1401 BCG Winning in Africa PDF

Winning in Africa
From Trading Posts to Ecosystems
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Winning in Africa
From Trading Posts to Ecosystems
Patrick Dupoux
Tenbite Ermias
Stphane Heuz
Stefano Niavas
Mia von Koschitzky Kimani
January 2014 | The Boston Consulting Group
Contents
Executive Summary
Embracing Africa
Economic Africa
A Trading-Post Economy
A New Dawn
Surging Domestic Demand
It Takes an Ecosystem
1 2
Five African Realities
1 4
Bring Africa into the Boardroom

Create an Africa Ambition
Ensure Senior Sponsorship
1 6
Address Africas Diversity

Prioritize Your African Markets
Organize for Many Africas
Adjust Your Business Model
2 0
Build 2020 Africa Capabilities now

Invest Aggressively in Talent and Human Resources
Invest Aggressively in Market Intelligence
Embed Risk Management in the Organization
2 3
Meet the New African Customer

Create an African Offering
Build and Leverage Brands
Control Distribution
2 7
Commit to Africa
Pursue Made in Africa
Engage with Your Local Stakeholders
Align with Africas Development Agenda
2 9
Building an African Ecosystem
3 1
For Further Reading
3 2
Note to the Reader
2 | Winning in Africa
Executive Summary
ostly ignored since the 1980s, Africa is now receiving

attention and investment from multinational companies.
In the past, multinationals treated Africa as a trading post,

extracting metals, minerals, and natural resources and shipping
finished goods to the continents large coastal cities. Their involvement with Africa was limited.
To succeed in the new Africa, companies will need to actively

engage with and commit to the continent by building ecosystems
of suppliers, partners, communities, and public and private
stakeholders.
Africa has been on a steep growth trajectory since about 2000,

with at least four factors, besides rising commodity prices, contributing to its success. Collectively, these developments have
helped create an emerging class of African consumers with discretionary income to spend.
Capital is returning to the continent.
A demographic dividend is supplying Africa with a youthful and

better-educated workforce.
Improvements in physical and digital infrastructure are easing the

challenges of doing business in Africa and helping to modernize
national economies.
Political stability and governance have in general improved

dramatically.
Africa is the final frontierthe last sizable area of untapped

growth in the global economy. To succeed, companies will need to
bring Africa into the boardroom.
The Boston Consulting Group | 3
They will need to create an explicit and sizable ambition for their
Africa business.
They will need to ensure senior sponsorship so that the Africa

vision is realized.
There is not just one Africa. The continent is a collection of different markets. To address Africas diversity, companies will need
to do the following.
Prioritize their African markets, focusing on those that offer the

best combination of attractiveness and competitive advantage for
their specific sector.
Organize for many Africas, leveraging hubs or regional clusters of

countries.
Adjust their business model when the realities of Africa require

different approaches.
Talent, market knowledge, and risk are bottlenecks. To build 2020

Africa capabilities now, companies must do the following.
Invest aggressively in local African talent and human resources.
Invest aggressively in market intelligence.
Embed risk management in the organization.
The African customer is rising. An African consumer classand a

set of thriving African companiesis emerging and starting to
reach critical mass. To meet the needs of the new African customer, companies need to do the following.
Create an African offering.
Build and leverage their brands.
Control distribution.
Africa has an ambitious development agenda. Consequently, companies should determine how they can assist African countries in
achieving their development goals. This means that they must
commit to Africa, which will require that they do the following.
Pursue Made in Africa.
Engage with their local stakeholders.
Align with Africas development agenda.
Embracing Africa
frica is growing larger on the

corporate map. Mostly ignored by
multinationals since the 1980s, the continent
is now receiving their attention and investment, and for good reason. Growth rates are
rising, and many long-running wars and
conflicts are giving way to democracy and
bureaucratic competence. Infrastructure and
connectivity are improving.
As competition for growth in Southeast Asia

and Latin America gets fiercer, companies are
seeking the next frontier market. They have
understandably trained their sights on Africa,
whose growth trajectory has been the steepest in the world over the past decade and is
likely to remain so into the future, with forecasts projecting 6 percent annual increases
over the next decade. Emblems of optimism,
progress, and consumerism abound in the
form of smartphones, paved roads, bank accounts, and peaceful transitions of power.
Over the past two years, dozens of media and
analyst reports have increased awareness of
Africas rise and the opportunity for private
investors and multinationals.
Awareness of the Africa opportunity is one

thing. Winning in Africa is another. The continent remains a dizzying collection of emerging markets, each with its own unique business environment, risk profile, and potential.
Success in places like China or India will not
necessarily translate into success in Africa.
Many companies have been operating in
Africa for decades and have learned the hard
lessons that await newcomers. Unilever,
Coca-Cola, Nokia, and a few others generate
up to 10 percent of their sales in Africa. But
companies just starting their Africa journey
in earnest do not necessarily know how much
to expect, where to start, and how to win.
In 2000, The Economist declared Africa hopelessthe conventional view at the time. In
2011, the magazine revised that assessment
to rising and in March 2013 to aspiring. In
fact, the seeds of Africas resurgence were already planted in 2000 but had not yet borne
fruit. Today the fruit is ripening.
Economic Africa
any of todays executives came of

age in the 1980s and 1990s, when
media reports about Africa focused on the
devastation wrought by drought, communicable diseases, and poverty. Unless they worked
for a nongovernmental organization (NGO)
or relief organization, the worlds business
leaders did not include Africa on their
itinerary or agenda.
subsidized operations elsewhere. Despite

high population growth, the continents share
of global agricultural production dropped. A
similar thing happened to Africas naturalresource industries, which remained focused
on upstream extraction rather than local
manufacturing and value addition. This left
them exposed to low commodity prices in the
1980s and 1990s.
Those years represented Africas lost decades. Fortunately, they are unrepresentative
of the continents past and future. Africa has
always been rich in natural resources and
produced bountiful supplies of food. In fact,
Africa entered the postcolonial era with a
running start over many other emerging markets and held onto that lead for at least 20
years. By 1980, Africas annual per capita
GDP of $708 was nearly three times the size
of Indias $230 and almost four times the size
of Chinas $186 (in constant 2000 dollars).
As a result of these developments, capital and

the best and the brightest fled the continent,
and foreign investment dried up. Debt service
as a percentage of GDP rose from less than 2
percent in the mid-1970s to more than 6 percent by 1985. Inbound migration during the
1960s morphed into outbound migration by
the 1980s. Per capita GDP stayed flat during
the lost decades. By 1996, measured by per
capita GDP, China had surpassed Africa.
Africa lost this lead for reasons both within

and outside of its control. Among other factors, weak governance, autocratic leaders,
ethnic conflict, and widespread nationalization of private enterprises stifled entrepreneurial zeal and slowed forward momentum.
When food and commodity prices plunged in
the late 1970s and 1980s, so too did many African economies. Africas small farms were
less able to withstand the decline in prices
than larger, more efficient, government6 | Winning in Africa
By the end of the lost decades, Africas postcolonial hope and promise had vanished.
Small groups of elites controlled both political and economic power in many nations,
and nearly all of them struggled to meet the
basic health, educational, infrastructure, and
environmental needs of their people. Africa
was a marginal player in the global economy.
A Trading-Post Economy
During the lost decades, many multinationals
retreated entirely from Africa or scaled back
their business. A select group of consumer

goods and natural-resource companies remained, served by another small group of infrastructure, industrial equipment, and logistics providers.
Consumer companies mostly focused on the
top of the market. They sold Western goods,
largely without modification or local adaptation, to elites and expatriates. They minimized their investment in Africa by building
their business model around low volume and
high margins and by shipping goods into Africa rather than sourcing and manufacturing
locally. They tended to send expatsand not
necessarily the best onesto run their local
businesses.
Natural-resource multinationals also tended
to follow a strategy that minimized their involvement and presence on the continent.
They extracted metals, minerals, and oil to
sell to customers outside of Africa, ignoring
domestic markets. Most of their senior managers were expats, and they hired local employees for low-skilled work that was often
dangerous. Rather than create value on the
continent by, say, cutting and finishing diamonds, they shipped raw resources abroad.
Even prior to the lost decades, Africa was a
distant outpost that often did not receive adequate management attention, investment, or
organizational support. While production capabilities and a consumer class began to
emerge in other emerging markets, Africa remained a trading post. Finished goods arrived to satisfy a happy few in selected ports
and urban centers. Raw materialsand most
of the value generated from doing business in
Africaleft the continent. This was the state
of play at the turn of the century.
A New Dawn
Fast forward to this decade. Since 2000, Africas GDP has been growing 2 to 3 percentage
points faster than global GDP, helping the
continent regain lost ground. Annual GDP
growth is now starting to approach postcolonial levels. (See Exhibit 1.)
Foreign companies are returning and moving
in. In 2013, Barclays Bank increased its stake
Exhibit 1 | Africa Returns to Normal

Postindependence
optimism
Lost decades
Africas rise
GDP per capita ($)
3,000
2.0%
800
0.0%
2.0%
400
1960
China
1965
1970
Africa
1975
1980
India
1985
1990
1995
2000
2005
2010
2015
CAGR
Sources: World Bank; BCG analysis.

Note: GDP per capita in constant 2000 dollars. Average North Africa or Sub-Saharan Africa growth rates used where no
specific country data were available.
in Absa Group of South Africa and rebranded

the entity as Barclays Africa Group. Philips,
which had reduced its presence in Africa from
35 nations to just 5 during the lost decades,
has been expanding across the continent by
building its direct presence in key markets like
Kenya and Nigeria and by starting to design
products tailored for the African market.
The consumer giants that elected to stay in
Africa are experiencing double-digit growth.
Samsung, for example, has set a goal of
$10 billion in African sales by 2015. The company is also committed to training 10,000 African engineers and technicians by 2015 in
order to develop the capabilities required to
succeed.
By 2040, Africa will have a

larger working-age population
than China or India.
Meanwhile, many large companies from other emerging markets have stamped their ambition on Africa. Chinese telecom-equipment
suppliers Huawei and ZTE both have a presence in more than 50 African nations and
generate more than 10 percent of their revenues from the continent. Indias Bajaj Boxer
is the best-selling motorcycle in Africa, which
accounts for more than 40 percent of Bajajs
exports.
Skeptics like to dismiss Africas resurgence as
a reflection of rising commodity prices. In
fact, Africa started growing before the global
run-up in commodity prices. Further, economies not dependent on oil or mining revenues, such as Ethiopia, Ghana, Morocco, and
Kenya, have also been growing. At least five
factors in addition to commodity prices have
powered Africas rebirth. (See Exhibit 2.)
Capital Flows. Capital flight had a draining
effect on Africa during the 1980s and 90s,
with nearly as much money flowing out of
the continent as arriving in the form of
investment, aid, and debt relief. During the
mid- to late 1980s and the 1990s, the equivalent of 1 percent of Africas GDP left the
continent. Now the equivalent of 11 percent

of GDP is flowing into the continent.
The tide began to turn at the end of the
1990s. Contributing to the reversal were improvements in the economic and political climate as well as the 1996 debt-relief plan for
poor nations instituted by the International
Monetary Fund and World Bank. Since 2007,
annual inflows of foreign direct investment
have reached at least $45 billion annually,
compared with less than $10 billion annually
during the lost decades. The investments are
coming from the West but also increasingly
from China, India, and Brazil.
In 2012, the Economist Intelligence Unit interviewed 158 large money managers about
their planned African investments over the
next five years. It found that fewer than one
in ten money managers are investing more
than 3 percent of assets under management
in Africa today, while nearly eight out of ten
will be doing so in five years.
At the same time, Africans living abroad are
sending money back home. In most years,
these remittances are nearly equal in size to
foreign direct investments, and in some years
they exceed them. Finally, while savings rates
in Africa still lag those in China and India,
they have risen modestly and now exceed
those of the U.S. and the European Union. In
2010, African savings exceeded $170 billion,
up from $109 billion in 2000.
Labor. While most of the developed world is
growing older, Africa will have a young
workforce for decades to come. Shortly after
2030, more than 60 percent of Africans will
be of working age. By 2040, Africa will have a
larger working-age population than China or
India, and by 2060, it will have a larger
percentage of people of working age than any
other continent.
Africa will reap the benefits of this so-called demographic dividend about ten years after Asia
does. The benefits are multifaceted. The continents large working-age population will supply
labor to companies but also free up capital that,
in older economies, is being soaked up by the
elderly in the form of social spending. In coming decades, a smaller share of Africans will be
Exhibit 2 | The Drivers of Africas Growth

Surging domestic demand
Commodity boom
Commodity price index (1992 = 100)
Millions of people with annual incomes > $2,700
400
300
184
200
104
100
0
257
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
2001
1993 1995 1997 1999 2001 2003 2005 2007 2009 2011
Capital flows
Established democracies (% of African countries)
20
60
11
8
40
3
1
4
2
1990
1999
2000
2005
2006
2011
1
1975
1982
1983
1989
Net private flows

Official grants and loans
50
12
10
2020
Governance and stability
Net capital flows as share of African GDP (%)
10
2011
30
20
10
0
Loan payments and interest

Capital flight
1960
1970
1965
1980
1975
1990
1985
2000
1995
2010
2005
2015
Labor: demographic transition
Connectivity
Telecommunication and Internet penetration rates (%)
Share of working-age population (%)
70
60
50
40
30
20
10
0
70
65
60
55
1990
1994
1992
1998
1996
Mobile phone subscribers
2002
2000
2006
2004
2010
2008
Internet users
50
1990
1970
1980
Africa
2010
2000
Asia
2030
2020
2050
2040
2060
Europe
Africas growth takeoff

Sources: World Bank; Canback Global Income Distribution Database; African Development Bank, African Economic Outlook; Political Economy
Research Institute; UN Conference on Trade and Development; Economist Intelligence Unit; Steven Radelet, Emerging Africa: How 17 Countries Are
Leading the Way, Center for Global Development, 2010; United Nations; BCG analysis.
Note: Net capital flows include capital flight estimates. Analysis also assumes a constant outflow of 4 percent of GDP. Net private flows include
foreign direct investments, remittances, and profit repatriation.
enrolled in school as more and more people enter the workforce. This transition will also lessen the social-spending burden.
Africas workforce is not just young and growing but also better educated than ever before.
In Angola, for example, the number of students enrolled in primary school has tripled
since 2001, and the enrollment rate has hit 80
percent. The share of young people of secondary-school age who are in school rose to 40
percent in 2010 from just 25 percent in 2000.
Across the continent, adult literacy rose from
57 to 63 percent during the same period.
Connectivity. The rapid rise in mobile and
Internet connectivity in Africa is helping the
continents economies modernize. Unshackled by legacy infrastructure or embedded
commercial interests, they are leapfrogging
their developed-market counterparts by
taking advantage of the latest waves of
innovation, leveraging technology to address
their most urgent development needs.
Africa is the fastest-growing mobile phone
market in the world. Penetration jumped
from less than 2 percent in 2000 to more than
60 percent in 2011. Between 2012 and 2016,
mobile connections in Africa are projected to
grow at an annual rate of 21 percent. Mobile
phones are increasingly helping Africans run
businesses; find jobs; pay bills; learn, share,
and connect; and deposit, withdraw, and
transfer money. East African farmers share
best practices in order to increase crop yields,
and a not-for-profit organization in Ghana is
using an SMS platform to fight the spread of
counterfeit medication. Internet usage is
growing, too, albeit less quickly. Google is
working to make the Internet local by providing translation for many of the continents
more than 2,000 languages.
Mobile and Internet access has had a greater
effect on productivity and economic growth
than elsewhere because the continent started
from such a small base of fixed-line usage.
For example, one-third of Kenyas GDP now
flows through the M-Pesa mobile-payments
systems created by Safaricom, a telecom operator. Internet access has also been instrumental in the spread of democracy and greater
government openness.
At the same time, African transportation and

utility networks are also improving. Privatesector infrastructure investments nearly tripled between 2000 and 2010, and electricity
generation has nearly doubled. The African
Unions Programme for Infrastructure Development in Africa, launched in 2010, is prioritizing a series of ambitious infrastructure-development projects for the continent.
Africa is the fastest-growing

mobile phone market in
the world.
Governance and Stability. Recent events in a
few countries notwithstanding, Africa is a less
risky and more predictable place to do
business as the continent increasingly benefits from peaceful political transitions. In
2011, for the first time in history, a majority
of African nations were governed by democratically elected leaders. Between 1991 and
1995, Africa endured 35 coups and attempted
coups. Between 2006 and 2010, that number
had dropped to 14.
Free elections are on the rise. While elections
do not ensure robust participatory democracy, they are a step in the right direction. In
the past decade or so, Angolans stopped
fighting after half a million people died, and
Chad lapsed into peace after four civil wars,
The Economist wrote in a recent cover story.
This reduction in violence has made investors
and companies more willing to invest.
Governments are not just becoming more
democratic. They are also becoming more
competent and more oriented toward the private sector. A number of todays African leaders and their cabinets have private- and development-sector experience. Policies such as
privatization are increasingly driven by dispassionate analysis and logic.
Surging Domestic Demand

These forces have promoted the development
of more diversified and sustainable national
economies and an emerging consumer class.
Between 2001 and 2011, the number of Africans with more than $2,700 in annual incomethe threshold for discretionary spending
in emerging marketsexpanded from 104 million to 184 million. By 2017, that number will
likely have risen to 257 million. These consumers tend to be forward looking, fascinated by
technology, and enamored of brands.
In fact, 88 percent of Africans are optimistic
about the future, compared with 72 percent
in China, India, and Brazil and 48 percent in
mature economies, according to BCGs survey
of 10,000 consumers in eight African countries. (See the sidebar 2013 Africa Consumer
Sentiment Survey.) According to the same
survey, 47 percent of African consumers aspire to trading up in mobile electronics.
Two-thirds reported that brands reflect their
identity, values, and sense of belonging, compared with just 34 percent of Chinese, Indian,
and Brazilian respondents and only 24 percent of respondents in mature markets.
Furthermore, 40 percent of Africans live in
citiescompared with 30 percent in India.
Since city dwellers spend more than rural residents, a wide range of industries are expected to benefit from urbanization.
These trends suggest that a sizable portion of

Africas population will soon be generating the
discretionary income required to purchase
more than just the bare necessities.
But the job is not yet done. Infrastructure still
needs to be built. Corruption and autocracy have
not yet been eliminated. Not all public leaders
have embraced free enterprise. And NGOs and
relief agencies have plenty of work left to do. Still,
Africa has a stronger economic foundation than
ever before and is better able to withstand commodity shocks and other external jolts.
It Takes an Ecosystem
Companies have a great opportunity to benefit from Africas rebirth by conducting their
business on the continent in a new way. They
must abandon the old model of shipping in
finished goods and shipping out resources
and profits. Instead, they must prepare to actively engage and commit to a rapidly maturing continent. In the words of former U.S.
Secretary of State Hillary Clinton, businesses
need to craft sustainable partnerships in Africa that add value rather than extract it.
They must treat Africa as an ecosystem, not
just a trading post.
2013 Africa Consumer Sentiment Survey

For more than ten years, BCG has conducted an annual Global Consumer Sentiment
Survey to gather information on consumer
behaviors and trends across many countries. In 2013, for the first time, BCG added
several African countries to the survey,
enabling comparisons across the continent
and with other emerging markets, such as
China, India, and Brazil, as well as with
mature markets. Altogether, the global
survey reached 40,000 consumers in 25
countries and was conducted in 20 languages.
In Africa, we surveyed nearly 10,000 urban
consumers in eight countries: Algeria,
Angola, Egypt, Ghana, Kenya, Morocco,
Nigeria, and South Africa. Respondents
represented a mix of consumers of different ages and different income and educa-
tion levels. The survey explored topics related to income, spending, and budgeting;
technology, mobile, and Internet usage;
preferred retail-shopping locations; and
banking habits.
Additionally, the survey assessed planned
expenditures, trading up and down, brand
preferences, and shopping behaviors in 20
product categories: automobiles; baby and
toddler products; beauty care; beer;
breakfast cereals and foods; chocolate and
candy; clothing, footwear, and accessories;
coffee and tea; consumer electronics; hair
care products; health care; home appliances; insurance; mobile phones and devices;
packaged food; restaurants and out-ofhome eating; snacks; soft drinks and other
nonalcoholic beverages; spirits and other
alcoholic beverages; and wine.
Five African Realities
frica is a demanding place to do

business, requiring more of companies
than other markets. It will take years for most
companies to build African businesses
comparable in size to their operations in
China, India, and other emerging markets,
where they have been operating for decades.
They need to make the right investments at
the right moment and with the right approach. Priorities, timing, and effectiveness
are critical.
Fortunately, companies do not need to reinvent the wheel in Africa, and many of the lessons they have learned in other regions will
be transferable. But companies that want to
win on the continent will need to modify
their approach to address at least five African
realities:
Africa is the final frontier. Africa is the last

sizable area of untapped growth in the
global economy. Its late economic emergence and challenging business environment mean that today there is less
competition than in other markets, but
that will not last. Despite the operational
challenges, the time to enter Africa is now.
But to succeed, companies will need to
bring Africa into the boardroom.
There is not just one Africa. The continent
is a collection of different markets. Clusters of African countries share language,
culture, borders, and trade and financial

agreements, but they all require vastly
different approaches to strategy, organization, and business. Companies need to
address Africas diversity.
Africa is the last sizable area

of untapped growth in the
global economy.
Talent, market knowledge, and risk are

bottlenecks. More so than in most other
emerging markets, talent and market
knowledge are in short supply in Africa.
Political, economic, and governance risks
remain in many markets. Companies must
build 2020 Africa capabilities now.
The African customer is rising. An African

consumer classand a set of thriving
African companiesis emerging and
starting to reach critical mass. Companies
must develop products, services, and
brands that resonate with these
consumers and business customers. They
also need to manage distribution to
ensure that goods and services are
delivered as promised. In other words,
they need to meet the new African
customer.
Africa has an ambitious development

agenda. African leaders are diligently
working to improve the economic and
social infrastructure of their nations.
Consequently, companies should determine how they can help countries achieve
their development goals while also
making a profit. They need to commit to
Africa.
The remainder of this report explores how to

think about and do business in the new Africa by building a comprehensive plan that
takes into account each of these five African
realities. (See Exhibit 3.)
Exhibit 3 | The New Mindset to Win in Africa

The old
trading-post
mindset
What is
changing
about Africa
The new ecosystem mindset
Africa is low on the

corporate agenda:
a small and high-risk
opportunity
Africa is the final

frontierthe
last large,
untapped
opportunity
Bring Africa
into the
boardroom
Companies serve
pockets of wealth
with an opportunistic
approach
There is not just

one Africa but
many attractive,
complex
opportunities
Address
Africas
diversity
Africa business run

by expats with
limited recruitment
and training of
local talent
Talent, market
knowledge, and
risk are
bottlenecks
Build 2020
Africa
capabilities
now
Companies target
a small, affluent
elite without tailoring
the offering and
distribution
The African
customer is rising
and has specific
needs
Meet the
new African
customer
Africa is a place to
trade and sell but not
to manufacture or
add value
Africa has an
ambitious
socioeconomic
development
agenda
Commit to
Africa
Create an Africa ambition

Ensure senior sponsorship
Prioritize your African markets

Organize for many Africas
Adjust your business model
Invest aggressively in talent and HR
Invest aggressively in market intelligence
Embed risk management in the organization
Create an African offering
Build and leverage brands
Control distribution
Engage with your local stakeholders
Align with Africas development agenda
Source: BCG analysis.
Bring Africa into

the Boardroom
fter Africa, there are no other

sizable emerging markets left to enter.
The reason I came to Africa is because
Africa is rising, U.S. President Barack
Obama said during his trip this June. And it
is in the United States interestsnot simply
in Africas intereststhat the United States
does not miss the opportunity to deepen and
broaden the partnerships and potential here.
It is not too late to play catch-up in Africa, but
companies will need to change their mindset.
When Africa was a distant trading post, it was
rarely a top priority for most companies. To
realize Africas potential, companies need to
ensure that their senior executives, board
members, and headquarters staff are committed
to the continent. This will require that they do
the following:
Create an explicit, sizable ambition for

their Africa business.
Ensure senior sponsorship so that the

Africa vision is realized.
Create an Africa Ambition
Success in Africa will not just happen. Without

explicit, ambitious goals that define their aspirations for Africa, companies will struggle there.
Senior leaders will not pay attention; investments will not flow; top talent will not join; and
local governments will not support them.
Many multinationals have already

established stretch goals for their Africa
business and are working hard to achieve
them. Hyundai, for example, the number-five
global automaker, got serious about Africa
several years ago and now has the secondlargest market share on the continent, after
Toyota. In the five key countries that account
for 70 percent of new-auto salesAlgeria,
Angola, Egypt, Morocco, and South Africa
Hyundai has surpassed Toyota. We consider
the region as a significant market and will be
making strategic investments to make
Hyundai cars the leading models in the
region, Sam Lee, a regional marketing
director of Hyundai, told the media in 2011
when the company entered East Africa.
Likewise, Samsung defined a long-term Africa
strategy that has allowed the company to
achieve a 20 percent share in the smartphone
market.
Ambition alone is not enough, but without it,
nothing else matters. If you think small, you
will stay smallespecially in Africa. But given the risks still remaining, companies also
need to be smart about their priorities, timing, and execution.
Ensure Senior Sponsorship

In our research for this report, we did not
find one global multinational that is succeeding on the continent without active, sus-
tained, and public support from senior leaders for their Africa teams. Without such
support, companies Africa business will fly
below the radar and not receive the corporate attention that a complex set of emerging
markets demands.
At General Electric, Africa is top of mind. In
the companys 2013 annual report, CEO Jeff
Immelt said, We could sell more gas turbines
in Africa than in the U.S. in the next few
years. Similarly, Barclays Bank has created
an African region in order to facilitate faster
decision making, easier adaptation of business models, and more funding from the center. In addition, Maria Ramos, the chief executive of Barclays Africa Group, reports
directly to Barclays chief executive, Antony
Jenkins.
Africa needs to be on the CEOs agenda, calendar, and itinerary. It is hard to imagine the
CEO of a major company not visiting Asia
several times during his or her tenure. But
until recently, that was the norm in Africa.
We surveyed 27 companies with an active
presence on the continent and found that,
until 2008, their CEOs had collectively made
five or fewer trips annually. But in 2012, their
visits more than tripled to 16, and they are on
pace to make 24 visits in 2013or nearly one
per year. (See Exhibit 4.)
Exhibit 4 | CEO Interest in Africa Is Growing

Visits to Africa by the CEOs of 27 selected companies
25
24
20
16
15
14
10
13
9
7
5
4
3
3
2
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2010
2009
2011
2012 2013E
Sources: Annual reports; online and press search; BCG analysis.

Note: The following companies were surveyed: Barclays, BHP Billiton, BNP Paribas, BP, Chevron, Citigroup, Coca-Cola,
Daimler, Ford, General Electric, Hewlett-Packard, HSBC, Hyundai Motor, IBM, Merck & Co., Mitsubishi Motors, Nissan
Motor, Novartis, Procter & Gamble, PepsiCo, Samsung, Sanofi, Shell, Siemens, Socit Gnrale, Total, and Vodafone.
Address Africas
Diversity
he continent of Africa is so vast that

India, China, and the U.S. could fit within
its borders, with room left over for several European nations. It comprises 54 nations with
populations ranging from less than 1 million
to more than 160 million, and hundreds of
ethnic groups speaking more than 2,100
languages. Wealth differences are stark.
Nearly three out of four people in Tunisia
earn more than $2,500 annually at PPP, a
level reached by less than 1 percent of the
population of Liberia. Compared with other
emerging markets, Africa is still relatively
undeveloped. Roads, ports, and other infrastructure are often not up to grade. Suppliers
of basic products and services may not exist
or be able to deliver the desired quantity or
quality.
The size, diversity, complexity, and volatility
of Africa raise challenging organizational and
business-model questions for companies.
They cannot simply import a structure and a
way of doing business that work in other
markets. They will need to both create and
empower local organizations that are close to
the market and create a regional structure
that takes advantage of scale and provides
consistency. In particular, companies need to
do the following:
Prioritize their African markets, focusing

on those that offer the best combination of
attractiveness and competitive advantage.
Organize for many Africas by leveraging

either hubs or regional clusters of
countries.
Adjust their business model when the

realities of Africa require different
approaches.
Prioritize Your African Markets

Africas diversity raises the stakes for companies that want to win on the continent. Even
across the 11 nations responsible for 80 percent of Africas GDP, large variations exist in
per capita GDP, the concentration and income of consumers, and other economic measures. Depending on their industry, overall
strategy, risk appetite, and proximity to other
operations, companies will likely make different choices about where to place bets and
build businesses. (See Exhibit 5.)
For instance, while Nigeria often makes it
onto lists of priority African markets because
of its large population and wealth of natural
resources, an active used-vehicle market
makes the number of new-car sales there relatively small. In Algeria, on the other hand,
there are more auto sales than the countrys
population or per capita GDP would suggest,
in part because of government incentives encouraging private consumption. Consequently, automakers have prioritized Algeria over
Nigeria.
Exhibit 5 | Priority Markets Vary by Industry

Fast-moving consumer goods
Consuming class by 2020 (millions)
Automotive
New-vehicle sales forecast for 2020
5.07.0
15.117.0
151,000300,000
7.111.0
17.130.0
1,00050,000
301,000700,000
11.115.0
31.057.0
51,000150,000
701,0001,000,000
Oil and gas
Daily production (millions of barrels)
Telecommunications
Number of mobile subscribers, 2011 (millions)
0.0
0.262.00
4.06.5
20.126.0
0.1
2.012.50
6.612.5
26.160.0
0.110.25
2.512.75
12.620.0
60.189.0
Sources: World Bank; United Nations Development Program; African Development Bank, The Middle of the Pyramid: Dynamics of the Middle
Class in Africa, April 2011; IHS Automotive; BP Statistical Review of World Energy, June 2012; GSMA, African Mobile Observatory 2011; BCG analysis.
Another example is Nokias initial focus on

South Africa, where the company operated
through a distributor. After building its direct
market presence there, Nokia expanded to
Kenya and Nigeria, which it now leverages as
hubs to enter adjacent markets. And a
pharmaceutical company, after analyzing
current and projected sales, ended up
developing a three-tier prioritization of
markets tailored to its growth strategy.
Organize for Many Africas

Until recently, many companies ran their Africa business from abroad. Today, many category-leading multinationals, including
Coca-Cola, General Electric, and Samsung,
are creating regional headquarters on the
continent in order to be close to customers,
stakeholders, and local talent. In 2012, for example, GE moved its regional business from
Dubai to Nairobi. Weve got to run Africa as
Africa, not as the Middle East Africa. We
might as well run the Africa business out of
the U.S., if were going to run it out of the
Middle East, said Christopher Akiwumi, corporate legal counsel of GE Africa.
Many companies divide Africa into two or
more regions in order to deal with its size and
take advantage of linguistic, cultural, economic, and historical linkages. The Maghreb, East
Africa, Lusophone (Portuguese-speaking) Africa, Southern Africa, and West Africa are all
common configurations. West Africa is often
split into French-speaking and English-speaking markets. Casablanca, Nairobi, Cairo, Johannesburg, Accra, and Lagos are natural candidates as bases for such regional hubs. The
Moroccan government, for example, is supporting the development of Casablanca into a
regional financial hub for the Maghreb and
French-speaking West Africa.
Other companies create regional sharedservice operations to ensure consistent service levels and increase efficiency. Ecobank,
for example, operates in 30 African nations
but has created three IT hubs and three call
centers to reinforce a common brand, policies, and procedures.
Companies cannot manage all their Africa
businesses centrally, however, or they will
sacrifice speed and agility. They need to energize and empower the local organizations in
order to take advantage of market opportunity. In June, Bharti Airtel decentralized its Africa operations by making each country head
responsible for investments, market-related
decisions, and financial targets. Previously, all
such major decisions had been made centrally in Nairobi.
Companies need to energize

and empower their local
organizations to take advantage of market opportunities.
Adjust Your Business Model
Africa often demands a larger presence on
the ground than more developed markets.
Many companies, for example, have discovered that they are unable to source various
parts and ingredients from local suppliers
and therefore must make their own.
MTN, a mobile operator based in South Africa, has built 6,000 microgeneration plants in
Nigeria to power its cell towers because local
power grids are not reliable. This has enabled
MTN to gain a competitive advantage over its
rivals in Nigeria. Likewise, Vale, a Brazilian
mining company, has taken over construction
and management of a rail line in Mozambique that it depends on to transport coal.
Vale entered the rail business only after its
exports suffered a two-year delay stemming
from the failure of another company to complete and run the line.
Maersk has ships that can sail into Africas
shallow waters and use onboard cranes to unload cargo in ports that lack this equipment.
In order to serve fast-growing markets, we
have had to make sure that our shipping fleet
has the capabilities and capacities that are required to go to ports that may not be up to
the Rotterdam standard or that have inland
logistics that are more complicated than
those in Europe, Nils Andersen, Maersks
chief executive, said in an interview with
BCG in 2012. To minimize the risks of doing
business in Africa, Coca-Cola bottlers have

built 29 small bottling plants in Nigeria and
South Africa rather than the few large plants
they would normally have built. This exposes
the company to less disruption if a plant is
taken out of service.
Finally, several companies are using mobile
technologies to replace traditional services.
GlaxoSmithKline has partnered with Vodafone, the GAVI Alliance (a public-private
health partnership), Mezzanine (a provider of
mobile medical solutions), and the Mozambique Department of Health to send text
message reminders to mothers about child-
hood vaccinations. And Commercial Bank of

Africa has partnered with mobile operator
Safaricom, in Kenya, to deliver mobile banking services through its M-Shwari service rather than through physical branches. The partnership gives the bank, with just 21 physical
branches in Kenya, access to Safaricoms 19
million subscribers.
Build 2020 Africa

Capabilities noW
ompanies need to build stronger

capabilities in order to win in any
emerging market. In Africa, because governments and companies alike underinvested in
education and training during the 1980s and
1990s, specific shortages and gaps require
special attention.
The first gap involves talent and skills acquired both in school and on the job. In 2000,
only one-quarter of secondary-school-age
children in Africa were attending school, less
than 5 percent of young adults in the
post-secondary-school age bracket were enrolled in an educational institution, and just
57 percent of adults could read. Since 2000,
Africa has made great strides in education.
But decades of underinvestment have created
large deficits in the continents talent pool.
(See Exhibit 6.) The University of Cape Town,
the top-ranked higher-education institution in
Africa, is still outside the top 100 in global
rankings, and other schools are ranked even
lower.
Companies, too, often did not invest significantly in the training and development of
their people during the lost decades. Their
leadership-development programs did not rotate rising stars throughout Africa. They did
not look inside Africa for the next generation
of leaders. And they did not invest in training
and development programs for their African
staff. Especially at the middle-management
levels, the result is that companies are now

left with employees who have not studied or
worked abroad and frequently do not have
the skills to compete in an increasingly
crowded market.
Decades of underinvestment
have created large deficits in
the continents talent pool.
The second gap involves traditional market
intelligence. Until recently, few marketresearch firms operated in Africa. Even today,
government statistics are often unreliable.
The World Banks chief economist for Africa
says that only 11 African nations have yearover-year comparable data.
The third gap is in risk management. For all
the progress made in the past 10 to 15 years,
Africa is still the riskiest continent in which
to do business. This risk extends beyond the
geopolitical sphere to the nuts and bolts of
doing business. Infrastructure and services
that companies take for granted in other
marketssteady electrical service, smooth
port operations, reliable delivery options
are missing in many places in Africa. To
address these issues, companies must do the
following:
Exhibit 6 | Talent Is Still a Bottleneck to Growth in Africa

Share of population enrolled in tertiary education
30
20
10
0
1990
China
1992
1994
1996
Brazil
1998
2000
North Africa
2002
India
2004
2006
2008
2010
Sub-Saharan Africa
Sources: United Nations Educational, Scientific, and Cultural Organization; World Bank; BCG analysis.
Invest aggressively in local African talent

and human resources.
Embed risk management in the

organization.
Invest Aggressively in Talent and

Human Resources
African MBA students studying abroad

would be willing to relocate to Africa. Twothirds of all recruiting searches for African
positions focus on Africans employed in the
U.S. and Europe.
In addition to recruiting abroad, companies
will need to nurture Africas home-grown talent by investing in local training and development programs. In a global rotational program established by Nokia, the top 20 African
leaders receive four to five weeks of leadership training in the U.S., India, or China over
the course of one year.
Some companies are starting to crack the talent and leadership code in Africa, giving them
a running lead over their competitors on the
continent. For example, spirits maker Diageo
has reduced its share of expatriate managers
in Africa from 70 percent to 30 percent
through rigorous local training.
Invest Aggressively in Market

Intelligence
Many companies have started to tap into the

African diaspora, whose members are increasingly ready to return home, as a source
of talent. The Unilever Future Leaders Program, for example, encourages African business-school graduates living abroad to return
to Africa. According to Jacana Partners, an
African private-equity firm, 70 percent of
Despite recent progress, reliable data about

market trends, purchasing patterns, and demographic changes are hard to come by in
many African markets. Further, where such
information is available, it is frequently unreliable. Public statistics are often inaccurate;
the informal sector and parallel imports are
difficult to measure; and leading marketinformation providers are not yet fully estabThe Boston Consulting Group | 21
lished on the continent. At the moment, Nigerias GDP estimate, like many statistics in
Africa, is wildly inaccurate, The Economist
wrote in January 2013.
Companies frequently rely on networks of
law firms, NGOs, suppliers, and trade associations to fill the gaps in official data. This
can provide a competitive advantage. Nokia
creates its own market-share statistics within
several African countries by sending field
teams to retail stores to gather information
on product availability, selling rates, and other relevant data. The company allocates resources based on the data collected.
Oswaldo Cruz Foundation (Fiocruz), a Brazilian public-health-research institute, worked
closely with the Mozambique government to
gather data on the spread of infectious and
chronic diseases. That information gave Fiocruz an insiders view into the nations public-health challenges. In early 2013, Fiocruz
opened a plant to manufacture antiretrovirals, used in the treatment of HIV, for SubSaharan Africa.
Embed Risk Management in the

Organization
Africa is less risky than it once was. But as
more companies enter the continent, as governments assert their influence, and as social media amplify negative publicity, risk is
not any easier to manage. Shell, Chevron,
and other energy companies, for example,
are increasingly moving oil and gas production facilities offshore in Nigeria, partly to
reduce the risks of sabotage, theft, and kidnapping.
Companies have responded to Africas risk

profile in several ways. Nestl has centralized
compliance, financial, and HR functions in a
shared-service hub in Accra, Ghana, in order
to reduce the risks involved in running critical functions in multiple locations in SubSaharan Africa. Vodacom has established
dedicated teams focused on regulatory, compliance, and government relations in each
country. This helps the company stay on top
of local market knowledge and comply with
rules and regulations in widely varied jurisdictions.
Standard Bank has both centralized and decentralized risk management. The centralized
function handles broad, cross-border topics,
such as money laundering and sanctions,
while business units house decentralized risk
functions focused on more specific and local
topics. Staff members also receive extensive
and ongoing training in risk and awareness.
Risk management is not just about mitigating
risk but about addressing it quickly and, if
the reward is sufficient, embracing it. Many
multinationals have stumbled in Africa because they have taken too long to evaluate
risks, losing business to more agile competitors. Those that have embedded risk management into their daily business, however, continue to thrive.
Meet the New

African Customer
fricas growing economies and

urbanization are increasing the number
of Africans with discretionary income. Many
Africans we spoke with during our research
expressed near-term plans to buy laptops,
upgrade their mobile phones, and spend
more on entertainment, homes, cars, and
education. In fact, compared with consumers
in other markets, even mature ones, Africans
are more likely to trade up on nonfood items,

according to BCGs 2013 Africa Consumer
Sentiment Survey. (See Exhibit 7.)
African consumers, like consumers everywhere, want to buy products and services
that meet their specific needs. They desire
brands that connote both quality and value.
And they want access to products that are
Exhibit 7 | African Consumers Are Ready to Trade Up in Nonfood Categories

Trading-up tendency in nongrocery categories
Respondents likely to
spend more (%)
100
75
50
51
48
56
45
40
34
25
51
49
29
20
18
34
22
0
Algeria
Angola
Egypt
Ghana
Kenya Morocco Nigeria
South
Africa
Africa
average
U.S.
India
Brazil
China
Sources: BCG 2013 Africa Consumer Sentiment Survey; BCG 2013 Global Consumer Sentiment Survey; BCG analysis.
Note: Nongrocery categories include clothing, consumer electronics, durables, beauty, health care, and away-from-home food; nongrocery
categories exclude food and beverages. The survey question was: For each of the following categories, please indicate those in which you are likely
to spend more to get a product that is better than the rest, those for which you are indifferent about how much you spend, and those for which you
choose to spend less. The Africa average is the average of the eight countries surveyed.
available in the rest of the world. For forward-looking companies, the African market
will be worth well over $1 trillion by 2020
and offer access to millions of new customers.
For their income levels, African consumers
are heavy users of the Internet and mobile
technologies, although this varies by country.
In BCGs survey, nearly half of African Internet users said they spend two hours or more
each day surfing the web. (See Exhibit 8.)
The way consumers access the Internet varies
tremendously. In Sub-Saharan Africa, they
primarily use their smartphones, while consumers in Algeria, Egypt, and Morocco rely
more on desktop or laptop computers. (See
Exhibit 9.) Mobile technology, in particular, is
enabling the continent to overcome its lack of
infrastructure and has enhanced consumers
access to information and knowledge.
Digital technologies cannot cure all of
Africas problems. While urbanization is
increasing, most Africans still live in rural
areas and in small villages and towns.
Distribution to this last mile is difficult,
given that only 19 percent of the roads are
paved and 70 percent of the continents rural
population lacks access to all-season roads.
Vehicles tend to be in poor condition, and the
destinations that companies must reach are
far-flung. Few logistics companies have the

comprehensive network required to ensure
product delivery across multiple markets.
Companies need reliable ways to reach these
consumers.
The prevalence of traditional-trade formats in
Africa compounds the challenges. Most people buy from traditional stores, street hawkers, kiosks, and markets. This makes distribution especially challenging for many
multinationals, which are accustomed to
working with modern retailers.
Finally, the African business-to-business market is a frequently overlooked segment. As
African businesses expand and mature, their
need for goods and services will rise. Companies in fields as diverse as advertising, equipment manufacturing, transportation, and logistics have an opportunity to jump in on the
ground floor.
In order to win in this environment, companies will need to become truly local. This will
require that they do the following:
Create an African offering.
Build and leverage brands.
Control distribution.
Exhibit 8 | Nearly One-Half of Internet Users Spend at Least Two Hours Online Daily
How much time do you spend on the Internet each day?
Respondents who spend more than
2 hours online each day (%)
100
75
60
50
39
38
54
56
Morocco
Nigeria
59
47
39
26
25
0
Algeria
Angola
Egypt
Ghana
Kenya
South
Africa
Africa
average
Sources: BCG 2013 Africa Consumer Sentiment Survey; BCG analysis.

Note: Respondents in some countries chose multiple answers; therefore, percentages are based on total responses to the question. The Africa
average is the average of the eight countries surveyed.
Exhibit 9 | Smartphones Are the Most Popular Way to Access the Internet
Which device do you use most to access the Internet?
Respondents (%)
100
86
75
71
71
68
64
59
60
84
81
58
55
50
44
43
35
28
25
37
35
33
22
22
14
25
20 18
23
23
12
0
Algeria
Smartphone
Angola
Egypt
Ghana
Laptop computer
Kenya
Morocco
Nigeria
Desktop computer
South
Africa
Africa
average
Sources: BCG 2013 Africa Consumer Sentiment Survey; BCG analysis.

Note: Respondents could choose two devices. The Africa average is the average of the eight countries surveyed.
Create an African Offering
Companies that have succeeded in other

emerging markets have done so by tailoring
their products. In Africa, however, companies
cannot modify their product portfolio to
appeal to all their target countries and to
specific market segments within those
countries. They must balance local
preferences against the need to achieve scale
and consistency.
ing more local R&D investment for further

local product planning, design, and development.
Build and Leverage Brands
Several companies have achieved success in

this area. Bajaj Autos Boxer motorcycle became the market leader in Nigeria in two
years, even though it was priced 30 percent
higher than Chinese models. The product is
adapted to local uses and weather conditions
and is less expensive than similar Japanese
vehicles.
The relatively short list of pan-African brands

has enabled several multinationals to move
into Africa and build up their own. OMO, Gillette, Colgate, Pepsi, and Nike are all wellknown and well-liked brands on the continent. In Morocco, detergent is commonly
referred to as Tide, while in Ethiopia, training
shoes are called Adidas. In fact, according to
BCGs Africa Consumer Sentiment Survey,
brands seem more important to consumers in
Africa than to those in developed nations or
in other emerging markets, such as China and
India. (See Exhibit 10.)
Samsungs appliances for the African market

frequently have built-in surge protection. Its
refrigerators frequently have extra insulation, and its washing machines are energy
efficient. We have a vision of developing
technology that is built in Africa, for Africa,
by Africa, said George Ferreira, the chief
operating officer of Samsung Electronics.
We will over the next few years be allocat-
The challenge is to figure out how to

strengthen brands in ways that are economical and measurable. The continents diversity
will require companies to deploy several
channels and platforms. Ideally, they can
leverage their global brand to fight through
some of the local media clutter. Finally, companies will need to work with local governments to combat counterfeiting, which can
Exhibit 10 | African Consumers Are Brand Conscious

Brands say something about who I am, my values, and where I fit in.
Respondents (%)
100
79
70
75
50
49
77
78
68
67
59
53
34
24
25
0
Algeria
Angola
Egypt
Ghana
Kenya
Morocco
Nigeria
South
Africa
Africa
average
Mature Emerging
markets markets
Sources: BCG 2013 Africa Consumer Sentiment Survey; BCG 2013 Global Consumer Sentiment Survey; BCG analysis.
Note: The Africa average is the average of the eight countries surveyed.
quickly dilute the brand equity that companies spend years building.
Pepsi used the 2010 World Cup football
championship in Africa to promote its products. The company created a viral musicvideo campaign featuring a number of famous football players, Senegalese-American
singer Akon, American singer-songwriter Keri
Hilson, and the Soweto Gospel Choir. Proceeds from the song were donated to charity.
The campaign garnered so much media attention that many Africans believed that Pepsi was the official sponsor of the World Cup,
when in fact it was sponsored by Coca-Cola.
Control Distribution
Many companies have historically relied on
local distributors to deliver their goods to
consumers who do not live in a port city or in
one of a few other locations that they serve
directly. These companies have not wanted to
go to the trouble of understanding the local
conditions and practices that would enable
them to extend their footprint deep into the
continent. It is an approach that exemplifies
the trading-post mentality.
By delegating distribution, companies have
often ceded control of pricing, branding,
channel management, inventoryand, ulti26 | Winning in Africa
mately, profitability and competitive advantage. In our work in Africa with manufacturers of consumer goods, construction
materials, and even fertilizer, distribution
consistently emerges as a critical part of the
puzzle. Companies cannot be successful in
Africa unless they control distribution. They
do not necessarily need to do it themselves.
But they need to do it right, and doing it right
will often require novel approaches.
About one-third of Nestls sales in Africa occur through informal channels, and in order
to facilitate these sales, the company has
turned to a small army of distributors who
travel by foot, bicycle, and car. In 2011, Nestl
was able to double its number of sales outlets
in South Africa by relying on these unconventional distributors. Similarly, Vodacom has
created more than 100,000 points of sale in
Africa through wholesalers and independent
contractors. Its Gimme That! program recruits
and trains young people to sell prepaid
vouchers on commission. Top performers are
awarded distributor franchises. Diageo, meanwhile, trains its distributors in basic financial
and sales-demand analysis and health and
safety issues. The training program, called
Platform for Growth, has helped increase revenues for both Diageo and its distributors.
Commit to Africa
hen companies treated Africa as a

trading post, their commitment and
exposure to the continent were limited. They
could skim off business from the coastal cities
and countries without venturing into the
interior. They did not manufacture locally to
satisfy local demand, let alone for export.
Given this limited ground presence, they saw
no need to develop close ties with local
officials and other stakeholders. They obtained the required permits and left it at that.
In todays ecosystem era, companies are starting to manufacture in Africa, taking advantage of government incentives and lower labor costs. They are also actively engaging
with governments and communities on numerous levels and in numerous ways. Many
of Africas new democracies have strong economic-development policies that encourage
investment, skills transfer, and social engagement. Governments are also imposing trade
restrictions that make it more costly to import products that can be manufactured locally. The days of taking out raw materials
and shipping in finished products are over. In
this sort of environment, companies need to
do the following:
Pursue Made in Africa.
Engage with their local stakeholders.
Manufacturing in Africa is rapidly increasing,

both for export and to meet local demand.
The cost of labor is lower in Africa than in
the BRIC nations, and many raw materials,
such as leather and cotton, are cheaper. African governments are also offering incentives
to encourage capital investment and local
manufacturing by foreign investors.
For all these reasons, it makes sense for companies to consider establishing manufacturing facilities in Africa. Some companies have
started to follow this path, including Samsung, which has established five manufacturing facilities in Africa in the last five years. Its
Ethiopian plant was built, in part, to avoid a
60 percent duty on goods imported into the
country, while its Kenyan plant takes advantage of the countrys relative strengths in talent, technology, and skilled labor.
Renault has invested more than $1 billion in
a plant in Morocco that will produce 400,000
vehicles annually, both for domestic consumption and for export. Morocco has developed an aggressive plan to boost local manufacturingin industries such as automotive,
aerospace, electronics, and renewable energythat is similar to Chinas Special Economic Zones and Mexicos maquiladoras. The
country hopes to take advantage of its favorable labor costs, proximity to Europe, improving infrastructure, and free-trade agreements.
Similarly, Ethiopia is encouraging the development of textile and other labor-intensive

manufacturing. Its government has set an
ambitious target of $1 billion in textile exports by 2016 and is bringing in foreign investors to modernize machines and factories.
H&M Hennes & Mauritz, the Swedish apparel
maker, has placed test orders in Ethiopia in
order to expand its supplier base.
Some companies have discovered that they can
improve the freshness and availability of their
products, and their bottom lines, by sourcing
locally. Danone has been sourcing milk products locally since it bought a South African
dairy processor in 2009. Likewise, SABMiller
sources barley from 45,000 African farmers.
Finally, many companies have been able to
take advantage of the U.S. African Growth
and Opportunity Act (AGOA). The act allows
Sub-Saharan nations to export certain goods
into the U.S. duty-free if they can show progress in opening their economies, protecting
human rights, and reducing corruption.
AGOA exports to the U.S. climbed to $34.9
billion in 2012, more than four times the
amount in 2001, when the law took effect.
Engage with Your Local

Stakeholders
As companies increase their presence in Africa, they need to become skilled at working
with governments, NGOs, and other stakeholders that hold power or influence public
opinion. Many pharmaceutical companies, for
example, try to supply local governments
with low-cost medicines in order to build relationships, brand awareness, and connections
with consumers. In many African nations,
they also work with NGOs such as the Gates
Foundation, which awarded more than $3 billion in grants on the continent in 2012 alone.
Mining companies in Africa and elsewhere
have discovered that their ability to operate
in local communities depends on their engagement with those communities. During
their active lifetimes, mines become social
and economic engines. By investing in social
and environmental initiatives, a company can
ensure greater stability for its operations, because the people living and working around
its facilities benefit from and therefore support its activities.

Companies are finding that when they successfully manage their social and environmental footprint in this way, they can maintain a license to operate. This is not a
formal agreement but rather the implicit consent of government and society to allow a
company to carry out its commercial activities with a minimum of regulatory interference or opposition from the local community.
Sometimes, competitors in Africa realize that
it makes more sense to cooperate than to
compete. Mobile operators MTN and Airtel,
for example, are sharing the costs of telecommunications infrastructure, such as cellular
towers and fiber cables. The agreement is
likely to save the two companies $8 billion in
capital costs.
Align with Africas Development

Agenda
For companies to succeed in Africa, they need
to pursue business opportunities that are
aligned with a countrys or a regions development agenda in support of local manufacturing, job growth, and skills transfer. Companies should partner with government by
identifying key public stakeholders and pursuing projects and businesses that will advance the agenda. They should rigorously
track performance against targets and goals.
By helping governments achieve their development goals, companies will have an easier
time both doing business and achieving their
own objectives. In Morocco, for example,
companies that produce or source locally are
given preferential treatment in the awarding
of government contracts. Other companies,
such as Anglo American, make a commitment
to hire a certain percentage of local employees, purchase a set share of their supplies locally, and assist in the creation of local businesses. In Nairobi, IBMs technology center is
working on potential innovations that will
ease the strain on public water and transportation systems created by a rapidly growing
population and otherwise contribute to sustainable economic development.
Building an
African Ecosystem
his report has explored Africas

arrival on the global economic map, laid
out the challenges, and proposed actions for
winning in Africa. BCG also has several
field-tested methodologies and approaches,
such as the global readiness index, the
emerging-markets acceleration program, and
the Africa readiness index, that can help in
assessing companies starting position and
putting them on the road to success in Africa.
Most important, companies must evaluate

their performance and priorities on the
continent, and executives should be asking
themselves and their organizations whether
they are ready to win in Africa by moving
quickly and building an ecosystem, rather
than relying on the trading posts of the past.
(See the sidebar below.)
Are You Building an African Ecosystem?

Below are some questions to help you
assess whether your African operations are
geared for success.
Organize for many Africas. Does your

Africa organization have the right
balance between localization and scale,
make use of hubs or other mechanisms
to make the continent manageable, and
empower local leaders to win?
Adjust your business model. Have you

identified adaptations to your business
model in order to compete more
effectively in your priority Africa markets,
and have you made those changes?
Bring Africa into the Boardroom
Create an Africa ambition. Do you have

specific revenue, investment, and
market-share targets for Africa and key
markets within it?
Ensure senior sponsorship. Has your chief
executive visited Africa within the past
year? Do you have an Africa champion
on your leadership team?
Address Africas Diversity
Prioritize your African markets. Are your

market prioritization and sequencing
aligned with your strategy?
Build 2020 Africa Capabilities Now
Invest aggressively in talent and human

resources. Have you put in place recruiting, training, and development programs to cultivate strong local leaders
and effective middle managers?
Are You Building an African Ecosystem?
(continued)

Do you have plans for overcoming
Africas gaps in market research,
macroeconomic data, and other
intelligence? Have you considered how
you can create competitive advantage
by developing this intelligence?
Embed risk management in the organization. Do you understand the key risks of
African markets, and have you developed a plan to address them with
traditional risk-management activities
and creative approaches that minimize
exposure?
Commit to Africa
Pursue Made in Africa. Have you

identified opportunities to locally
manufacture, assemble, or otherwise
add value to your African products?
Have you considered Africas advantages as a sourcing location for your
international markets?
Engage with your local stakeholders. Have

you identified and prioritized the top
strategic stakeholders in your key
markets at the national, provincial, and
local levels?

Are you aware of the governments
economic-development objectives in
key African markets, and is your
organization shaping its local business-development strategies to align
with them?
Meet the New African Customer
Create an African offering. Have you

identified the changes you must make
to your products and services to ensure
their appeal in your key African markets?
Build and leverage your brands. Do you
know how your brands are perceived in
your key African markets and do you
have a plan to establish, build, and
protect them?
Control distribution. Have you identified

the optimal distribution models in key
African markets and moved to direct
and control them?
for further reading

The Boston Consulting Group has
other publications that may be of
interest to senior executives interested in developing their operations
in Africa. Recent examples include:
The New Prosperity: Strategies

for Improving Well-Being in SubSaharan Africa
A Focus by The Boston Consulting

Group and the Tony Blair Africa
Governance Initiative, May 2013
Ten Things to Know About

African Consumers: Capturing
the Emerging Consumer Class
Whither the Internet in Africa?

An article by The Boston Consulting
Group, November 2012
The African Challengers: Global

Competitors Emerge from the
Overlooked Continent
A Focus by The Boston Consulting
Group, May 2010
An article by The Boston Consulting

Group, January 2013
note to the reader

About the Authors
Patrick Dupoux is a partner and

managing director in the
Casablanca office of The Boston
Consulting Group. Tenbite Ermias
is a partner and managing director
in the firms Johannesburg office.
Stphane Heuz is a principal in
BCGs Casablanca office. Stefano
Niavas is a partner and managing
director and Mia von Koschitzky
Kimani is a project leader in the
firms Johannesburg office.
Acknowledgments
The authors would like to thank

Adam Alagiah, Charles Boatin, Pia
Carona, Garett Chau, Graham Fizer,
Belinda Gallaugher, Alexandre
Gorito, Ayoub Mamdouh, David
Michael, Brian Sangudi, Lori Spivey,
Andrew Tratz, Mark Voorhees, Carey
Wikstrom, and Nomava Zanazo for
their assistance in the research,
writing, and marketing of this
report. They also thank Katherine
Andrews, Gary Callahan, Kim
Friedman, Gina Goldstein, and
Sara Strassenreiter for their
contributions to its editing, design,
and production.
For Further Contact
For further information about this

report or to learn more about BCGs
capabilities in Africa, please contact
one of the authors.
Patrick Dupoux
Partner and Managing Director
BCG Casablanca
+ 212 5 2902 3099
dupoux.patrick@bcg.com
Tenbite Ermias
BCG Johannesburg
+27 11 245 1600
ermias.tenbite@bcg.com
Stphane Heuz
Principal
BCG Casablanca
+212 5 2902 3099
heuze.stephane@bcg.com
Stefano Niavas
BCG Johannesburg
+27 11 245 1600
niavas.stefano@bcg.com
Mia von Koschitzky Kimani
Project Leader
BCG Johannesburg
+27 11 245 1600
kimani.mia@bcg.com
The Boston Consulting Group, Inc. 2013. All rights reserved.

For information or permission to reprint, please contact BCG at:
E-mail: bcg-info@bcg.com
Fax:
+1 617 850 3901, attention BCG/Permissions
Mail: BCG/Permissions
The Boston Consulting Group, Inc.
One Beacon Street
Boston, MA 02108
USA
To find the latest BCG content and register to receive e-alerts on this topic or others, please visit bcgperspectives.com.
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Winning in Africa

From Trading Posts to Ecosystems

January 2014 | The Boston Consulting Group

Five African Realities

Bring Africa into the Boardroom

Address Africas Diversity

Build 2020 Africa Capabilities now

Meet the New African Customer

Building an African Ecosystem

For Further Reading

Note to the Reader

ostly ignored since the 1980s, Africa is now receiving

In the past, multinationals treated Africa as a trading post,

To succeed in the new Africa, companies will need to actively

Africa has been on a steep growth trajectory since about 2000,

Capital is returning to the continent.

A demographic dividend is supplying Africa with a youthful and

Improvements in physical and digital infrastructure are easing the

Political stability and governance have in general improved

Africa is the final frontierthe last sizable area of untapped

They will need to ensure senior sponsorship so that the Africa

Prioritize their African markets, focusing on those that offer the

Organize for many Africas, leveraging hubs or regional clusters of

Adjust their business model when the realities of Africa require

Talent, market knowledge, and risk are bottlenecks. To build 2020

Invest aggressively in local African talent and human resources.

Invest aggressively in market intelligence.

Embed risk management in the organization.

The African customer is rising. An African consumer classand a

Create an African offering.

Build and leverage their brands.

Pursue Made in Africa.

Engage with their local stakeholders.

Align with Africas development agenda.

frica is growing larger on the

As competition for growth in Southeast Asia

Awareness of the Africa opportunity is one

The Boston Consulting Group | 5

any of todays executives came of

subsidized operations elsewhere. Despite

As a result of these developments, capital and

Africa lost this lead for reasons both within

their business. A select group of consumer

Exhibit 1 | Africa Returns to Normal

GDP per capita ($)

Sources: World Bank; BCG analysis.

The Boston Consulting Group | 7

in Absa Group of South Africa and rebranded

By 2040, Africa will have a

continent. Now the equivalent of 11 percent

Exhibit 2 | The Drivers of Africas Growth

Millions of people with annual incomes > $2,700

Established democracies (% of African countries)

Net private flows

Governance and stability

Net capital flows as share of African GDP (%)

Loan payments and interest

Labor: demographic transition

Share of working-age population (%)