Posted by: Home Strange Home | December 5, 2009

Good News From Africa

When my boyfriend, who works in marketing, suggested to me a business book about Africa, I was intrigued.  For those working in the field of development, Vijay Mahajan’s Africa Rising is not likely to appear on the radar; it is published by the Wharton School of Business and focuses on business marketing, with the subtitle “How 900 Million African Consumers Offer More Than You Think.”  But for anyone interested in the future of Africa, it is worth reading and offers a breath of fresh air.

Vijay Mahajan is an Indian business and marketing guru who has won several prestigious marketing industry awards and has consulted a host of Fortune 500 companies.  He was inspired to write Africa Rising after his 2005 book on emerging markets entitled The 86% Solution was awarded the 2007 Book of the Year Award from the American Marketing Association but was criticized for paying insufficient attention to Africa.  In The 86% Solution, Mahajan notes that companies have focused on marketing to the world’s wealthiest consumers in developed countries.  However, he argues the top 14% segment of the market is rapidly becoming saturated and future growth opportunities lie with “the other 86%” in Asia, Latin America, and the Middle East, where consumers may be poorer, but are consumers nonetheless.

In Africa Rising, Mahajan refreshingly presents Africa not as a charity case, but as a market opportunity.  In the same way that India was seen as a “lost cause” to business investors in the 1960s, and later went on to become an important and dynamic emerging market, Mahajan sees Africa as the next “rising star.”  To research the book, Mahajan went on a “consumer safari” through the continent, speaking with business leaders, consumers, entrepreneurs, small business owners, and expatriates in the African diaspora. 

Mahajan segments the African market into three layers (Africa One, Africa Two, and Africa Three, roughly corresponding to the rich elite, the burgeoning middle class, and the poorest) and explores opportunities in retail, banking, youth-oriented products, infrastructure, media, and entertainment.  Throughout the book, he repeats the mantra “Africa is richer than you think,” noting that twelve Africa nations have GNI per capita greater than China’s, and twenty greater than India’s.  For a continent that is almost universally negatively perceived in the media and often ignored by the business community, it is reassuring to read a more positive account of Africa that highlights the opportunities for profit and growth which do exist.

That said, I did feel the book is overly simplistic in its view of Africa, often aggregating together many very diverse and heterogeneous countries and presenting them as a single homogenous market, and moreover ignoring the high degree of inequality that exists within African countries.  Although several African countries may indeed have a GNI per capita higher than China’s or India’s, this is not a very meaningful measure of the robustness of consumer markets when a) many of those countries GNI’s are skewed by their oil wealth (e.g. Equatorial Guinea, Libya, Gabon, Angola, etc.), and b) that aside, those 12 countries taken together have a combined population of 100 million spread across geographies as diverse as the Seychelles, Algeria, and Swaziland – hardly “one” market.

Moreover, Mahajan often overlooks significant infrastructural problems which present a real barrier to the profitability of businesses in Africa.  For example, he says the lack of reliable electricity supply in many countries creates a market for entrepreneurs to supply generators.  In my view, this is a bit rose-tinted, as a reliable electricity supply is a basic requirement for businesses to operate, and the inability of the state to provide this service means that businesses as diverse as factories, hotels, and restaurants have to incur substantial extra costs to acquire and operate generators, cutting into their profit margins.  While it is true that entrepreneurs can sometimes step in to compensate for market failures, surely we cannot expect the free market to spontaneously resolve what are serious structural constraints on growth in Africa.  In his excessive optimism, Mahajan ends up overlooking some of the significant barriers to development that do inhibit many African markets.

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