One of the most high-profile events Kenya has hosted since independence begins this week when heads of state from across Africa and the Prime Minister of Japan Mr Shinzo Abe jet in for the Tokyo International Conference on Africa Development (TICAD). It will be the first time that Ticad has been held outside Japan and it is an honour to Kenya to have been picked to host this event. ~ Daily Nation editorial
The Nikkei Asian Review has been preparing for days with longform articles on the African consumer market, and other opportunities for Asian businesses. While Indian B2C investments have been closely analysed (and embraced), it is clear that the East Asians are eyeing each other as their closest competitors.
Africa was once dominated by Western investors, due to ties forged in colonial times. But Chinese companies have muscled their way in, and Indian, Japanese and South Korean players are arriving and thriving. This intense competition is no longer just about extracting minerals and materials. It is about tapping the next big consumer market.
Their articles are well researched and provide ample insights for businesses contemplating these new markets. Here are some highlights that caught my eye:
Vivek Karve has a clear picture of the ideal African market. The chief financial officer of India’s Marico, a maker of hair and body care products and other fast-moving consumer goods, said his company targets countries with “per capita GDP under $5,000, many mom-and-pop shops, low penetration of multinationals and political stability.”
There’s little handwringing over lack of data or missing middle class metrics. Inadequate infrastructure and informal retail in Africa is no different for your average Indian FMCG brand than their domestic market, thus the concept of the ideal market being one full of little mom and pop shops.
Marico’s strategy for achieving that includes promoting local brands familiar to African consumers, rather than pushing products that are popular in India. It uses multiple distributors to cushion itself against credit risks.
The Japanese, having already faced off with the Koreans in India’s large, diverse, and fragmented markets, are ready to take a leaf from the Indian playbook for their foray into the African market.
The gap between Asian and Western rivals is expected to narrow over time, with China making up much of the ground. About 3,000 companies from China — Africa’s largest trade partner since 2009 — are doing business in sectors such as infrastructure, resource development and telecommunications.
And even this focus on infrastructure development and large scale investments is changing. The Chinese idea is to boost purchasing power across Africa and turn the continent into a massive consumer market.
The Japanese are preparing the ground to apply their own strengths in Africa. Japanese companies see Africa as a lucrative but daunting challenge — one they would rather tackle with a partner or subsidiary that is familiar with emerging markets.
This, again, is where India comes in. Toyota Motor, Honda Motor, Nissin Foods Holdings and Hitachi all export from their factories in India to Africa. The Japanese government is actively working to help companies make inroads in India as a springboard to Africa.
A couple of years ago, the Ministry of Economy, Trade and Industry compiled a list of potential Indian partner companies with strong African operations in 16 fields, including beverages, consumer goods, retail, electronic parts and auto components. Godrej Group and Marico were among them.
The lessons of the last quarter century are driving a new collaborative strategy. My rupees and yen are on Asia.