Its complicated: Pondering the implications of the Emerging Markets hyperbole for Africa

By | April 19, 2014
Middle class or something uniquely African? Businessman’s home in Mombasa, Kenya Photo Credit: Niti Bhan

As I mentioned in my previous post, the hyperbole and handwringing characterising current day news coverage of the frontier market opportunity in the African continent has been reminding me of the way India and China were covered back in the heady days of their emergence. I’ve been looking over, comparing the coverage and what I’m picking up, however, is an underlying sense of unease. One that I am not able to pin down in black and white terms. Its not quite as simple as saying “Oh, you can’t compare these apples to those oranges because Africa is a continent of 54 countries while India and China are countries in their own right”. That’s undeniably true but I suspect there’s more going on here and I want to use this post to tease this tangle out further.

Heritage, history and the burden of mainstream media perceptions

India and China rose to global prominence during the last decade of the previous century and the early years of this one, primarily through the resurgence of their economies. As cultures and countries, they have thousands of years of recorded history, and are ancient civilizations with vast bodies of accumulated scientific knowledge, philosophy, religions and civil society structures. Each, in their time, were wealthy centers of trade and learning, attracting travelers and traders and ultimately, the western powers who dominated and overtook them. Until recently, they were perceived as developing countries struggling to cope with the challenge of their teeming, hungry billions. At least as far as global mainstream media perceptions went.

When the first ‘gold rush’ of globalization began and companies rushed into these emerging markets of millions of middle class households with their billions of dollars of consuming power, they were taken by surprise at the pushback from entrenched local brands and far more complicated domestic market infrastructure than they had been given to expect. The market entry strategies drew heavily on Theodore Levitt’s 1983 classic “The Globalization of Markets”, which presumed the natural evolution of a homogenous global middle consumer class. That assumption cost some of the largest consumer brands millions of dollars and many lost years to realize and recover. Some never did and even today, the Indian and Chinese markets are still domestic strongholds proving a challenge to newcomers.

Africa, on the other hand, carries the heavy burden of a heritage of negative media narratives. The perception of risk and danger is far greater and the implicit assumptions around corruption, chaos and systemic mistrust far more embedded than we realize. Even as press releases tout the opportunity of the African emerging consuming classes and their dollar value, one picks up the sense of unease inherent in the reports’ disclaimers. And though it has only been 3 years since The Economist changed their tune on the African opportunity, venerable publications like The Financial Times have already begun issuing cautionary notes on the breadth of diversity and disparity across Africa.

The shift in perspective has been jarring

There’s almost a sense that even while the reports and the releases and the articles play up the frontier market opportunity of the sub Saharan consumer, they are unable to take it as seriously as they did when they wrote earnestly about the Indian and Chinese middle classes. I touched upon this briefly last year, in The Tale of Two Africas, where I saw the early signals of a future clash that will become increasingly obvious within the next 5 years if not sooner.

Imagine the magnitude of the shift in perspective being asked of the business press and the management consultancies and the market research firms as well as the middle managers and business strategists, all of whom may have grown up seeing the hungry Ethiopian faces or the reading about Rwandan genocides, Ugandan child soldiers and constant conflict in CAR and Congo. Suddenly, they’re expected to consider the same people as middle class consumers demanding international retail experiences when shopping for the trendiest brands.

So in a way it makes sense that the media coverage is defaulting to the safe and familiar jargon of consumer behaviour, brand preferences and disposable incomes thus resembling the hyped growth opportunities from the last time around, even as the disclaimers and cautions explicate and sometimes, contradict, that very same hype. This underlying unease seems to be stemming from the change in mindset and worldview required to see customers and consumer markets where one had only perceived beneficiaries and refugee camps.

Active customers not passive beneficiaries

This change in perspective will be critical for business success in African countries. Different nations are at different stages of development and thus, self perception and ambition. For some, the inflection point has already been reached where the choice is not how much money can foreign investment bring into the country but whether they want it in the first place and from whom. At the same time, there has been little recognition of the impact of the mobile revolution that is taking place across social and economic strata where ubiquitous and affordable information technology is empowering people with aspirations and ambitions far beyond the dreams of their grandparents’ generation. It is those voices that will push back in unpredictable ways that will make “frontier African markets” a very different challenge from that posed by the “emerging markets of India and China” of a decade or so ago.

Back when India and China were opening up, mobile phones were also in their early stage growth phase, and hadn’t yet put the internet into every rural youth’s hands. Social media such as Facebook and Twitter weren’t even on the radar. Across Africa today, new and emerging communication tools are changing the landscape of the consumer market in ways we do not yet realize. Word of mouth and trusted referrals within social networks, the traditional grapevine, are being scaled by technology to reach far beyond what was within the realm of possibility. And the emerging African consumer is not only well connected but less likely to stay quiet about corporate excess or marketing failures. First impressions will matter far more than they did in the early days of Indian and Chinese markets. Perhaps this too explains the underlying unease in this edition of the emerging market ‘gold rush’.

An update: I just came across this snippet that seems to capture the above transition well:

“The real challenge facing consumer product companies these days is to survive in a globally connected, consumer-driven world. In order to manage and grow profitably, companies must learn to meet consumer’s demands from any part of the world, through any channel. New approaches that must be embraced include end-to-end global supply chains, virtual market entry, direct-to-consumer channels and more investment in consumer insights. A more connected consumer is a more powerful consumer and that is the frontier consumer products companies now face.”

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