I am very positive about Africa. However, I am also sceptical about the various reports being produced that market the ‘Africa rising’ narrative. I am yet to be convinced that what is being marketed is true.
There is no doubt that major opportunities are emerging in many parts of Africa. For a retail business like Pick ‘n Pay, the growth of a middle class that can afford to shop in stores is one example of an exciting opportunity.
However, I am also concerned that many of these opportunities are being exaggerated, and that the real challenges that remain are being glossed over. This is not because I am sceptical about Africa’s growth potential, but rather because there are practical, social and political challenges that need to be addressed if we are to realise that potential.
Two serious challenges
Probably two of the most serious of these challenges relate to over population and environmental sustainability.
While Africa’s young and growing population certainly represents an opportunity from a consumer perspective, it also represents a threat to stability and sustainability. Already, we are seeing the devastation and disappearance of natural habitats across the continent. As pressures to grow economies and feed more people continue to mount, there is a strong possibility that population pressures will lead to natural resources being destroyed for future generations.
Speaking more specifically to business-related challenges, probably the most significant issue for us is logistics and the difficulty experienced in moving goods and people across borders. Regional integration is a fine concept, but our experience is that barriers are put up despite regional trade agreements. It is not only trade barriers that are the problem; it is the entire system of customs, border control, logistics infrastructure, and related activities.
Roads are being built, but often on the cheap, bureaucracy at borders remains a nightmare, and there seems to be very little genuine effort to improve things at ground level. It takes between five and six days to transport goods via road from Johannesburg to Lusaka; a trip that should take two days at most. Logistics to other African cities via sea can be even worse, with goods routinely being held in port for months. The situation seems to be worsening, rather than improving.
Emergence of new leaders
What does make me positive that key challenges like these can be addressed, is the emergence of a new generation of leaders. As the next generation of leadership starts to take shape, I am hopeful that the more traditional hierarchical and patronage-driven model will begin to disappear. In the future we are going to see far more diverse, dynamic, and polyglot communities that will break down these barriers to progress. The process of urbanisation is already breaking down old-style political structures and traditional ways of thinking. I suspect that the rise of new technologies will accelerate this process; cheap smartphones and broadband will be crucial to this.
It will also be vital though that the next generation of African leaders are visionaries who have the courage to adopt a long-term perspective. The danger, and one of the risks of deepening democracies, is that Africa’s sustainable future is traded off against political and short-term expediency. This will require, for example, significant investment in infrastructure; converting the abundant wealth that sits underground into above-ground wealth. The upgrading of cities, given the pressures of population growth and urbanisation, is going to be particularly important. Luanda provides an example of a city that seems to be getting this right by taking a portion of the oil wealth and using it to substantially upgrade the city’s infrastructure. Currently though, Luanda seems to be the exception rather than the rule.
Recolonisation a real threat
Whatever the opportunities and challenges, one issue we are all going to have to seriously consider is how we avoid a recolonisation of Africa by the likes of China, the USA, and even South Africa. We need to ensure that value creation is shared fairly, that foreign investors make a positive and sustainable socio-economic impact, and that profits are not simply stripped and repatriated from African countries, as has so often been the case in the past.
In our business, the implementation of global supply chains and pricing and intensifying competition can make retaining income in-country very difficult to get right. As global supply chains become more efficient, local suppliers can often get squeezed out.
We are very pragmatic about the value we can create in the markets in which we operate. Besides providing consumers with good products at good prices in a pleasant and safe shopping environment, we create new jobs, and push hard to purchase as much as possible from local sources and suppliers located near our facilities, rather than ship product from our central distribution centre in Johannesburg. Ultimately, creating jobs and economic opportunities systematically, literally ‘one-by-one’, is probably the most positive impact that organisations like ours can have on local economies.
Gareth Ackerman is the chair of Pick ‘n Pay, a South African retailer with operations in a number other Southern African countries. This article was first published in EY’s new Africa 2030: Realizing the possibilities report.