Navigating the African market opportunity

We have not been able to ignore the constant stream of media articles this year on the ‘rise of the African lions’ echoing the tigers and dragons of Asia just a few short years ago. The first reports mentioned GDP growth rates and economic potential followed rapidly by statistics on consumption, market opportunities and now, the emergence of a hitherto unnoticed middle class.  Critiques were not far behind, particularly those questioning the implications of the term ‘middle class’ applied to those spending between $2-$4 a day.

So the question of “Is there a consumer market opportunity?”  is better answered conditionally rather than absolutely. Yes, there is definitely an opportunity (as the Indian and Chinese businessmen will be the first to tell you) but a few caveats apply.

Certainly, there is a conventional consuming middle class in each country, World Bank figures say the average is about 14% of the population and definitely the African nations have never been taken seriously as consumer markets in their own rights by the world’s largest brands, except perhaps for  the mobile phone and all its accoutrements.

However, as the data table above shows, the largest chunk of what is being deemed the ‘middle class’ is the same group giving rise to so much debate – those who spend about $2 to $4 a day. This is the mass market majority across the region, just above the wellknown “Bottom of the Pyramid” demographic who live on $2 a day. The aspect that concerns me is the implicit assumption that these figures are predictable and steady – that is, people have access to these funds every single day rather than the reality that the majority manage on irregular income streams from a variety of sources than a regular paycheck. Even if the aspirations and economic purchasing power are increasing, the concurrent popularity of prepaid payment plans or the kadogo economy across the continent are witness to the fact that this market opportunity will be very different to any other.

If anything, that should be the lesson learnt from the first dawn chorus that sang about the rise of India and China only to stumble around in those emerging markets for the longest time.  This is why Samsung’s activities constantly catch my attention – they’ve leapfrogged the whole new market entry hurdles that most global brands experienced in their Indian and Chinese forays, taking years sometimes to work through their assumptions and figure out the need for relevant and appropriate products instead of global solutions – and have started off on the right foot by acknowledging the need for African design for African markets.

They seem to be taking a balanced approach – neither emphasizing the poverty or challenges nor over optimistic about a ‘booming’ middle class, instead they’re very simply taking the African customer seriously, something its high time more companies in the world did, regardless of how much they may have available to spend on average every day.

Leapfrogging need not be just for technology or infrastructure, as the next generation of innovation built on the popularity of mPesa demonstrates, but also business models such as those built on the prepaid model (from electricity to healthcare) if not entirely new (and as yet unknown) businesses, services or products. Even something as ostensibly simple as market segmentation may need to be wholly rethought from scratch if indeed the world is waking up to the African dawn these reports imply.  Generalizations on disposable income such as “$3 a day” may overlook the complexity of the African consumer – starting with the fact that unlike India and China, Africa is a vast and varied continent with a diverse population spread across more than 50 countries.

There is indeed an opportunity in Africa, but one that it will go to those, like Samsung, who are willing to take the time to take this market seriously, question their assumptions and start from scratch in understanding the people in their own context and environment in order to maximize their investment in the continent.

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