It’s not often that global entrepreneurs are presented with the opportunity to change the world. That’s exactly what the rapidly growing economies of sub-Saharan Africa offer smart investors and ambitious startups. The untapped potential in the African continent for consumer goods, social networking services, telecommunications and mobile advertising is huge, and it’s there for the taking. Right behind China and India, Africa is one of the fastest growing economic regions in the world. It’s a veritable boom town. The African continent has the fastest growth rate of Facebook subscribers, although its saturation rate is one of the lowest. And many of these users access the Internet from their enhanced mobile phones. Africa’s poor infrastructure, and lack of basic landline phone service created a demand for cheap mobile phones that spurred a GSM revolution nearly a decade ago. Now, the GSM wave is quickly maturing into the mobile smartphone market, which is opening up the Internet to African consumers, and providing business opportunities to visionary entrepreneurs.
Entrepreneurs Need to Wake Up and Take Notice of Africa’s Potential Before It’s Too Late
China and India have already made inroads into the burgeoning African consumer market, especially in the mobile phone industry. The Chinese telecom companies Huawei and ZTE already dominate much of the African mobile phone market. The Chinese invested heavily, early on, in infrastructure and wireless networks, while Western companies largely ignored the African continent.
Despite continuing problems with famine, disease, poverty and political unrest in some regions, the trend lines paint an encouraging economic future for the developing African countries. Last year, the McKinsey Global Institute published an eye-opening study of the changing landscape of Africa’s microlevel consumer markets, entitled “Lions on the Move: The Progress and Potential of African Economies.” The study found that Africa offers the highest rate of return on foreign investment in the developing world. If you believe that Africa’s economic growth is largely the result of higher prices for oil and other resources, think again. Natural resources represented only 24 percent of Africa’s GDP growth from 2000 to 2008. Wholesale and retail sectors account for 13 percent, transportation and telecommunications for 10 percent.
The growth in consumer markets is just beginning. Africa’s GDP nearly doubled this past decade, and by 2009 Africa’s GDP mushroomed to $1.6 trillion, which is on par with Brazil’s or Russia’s consumer growth. Based on these growth patterns, Africa’s GDP is projected to grow to $2.6 trillion in 2020.
Things You Probably Don’t Know About Africa
The McKinsey study uncovered some surprising facts about Africa’s economic future that should serve as a wake-up call to Western businesses.
● African Consumers Spent $860 Billion in 2008.
● Africa’s Collective Consumer Spending Will Reach $1.4 Trillion in 2020.
● Since 2000, 316 Million New Mobile Phone Subscribers Signed Up in Africa. (That’s more than the total U.S. and Canada population combined.)
● Nearly 128 Million African Households Will Have Discretionary Income in 2020.
● About Fifty Percent of the African Population Will Live in Cities by 2030.
Africa’s Mobile Phone Market Has the Fastest Rate of Subscriber Growth
The vast African population is eager to connect to the Internet via their mobile phones and join the global community of social networking. App developers, social media entrepreneurs, developers of mobile payment systems and the mobile advertising industry, all have the opportunity to reap huge profits from the pent up consumer demand for mobile smartphones. African consumers are willing to forgo other necessities to gain access to mobile phone service. A World Resources Institute study found that household spending on mobile phones in developing countries surpasses spending on everything else.
A study by the Economist on telecoms in emerging markets found that the African continent is ground zero for the next great expansion of the mobile phone market.
“And Africa is the region with the fastest rate of subscriber growth. With developed markets now saturated, the developing world’s rural poor will account for most of the growth in the coming years. The total will reach 6 billion by 2013, according to the GSMA, an industry group, with half of these new users in China and India alone,” according to the Economist.
Indeed, Tech Crunch’s Jon Evans recently traveled to sub-Saharan Africa and witnessed the region’s vast potential first-hand. He also found Chinese companies dominating the emerging economies. He likened present day Africa to China 20-years ago. “It’s still mostly very poor, and it faces serious challenges – for instance, rising food and oil prices – but at the same time it feels a lot like China in 1990, or India in 2000 … and look at them now. For the first time in, well, ever, it is possible to seriously consider Africa as an emerging economic power,” said Evans. As a Nigerian-born Canadian, I’m in a position to say Jon is not far from the truth in that context.
Africa has always been a great market but her beauty has mostly been marred by mostly biased and overbearing images projected by old media. Savvy entrepreneurs and companies have been leveraging the African market for long and the opportunity of this emerging ecnomic power has never been this attractive.
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