Market Spotlight: Africa the next greener pasture
While it remains a far cry from being a super power, Africa has been labelled as potentially one of the biggest growth engines of our time and rightly so. Rezwana Manjur reports.
After years of being shunned by global brands and marketers, Africa has finally emerged on their radars as the new commercial frontier.
African governments are making a conscious effort to tackle issues such as violence and corruption and, as the continent continues to see more political reforms, the economic revolution will not be far behind.
In fact, the economy has been showing signs of great growth coupled with the rise of the discerning African consumer. According to Mckinsey Quarterly, in Africa, real GDP has risen by 4.9% a year from 2000 until 2008 which was more than twice the momentum in the 1980s and 1990s. This led to a collective GDP of US$1.6 trillion in 2008, comparable with markets such as Brazil and Russia.
Mckinsey says while this growth rate can easily be attributed to oil prices increasing from less than US$20 a barrel in 1999 to more than US$145 in 2008, it is worth noting natural resources generate only 32% of Africa's GDP. "The remainder of the contribution comes from industries such as wholesale and retail, transportation, telecommunications and manufacturing."
As seen earlier in the year, for the first time an African brand made to the top 100 Most Valuable Global Brands in a study by global research agency Millward Brown. South African mobile company MTN was 88th in this year's rankings with the brand being valued at US$9.2 billion.
The study also highlighted that for most other top brands, business from Africa was on the rise, indicating the importance of the market.
About 40% of Guinness' sales come from Africa, while Indian telecom company Airtel's 2011 third-quarter results showed a 16% increase in revenue in Africa. Similarly, another telco company Orange enjoyed rapid growth in Africa in 2011, while Walmart invested in the market with the acquisition of Massmart. In recent years, businesses have realised that despite the risks involved, not investing in the market is also a risk.
The enormous potential the African consumer market possesses has anchored in many investments from such conscious businesses.
And this includes major ad holding groups such as WPP. WPP collectively employs more than 23,000 people on the continent, generating revenue to the tune of US$600 million.
In April this year, it acquired a stake in multi-national retail marketing agency, Barrows. Its spate of investments last year also included Burson-Marsteller agreeing to acquire a majority stake in Arcay Communications; Ogilvy and Scangroup inking joint ventures in Ghana; and the acquisition of a majority interest in Ogilvy South Africa, and snapping up a 50% share in Mindshare South Africa.
Omnicom has also placed an emphasis to set up home in the region with its agency BBDO Worldwide recently setting up its office in Nairobi, Kenya in East Africa following the launch of BBDO's agency in Lagos, Nigeria last year. With this, the agency fulfils the network's goal of establishing a presence across the sub-Saharan region.
Chris Thomas, chairman and CEO of BBDO Asia, Middle East and Africa, reiterates the rise of Africa cannot be ignored. "If you can't win in Africa, then fundamentally, you can't win.
"Africa is the second most populous continent in the world and a recent IMF forecast predicted that sub-Saharan growth is expected to exceed 5% in 2012, despite challenging global economic conditions."
BBDO is aligning its Africa operations more closely with Asia and the Middle East, based on the belief that there are lessons learned in the vast cultural diversity, retail environment, emerging middle classes, urbanisation and rise of mobile from these emerging markets that can be applied to Africa.
According to a report by The Economist, despite most Africans living on less than two dollars a day, the market has more than 600 million mobile phone users. It adds technology has undoubtedly contributed greatly to the region's robust growth "accounting to nearly a tenth of Africa's land mass that is covered by mobile-internet services - making this a higher proportion than technological giants such as India".
Although six of the world's 10 fastest-growing countries in the past decade were African, this is not to say Africa is out of its period of turbulence.
For a major chunk of the population in the region, there is no light at the end of the tunnel, yet. Average lifespan in some areas remains under 50. Climate challenges continue to persist and corruption remains a way of life.
Such deep-set issues will not be erased with a magic marker, however, the gradual changes the continent has seen in the past few years has lent a silver lining to the dark clouds of corruption and lawlessness.
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