Africa’s time is now1.15.15
Q&A WITH GEOFFREY WHITE
Geoffrey White is CEO of Agility Africa and a frequent commentator on Africa on the BBC, CNN and CNBC, and in public forums such as the World Economic Forum, CCA and Chatham House.
Q: “Africa rising” is a recurring theme. How can we be sure this isn’t another false dawn?
I am a firm believer that Africa’s time is now. This is an emerging market where, for the first time, growth is underwritten by solid economic fundamentals. The economics of Africa have subtly, but very significantly, altered. Historically, Africa was of little importance to the world, but this has recently changed as the world becomes increasingly dependent on Africa for agricultural output and as a source of energy. Today, as never before, Africa has become increasingly important to the global economy, holding an estimated 15%+ of the world’s energy resources and 60% of the world’s unused arable land. Africa is attracting increasing FDI for development of its energy and agricultural resources. This in turn creates and stimulates jobs and prosperity. A recent report by Deloitte noted that Africa’s economy is expected to grow by 50 per cent in the next five years to $3.7 trillion by 2019, driven by an expanding middle class that is spearheading rapid urbanization. According to the World Bank, more than half of African countries will be middle income and 30% of Africans will be middle class by 2050, with a forecasted consumer expenditure of $2.6 trillion. With a population of 2 billion by 2050, that is a market global manufacturers ignore at their peril.
Q: What’s most striking in terms of how today’s Africa differs from a decade ago?
Improved governance, better education and health, greater democracy, wider access to capital – these are all significant drivers of progress. But, to me, the most fundamental change in Africa in the last decade is that everyone now has a cellphone. The arrival of 750 million new cellphone users (twice as many as in the USA) has fundamentally changed society. Cellphones have delivered connectivity, access to information, knowledge and commerce to even the remotest parts of Africa and that, in turn, has directly driven economic growth, transparency, accountability, and progress. Africa has leapfrogged many developed countries in the use of cellphones for commerce, banking and market information. Growing access to the Internet is having an even greater impact on growth, especially when you consider that half the population is under the age of 25 and the median age is 20. The adoption and increasing spread of an Internet-accessible generation is potentially another massive step forward for Africa because the number of Africans under age 18 could swell to almost a billion by 2050.
Q: In basic terms, what will it take to “connect” Africa – to integrate its markets with one another and connect them to the world?
This is one of Africa’s biggest challenges. There is a substantial shortage of infrastructure and power to support growth and development. Without both, the rate of economic development is stifled. There is a growing private sector investment in these critical areas and organizations such as the African Development Bank (AFdB), the Africa Finance Corporation and the International Finance Corporation, as well as the Chinese are investing heavily in building capacity. In 2012, for instance, FDI for infrastructure projects grew by 14% to reach $47 billion. This is still short of the $93 billion the AfDB and the World Bank estimate needs to be spent annually until 2020 to close Africa’s infrastructure deficit.
Q: The African economy seems two-dimensional. Africa sells commodities such as energy, minerals and agricultural products, and buys western consumer goods and technology. What’s the outlook for manufacturing? Knowledge-based industries? Other things farther up the value chain?
Africans are very entrepreneurial. There are great examples of SMEs in every country you visit. As the infrastructure and power available across the continent develops, businesses are thriving. Intra-Africa trade is currently only 11%, very low in comparison with developed countries. Globally, trends show that manufacturers are moving closer to their markets, and as the continent develops I believe manufacturers will increasingly locate in Africa for assembly and OEM. As economic prosperity develops, a whole new service industry is yet to emerge in Africa, which will create further jobs and expansion.
Q: What countries are making strides that impress you?
Many are progressing, but those that stand out are Ghana, Angola, Cote D’Ivoire and Senegal on the west coast, and Mozambique, Kenya and Tanzania on the east. Nigeria remains a huge market in its own right with 185 million people, and it is finally showing some real signs of economic progress.
Q: What’s the biggest mistake foreign companies are making in Africa?
Africa is open for business. Those who are engaging and committing to the continent and investing in long-term sustainable businesses are already profiting and succeeding. The winners will be the first movers, those who commit early. It is a very different market from the mature western economies. The commercial focus isn’t on stealing 1% market share from your competitors, but rather scaling up to have the capacity to meet the burgeoning demand. There are very few established pan-African brands, so it’s a marketing director’s dream opportunity! The perception by those who aren’t engaged with the continent is probably ten years behind reality on the ground. Those prepared to spend the time and resources to understand the reality of the opportunity will make significant strides forward.
Q: Some consumer companies manage African distribution through Dubai. Others are trying to work it through regional hubs such as Nairobi and Johannesburg. What makes the most sense?
Interestingly, all of them have individual attractions and logic. The reality is that Africa, excluding South Africa, is so underserved from a logistics perspective that any international standard integrated logistics solution finds a warm welcome and a willing market. Dubai is seeing very strong growth as a “gateway to Africa,” a hub for both administration and logistics. This is primarily due to Emirates Airlines, which now provides an unparalleled service to the major cities of Africa from Dubai, making it the center of choice for meetings, banking, trade and commerce.
Q: Most of the risks in Africa are well publicized. Corruption, instability, poor physical and IT infrastructure, lack of policy-making capacity, a shallow pool of skilled labor. How real are the risks, in your view?
Africa is a frontier, emerging market, with all the development challenges and growing pains that a young continent brings. The encouraging thing is that progress is being made and the commercial environment is improving. There is a very noticeable new generation of well-qualified African human resources professionals emanating from schools and universities who are extremely capable. This new generation will be a stimulus for further steps forward in governance, responsible business and social and economic development.
Q: What can you tell us about Agility’s approach to Africa?
Agility has vast experience of operating to international standards in emerging markets, so it has perfect synergy with Africa and its requirements. Agility Africa is focused on building long-term sustainable business that supports the growth and development of Africa and has implemented a plan to develop a network of Agility Distribution Parks (ADPs) across the continent to meet the demands and serve our existing and new customers as they enter the African market and expand across the continent. These will be international standard logistics parks, providing warehousing facilities and services and acting as a solid, secure and reliable platform from which businesses can safely and smoothly operate within the African market. They will also provide a route to export African products to the rest of the world. There is an ADP under development in Accra in Ghana and another in Busia, Uganda. In 2015, we will see further ADPs being developed in both East and West Africa. All of Agility’s Group companies, including GIL, Tristar, NAS, GCC Services, RED, DGS and ICS will be able to use Agility Africa and the increasing Agility brand awareness and presence on the ground to increase their footprint in Africa and pursue new opportunities in this rapidly developing market.
Pictured at the head of the article is a new FPSO (floating production storage off-take) vessel is under construction to service Ghana’s offshore oil sector. Operated by Tullow, the vessel will launch in 2016 and be capable of producing 80,000 barrels of crude per day and storing 1.7 million barrels.