest in Africa?’ to ‘managing risk of not being in Africa’.”
He said that with 54 countries Africa is much more diverse than other emerging markets such as China and India. “Because of the lack of intra-regional trade it is really up to the individual African countries whether the African continent is going to move into the renaissance over the next 10 to 20 years.”
According to Malan, Africa’s current growth spurt is much more sustainable than what was experienced in previous years. “We are confident that it will continue for years to come. The growth is much more diversified, driven by consumption, a growing middle class, urbanisation and strong infrastructure needs, creating a new African story in our view.”
Malan said that Africa suffers from a large gap between actual and perceived risk. “Whenever a discrepancy like this exists there is money to be made.”
Africa’s more diversified economies pose less risk to foreign investors. “Your pure oil exporters such as Algeria, Angola, Libya and Nigeria might be less attractive at the moment, but your diversified economies such as South Africa, Morocco and Egypt are obvious choices. And Mauritius is a little tiger, don’t forget. There is a group of countries slowly but surely diversifying, which you need to watch out for – Zambia, Mozambique, Uganda, Tanzania, Ghana and Cameroon are definitely hot spots,” he said.
Malan advises companies to only enter one or two African countries at a time. “Operationally there are so many lessons that you need to learn when ramping up operations in Africa because of all the challenges. It is very difficult to manage all of that across three or four markets … One or two markets at a time is a good approach. Ramp up slowly, find your feet, make sure that you understand the country and the region first before expanding and putting your expansion process on steroids.”