The truth about Africa rising is that it is real. The economy is growing and potential for huge and sustained growth is enormous. According to the British newspaper, The Independent, 31m households in Africa have moved up from poverty into the consuming class, and in only 20 years Africa will have the largest labour force in the world. The spending power of this demographic will further fuel the economy.
The fiction about Africa rising is that it will happen as a matter of course, and that anyone can turn up and share in the benefits. It won’t happen unless government and the private sector address the challenges posed by bloated bureaucracies, lack of infrastructure, and lack of flexibility.
Overcoming perceptions of risk
Development and growth in post-colonial independent Africa was blighted by weak leadership, blinkered visions, flawed ideologies and unattainable economic policies. It is because of this legacy that Africa is perceived as a risky investment destination.
But Africa has come a long way since then. Many countries are establishing stable democratic governments, rule of law and respect for individual property rights, efficient tax collection systems, fair judicial systems and realistic long-term macro-economic strategies. These conditions are pre-requisites for sound direct foreign investment. So it is fair to say that in 2014 investing in many African states is much less risky than it has been.
My advice to investors is to stay away if they are not willing to commit to long-term investment in Africa. If they do commit over the long-term they will stand to profit handsomely from the great rewards that follow sustained growth. Investors who think globally, but adapt to local conditions, will minimise their risk and be part of Africa’s long term sustainable growth.
Investors must also be willing to adapt to local conditions. They must show their long-term commitment by investing in society and in infrastructure. The short-term driven looting of resources wasn’t sustainable in colonial times, and it isn’t sustainable in the 21st century either.
Closing the data gap
The story of Africa rising is told in data and statistics. Investors and governments need accurate data to make sound investments and devise economic strategies. Unfortunately in Africa the quality of data is often poor. With insufficient data the full picture is not revealed, which means that reliable models for investment and planning can’t be developed. The challenge is to close the data gap.
The long-term solution is universal primary and secondary education. The immediate and short-term solution is to use technology to fill in the data gaps. Computers can process and relay masses of data, but are not accessible to the rural and urban poor populations. Data and information gathered by satellite are accurate, but expensive and rely on foreign intermediaries.
Cellphone technology is proving to be immensely useful for gathering, disseminating and redistributing data. There are huge opportunities for entrepreneurs to develop cellphone applications (apps) for specific situations so that more data can be gathered and made available, which will lead to better decision making.
Governments must create strong policies that encourage the gathering and dissemination of data. Because it is only through providing potential investors with reliable and packaged data that they will be able to assess risk and make good investment decisions.
Leveraging local media and the creative industry
Global players who seek to attract local co-investors for joint ventures in Africa need local input in their marketing efforts. They need to form partnerships with local media companies if they are to create authentic marketing content. Local media platforms need to be included and should benefit from these marketing efforts.
Marketing should be creative and entertaining. It should have a local angle, but should not exclude the global village. The Africa rising story is a worthy one and needs to be told as widely as possible.
Promoting brand Africa
Africa looms large on the radar of many multinationals because it offers greater potential than waning traditional North American and European markets. Africans need to market and brand the continent in such a way that it becomes irresistible to foreign investors.
With over 50 countries, hundreds of languages, many cultures and religions, Africa is so huge and so diverse, that it is hard to try and brand it as a single entity. What counts in its favour is that Africa, as an independent continent, is only 50 years old. By shaking off its colonial baggage it can brand itself afresh. So, governments must attempt to brand their countries, regions and continent as a place where stable democracy and rule of law are the order of the day, and where infrastructure development is a priority.
Germany – as a brand – is synonymous with efficiency and technology. Italy is synonymous with style and design excellence. Africa has a unique brand attribute that can be used to attract investors. It is a place with friendly people who want to play their part in the rising continent, where potential growth is huge. Africa abounds in opportunities in the retail, manufacturing, mineral resource, agriculture, hospitality and energy sectors. The narrative of the African rising story is constantly being rewritten and often the truth seems to be stranger than fiction. And as the story unfolds and reveals itself, the outcome seems much more positive than was previously imagined.
This article is part of a KPMG report, titled Africa Arisen: The Blue-Sky Continent 2014.
Nasser Sattar is head of Advisory for KPMG Portugal and KPMG Angola.