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March 19, 2018

Africa Presents Multinational Businesses With a World of Opportunity

The appeal of the African markets to multinational companies is seen in short- and long-term growth forecasts. The International Monetary Fund believes the continent is on course to show the second highest growth in the world leading up to 2020.

Considering the economic and political upheaval that continues to trouble some African nations, it is a startling testament to the consumer-led markets. By 2025, the continent’s largest markets are expected to show combined 5 percent growth each year, reaching a value of $1.25 trillion.

With a predominantly young and growing middle class, Africa represents unique opportunities for multinationals, particularly those whose products are in or rely upon technology sectors.

Internet sales are tipped to perform well with in the next decade and forecasted to comprise 10 percent of the growth, which is enticing companies to make new inroads into the markets, alongside the burgeoning African entrepreneurial spirit.

Growth is a word repeatedly used in commercial terms for the continent, underpinned by investment in the technological infrastructure and, according to the McKinsey Global Institute report Lions II: Realizing the Potential of Africa’s Economies. Additional drives are domestic building programs and a working-age population that is set to become the biggest in the world in the next two decades.

There are warning signs to heed, according to McKinsey. Africa is divided into three strands and two of the markets – the Arab Spring and Oil Nations – saw zero growth and falling growth rates between 2010 and 2015, respectively. Against that, the remainder of the continent grew to 4.4 percent, giving some confidence to the growth forecasts.

It’s estimated that around 125 multinationals are already in Africa, taking in around $300 billion each year. There are new additions to that number on an almost daily basis, coming from diverse industry backgrounds. Betway, the online casino, has just opened a base of operations in Ghana; environmental and industrial measurement specialist Vaisala moved into Nairobi; and Volvo’s truck division recently opened a manufacturing plant in Mombasa.

As with any part of the world, Africa brings unique challenges to businesses from around the globe, but the opportunities provided by a continent rich in all manner of natural resources are too good to miss.

No Substitute for Local Knowledge in a Global Business

Local expertise is proving invaluable to commodity-based companies, with native businesses contributing all or key elements of the distribution chain. Long-term partners also provide intelligence on markets, which outlying providers cannot always accurately ascertain.

With progressive business nations embracing and investing in reliable business grade broadband services, Africa is coming closer to the doorstep of the world and overcoming prejudices that previously held back global investment.

As with the Far East and Asia, technology is driving this forward, and not just in the traditional IT sense of the word. Pneumonia carries a heavy toll on African children, but a biomedical smart jacket invented in Uganda is leading the fight against the virus, keeping doctors informed with readings sent via Bluetooth and a smartphone app.

Several agricultural based apps – Mlouma (Senegal), Esoko and Farmerline (Ghana), Mobile AgriBiz (Democratic Republic of Congo), Farming Instructor (Tanzania), and, Poultry Farming Guide (Uganda) – sprang from innovation centers across the continent.

In its last report on the subject, the World Bank mapped 117 such centers in Africa; the GSMA (News - Alert) went further and claimed more than 314 exist in 93 cities across 42 different countries two years ago. It is a staggering success story, underplayed in the rest of the world.

At the heart of it all, the spur for other successes, is Kenya’s iHub, known as African Silicon Savannah, which has seen close to 200 startups since its creation at the beginning of this decade.

In many fields, including medical, education, and agriculture, there’s a strong innovative ethic across the continent to help strengthen native industries and bring improvements to lives. It isn’t a one-way street; the technology is exported as well, improving trade deficits across Africa with the rest of the world.

The University of Pretoria, for example, created a Virtual Reality mine, facilitating training in a risk-free environment. The project is exportable, resonating with nations such as Chile, mindful of its own disasters in this field.

Global businesses recognize the importance of this aspect from their own perspective and cross-trading is not all about inward investment.

Edited by Erik Linask
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