What makes African business leaders successful?

 

Sara Firouzyar

On Wednesday, 29th of January, we had the pleasure of welcoming frontier markets development expert, Jonathan Berman, to an event at the Institute of Directors to discuss his book – Success in Africa – with a diverse group of investors, commentators, multi-national companies and start-ups, some of whom have a long track record of operating on the Continent and some who are just dipping a toe.

Jonathan shared fascinating insights from the CEO interviews which make up the focus of his book – viewing Africa from the perspective of business leaders who are building successful local enterprise. Here are the insights which resonated most strongly with us:

  • Google ads achieves more click-throughs from Africa than all of Europe. A surprising fact for some sceptics, but one that pointedly demonstrates the current reality of the Continent!
  • Jonathan likened leaders operating in frontier African markets today to characters like Rockefeller, Carnegie and JP Morgan at the dawn of the 20th Century in the US economy – entrepreneurs whose ambition was matched only by the scale of the opportunity presented to them
  • To succeed in business in Africa you have to be able to embrace risk – One of the reasons why the Chinese are so successful in Africa as partners to local governments and as suppliers to transforming infrastructure projects is that they have experienced this in their own country first hand within their own lifetimes.
  • There are regulatory uncertainties and there is corruption within Africa, as within many other emerging, frontier and indeed developed markets, but long-term transparent relationships are the best way to negate these risks
  • Successful businesses in Africa earn their ‘license to operate’ from local people by aligning their interests with the interests of their shareholders. Developing your business while also developing local economies and societies is a strategy that all of the CEOs Berman spoke with championed.

 

We continue to be inspired by African stories and are grateful for everyone that came and contributed to the conversation.

Are you considering investing in Africa?

 

Isabelle Alenus-Crosby

According to the World’s leading forecasters, the African economy is expected to grow by approximately 6% during 2013/14, while its total GDP is expected to reach USD 2.6 trillion by 2020. The Nigerian stock market alone returned 47.2 % in 2013.

This is great news, but where should one invest?

Let me quickly state the obvious; Rapid urbanisation on the continent means that priority needs to be given to infrastructure (mostly power and transportation). Africa has a growing population of young, globally minded people who increasingly use mobile phones and the internet. The banking industry is expanding with growing income levels, as is consumer demand, and a population explosion requires more schools and hospitals. The African continent is also said to be on its way to become the world’s low-cost manufacturing hub.

A CNBC news reporter recently stated that sub-Saharan Africa, which was once seen as a pure commodity play (or as a part of the world to avoid entirely) is now the place to get big returns on relatively small investments.

The key issue is of course the risk/reward balance. Investment-grade countries like South Africa, Botswana and Namibia might offer lower returns than countries with higher risk like Nigeria, Ghana, Tanzania and Kenya. The bottom-line is that Africa offers numerous opportunities and that they are as varied as the 54 countries of the African Union.

The overall buzz resounding around the globe however, is that the time is now!

5 things we didn’t know about Madagascar

 

Sarah Nicholas

On Thursday morning, we welcomed journalist Emilie Filou for a breakfast briefing on Madagascar – an island which is hugely under-reported in the English language press, and that even Africa experts often know little about. Emilie’s presentation was packed with new information; these are the updates which particularly stuck in our mind:

1.       The cost of Madagascar’s political crisis

The political coup in 2009 had a huge impact on the economy – the World Bank estimates that the cost of the crisis has reached about $8 billion. While Madagascar still lags behind its neighbours on the African continent, it is beginning to recover.

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2.       A turning point?

The confirmation last week (17 January) of Hery Rajaonarimampianina as the first officially elected president of Madagascar in five years has been greeted with cautious optimism by the international community. Hery’s choice of Prime Minister will be the most significant indication of whether anything will truly change under his leadership. If the country can take advantage of its strategic location between growing Asian and African markets and its cheap workforce, it could still return to the pre-coup growth rates of 6-7%.

3.       Out of the crisis rises opportunity

– A backlog of 4,000 mining permits and 223 oil exploration licenses have accumulated since the crisis, as well as a huge backlog of infrastructure and construction projects

Agribusiness is beginning to benefit from new foreign investment, and with 90% of the population employed in agriculture and 70% of the island’s land used for arable, there is great potential in this secto

– Tourism was Madagascar’s second largest cash earner before the crisis. About 70% of the island’s fauna and 90% of its flora is endemic, and both Lonely Planet and Rough Guides cited the island in their ‘Top 10 Destinations’ in 2013 and 2014

4.       Challenges remain – national electricity production capacity is 0.5 MW

Madagascar remains one of the toughest markets in which to do business, which will take time and concerted effort from a committed leadership to redress. Corruption is culturally embedded, bureaucracy is burdensome, and – as anyone who has spent time in the country can testify – infrastructure is severely lacking. Electricity supply is unreliable and road density is just 9.7km/1000km2, compared to the sub-Saharan average of 31km/1000km2. And while Madagascar’s population is young and labour is cheap, education is poor and two thirds of teachers have no formal teaching qualification and often do not speak French – the language of the national curriculum.

5.       How to pronounce Hery Rajaonarimampianina’s name

The audience were suitably impressed when the longest name of any head of state tripped of Emilie’s tongue. For those who are still perplexed:

Emilie Filou is a freelance journalist specialising in business and development in Africa. Her work has been featured in The Economist, The Guardian and BBC Radio 4’s ‘From Our Own Correspondent’, as well as contributing to the Lonely Planet guide to Madagascar in 2011. She revisited the island in 2013, and is available for commissioned articles and briefings on the country. Email: filouemilie@yahoo.com

 

Setting the example

 

Isabelle Alenus-Crosby

Quite recently, the five members of the East African Community (EAC) agreed to adopt a single currency, which should go into effect within the next 10 years. Kenya, Uganda, Tanzania, Rwanda and Burundi first came together in 2000 to create a common market and single customs union, modeled after the Eurozone. The aim is to make business a lot easier across East Africa.  If their model is a success, then the entire African Union might follow suit.

When 50+ African countries are watching your every move, setting the example can be quite daunting. After all, success could contribute highly to the continued economic success of Africa (no pressure).

Of course, regional integration is a deeply political process and the implementation of a single customs territory has important political aspects.

However, East-Africans are already thinking of themselves as just that: East Africans. There are rumours that Burundi, like Rwanda, wants to adopt English as their common language in order to assure the Union’s success, and all reports following the numerous meetings between the five EAC leaders are very positive. Having spent a considerable time in all five countries myself, I am convinced that the Union will be a resounding success, even if there are quite a few reported delays at the moment.

Rome wasn’t built in a day after all.  And neither was the Eurozone.

Whose Success in Africa?

 

Jonathan Berman

“It is Africa’s ambition and no-one else’s that leads Africa. Africa is not a place that success is landing on; it is a place creating success for itself and others.”

I was glad the team at Gong plucked this phrase from my book Success in Africa as the banner for their upcoming event in London. For in London, as in my native New York and my current home, Washington, I find many understand that Africa is succeeding. Few understand why. Almost none acknowledge it’s mostly because of Africans.

In March of last year, a general election campaign was underway in Kenya. Western leaders urged the people of Kenya to refrain from violence. It seemed reasonable, as Kenya experienced horrific violence in its 2007 elections. But no one knew that better than Kenyans. They didn’t need foreign heads of state to tell them about it.

At their best, successful managers of global capital and global businesses do much better in this regard. Their practices allow them to transfer skills, networks and corporate cultures that work in the African context, and are welcomed there by capable partners and stakeholders. I asked some of the CEOs who lead those global companies to participate in Success in Africa, and they shared their perspectives alongside mine.

Of course, no one knows better how to succeed in Africa than Africans. That may seem an obvious point, but consider how often, in any medium, you hear management wisdom from an African? I have worked with corporate leaders in the US, Europe, Asia and Africa. In my view, some of the most visionary and accomplished business men and women anywhere are the ones leading the current transformation of Africa. Emerging continents have been the wellspring of transformative business leaders before. Rockefeller. Carnegie. Tata. From the US in the 19th century to Africa today, frontier markets have given rise to business leaders uniquely capable of managing uncertainty, generating disruption, and leading breathtaking growth.

Those are skills in demand not just in Africa, but the world over.

 

Happy New Year

 

Isabelle Alenus-Crosby

The good news is that Africa’s economic outlook for 2014 remains promising with an overall projected growth of 5.3%. Should the global economy recover faster than predicted, then sub-Saharan Africa’s economy might expand by as much as 6.0% according to the IMF. This is consistent with the average long-term trend growth rate of approximately 5.5% between 2000 and 2010.

According to the World Bank, an economic rebound would also scale up investments in much-needed infrastructure (physical and economic) which will lead to policy reforms that will improve the overall business environment. In addition, African market performances in 2013 have proven that investments into Africa can continue to offer a sound return. Investment levels are expected to remain buoyant (again according to the World Bank), with private investments expected to double in areas such as consumption and infrastructure.

Happy New Year indeed!