CHAPTER 3

MAP YOUR AFRICA STRATEGY

If, like us, your work keeps you traveling across Africa, you end up spending a lot of time on planes. A direct flight from Cairo to Johannesburg takes eight hours—longer than the trip from New York to Paris. Getting from Nairobi in East Africa to Accra in West Africa will take you six hours, the equivalent of a flight between the East and West coasts of the United States. If you go the overland route, you should plan on a bit longer: when a colleague of ours decided to motorcycle from Cape Town on the southern tip of Africa to Egypt in the north, he ended up taking six months.

If any of these distances surprise you, you’re not alone. Many people underestimate just how big Africa is. In part, that’s the fault of the commonly used Mercator mapping system, which has the effect of shrinking regions on and around the equator and magnifying those closer to the poles. In reality, Africa is larger than the United States, China, India, Japan, and much of Europe combined (figure 3-1). Africa’s land area, at 11 million square miles, is second only to Asia’s.

Africa contains a few highly populated countries: Nigeria has nearly 190 million people; Ethiopia, 93 million; and Egypt, 92 million. But most African nations have populations below 20 million—fewer inhabitants than the US state of Florida. The same is true of GDP: just nine countries make up three-quarters of Africa’s GDP, although many smaller countries are growing fast. To serve a sizeable market, companies must therefore shape a coherent geographic portfolio that prioritizes the countries or cities they will play in.

In other words, you need to map your Africa strategy. If your map is to serve as a meaningful guide on your journey of business growth, it will have to be fact-based and granular—at the hundred-foot, not ten-thousand-foot scale. You will have to dispense with generalizations, and truly understand the differences in countries’ wealth, growth, and risk profiles.

Each company’s strategic map of Africa will be unique, influenced by the customers it seeks to serve, the opportunities in its industry, and whether it has strengths or local knowledge in a particular country or region. Your map might be focused on a few countries in which you invest to build a leading position—or even a single large market such as Nigeria. You might expand country by country to build a regional business—say, in East Africa or Francophone West Africa. Or you might go much broader and create a pan-African conglomerate.

Saham Finances has put itself firmly in the “expand your map” camp. In little over a decade, the Morocco-based company grew from a small local firm into a leading African insurance company operating in twenty-three countries across the continent. Between 2005 and 2015, it increased its sales nearly tenfold, to over $1 billion. Nadia Fettah, the company’s CEO, is one of the few women at the helm of a major African business. “Our first step was to become a big player in Morocco, which we succeeded to do in three or four years,” she told us. “But our ambition was big and our market was small, so we looked for the next countries to expand into. We considered North Africa and Europe, but when we started traveling in sub-Saharan Africa, we realized that we could have major impact there: most countries had very low insurance penetration. There was big potential to serve clients who had very little access to insurance.”

Saham embarked on a bold strategy of buying stakes in existing insurance firms in countries ranging from Angola to Madagascar, then overhauling their management and rapidly growing their sales. In 2016, Saham took its African expansion strategy to the next level: it partnered with Sanlam, a long-established South African insurance company that had also made Africa its major growth focus. “They were moving north, we were moving south; we met in the middle,” Fettah recounted. “Together we have the biggest footprint of any insurance company in Africa, covering thirty-four countries.” That partnership turned into a merger in 2018, when Sanlam announced a full acquisition of Saham in a transaction that valued the Morocco-based insurer at $2 billion. In a vote of confidence, Sanlam said it would keep Fettah on as CEO of Saham. (Shortly afterwards, Africa’s top CEO forum named her CEO of the year.) Fettah’s erstwhile colleagues in Casablanca won’t just be pocketing the proceeds of the sale: Saham’s parent group announced its transformation into a pan-African investment fund focused on “future-oriented businesses” across the continent.¹ Its aim is to replicate its success in insurance in other growth sectors.

African-owned businesses are not the only ones pursuing bold geographic expansion. According to a McKinsey analysis, eighty-eight large multinationals operating in Africa had built pan-African businesses with operations in more than ten countries. Nearly a third of them are present in more than twenty countries, and on average, the firms with the widest footprint have the largest revenues. For these multinationals, drawing a pan-African map has typically been a decades-long undertaking: most have been in the continent for twenty-five years or more (figure 3-2).

Coca-Cola is arguably the most pan-African multinational of all. Whether you’re in a village in rural Mali or a street market in bustling Kampala, you’ll find a Coke to quench your thirst—or another of the dozens of brands the company has tailored to local markets, such as Stoney Tangawizi ginger-flavored soft drink in East Africa. That is the result of a clear vision articulated at the beginning of this century: to make sure there’s a Coca-Cola beverage in reach of every consumer who wants one. The company had long been present in Africa, but in 2000 Coca-Cola’s board decided to make the continent a priority for growth. Its rationale was clear: Africa’s population was growing fast, yet its per capita consumption of Coca-Cola products was less than 1 percent of that in North America, and much smaller than in other emerging markets.

Liberian-born Alex Cummings was appointed president of Coca-Cola’s Africa Group in 2001 after leading its Nigerian operations. He gave us the inside track on the company’s daring Africa expansion strategy. Eager to grow its presence in emerging markets, Coca-Cola let its Africa leadership team take risks and make bets that other companies might have balked at. For example, it opened a $26 million bottling plant in Angola in 2000, while the country was in the middle of a civil war. “People thought we were crazy,” said Cummings, “but today we’re selling around 40 million cases a year in that market.”

Likewise, the company acquired a bottling plant in Zimbabwe in 2004, when the country was in the midst of hyperinflation and recession and other multinationals were leaving. “We thought: at some point this country will turn, and when it does we want to be there,” Cummings told us. Coca-Cola even opened a new bottling plant in Somalia during his tenure. “My colleagues went in, flak jackets and all,” said Cummings. “It was important to show Somalis that the world had not abandoned them.”

Companies like Coca-Cola and Saham, along with successful firms that have chosen to concentrate on a smaller African footprint, provide four navigation tools to master Africa’s geographical complexity and draw the right strategic map for profitable growth:

1. Set a clear aspiration to guide your expansion strategy.

2. Prioritize the markets that matter most for your business.

3. Define how you’ll achieve scale and relevance across your African map.

4. Identify—and help build—the ecosystem you need to thrive.

NAVIGATION TOOL 1: SET A CLEAR ASPIRATION TO GUIDE YOUR EXPANSION STRATEGY

For Coca-Cola, the answer to “Which country?” was every country in Africa, regardless of political or economic stability. “We thought about Africa holistically and took a long view,” said Alex Cummings. “We had a clear vision and strong belief in what we could build in Africa—and that was backed up with facts. But we knew it wouldn’t be simple, and that there’d be peaks and valleys on our growth journey. We knew from the start that we’d have to be tenacious.”

The company invested billions of dollars in building its network of bottlers and salespeople, buying up local beverage companies, and strengthening its African organization. As a result, Coca-Cola increased its Africa volumes by over 50 percent in less than a decade and grew revenues and profits even faster. Coca-Cola and its bottling partners today employ seventy thousand people across Africa, making it one of the largest private-sector employers on the continent. Those achievements propelled Cummings to the role of global chief administrative officer, based at Coca-Cola’s Atlanta headquarters, until his retirement in 2016. (It hasn’t been a quiet retirement: Cummings ran for president of Liberia in 2017.)

Likewise, Saham set out a bold, continentwide vision from the start. “Our goal was to become the best insurance company in Africa,” CEO Nadia Fettah told us. That led the company to expand quickly across different regions of Africa. First it built a presence in the Francophone countries of West Africa—which made life easier for its Moroccan managers, all of whom speak French. “But we also wanted to go to other big markets in Africa that were underpenetrated,” Fettah said. “So we went to Angola and became the first private insurance company there. We also invested in Nigeria, Kenya, Rwanda, Madagascar, and Mauritius.” Despite language and cultural differences, Saham built successful businesses in all these markets, creating lean, highly empowered local leadership teams backed by shared, technology-driven back-office systems.

Rapid expansion often comes with challenges, as the example of Saham’s entry into Angola illustrates. It bought a fast-growing local insurance company in 2015, but just as the deal closed, the oil price collapsed and put Angola’s oil-dependent economy into a tailspin. “Suddenly, everything went wrong,” Fettah told us. “We were facing a crisis. But we took a long-term view, and our local management team quickly came up with a strategy to save the business.” Rather than scaling back, Saham focused on ramping up sales to business customers, including thousands of smaller enterprises. Within a year, its Angolan business had returned to profitability and built a real beachhead for the company. “As we were growing, our competitors were halting their investments,” said Fettah. “That will give us a strong competitive advantage when the economy recovers.”

At about the same time Saham set its sights on becoming a pan-African business, another Moroccan financial services firm did the same. Attijariwafa Bank was running up against the limits to growth in its home market, and in 2005 it set the goal of becoming a pan-African bank. It understood that while banking penetration in Morocco was deep, that was not the case in many of the countries it hoped to expand to. Rather than limit itself to a small, upper slice of the market, Attijariwafa embraced a new role as the institution that would bring banking services to informal companies and individuals who did not bank. By 2017, Attijariwafa was the sixth-largest bank in Africa, with operations in twenty-five countries across the continent and beyond.

BROAD OR NARROW?

Of course, a pan-African map is not the only recipe for success. Among the large companies in our survey sample (those with annual revenues exceeding $1 billion), around one-third are pan-African firms with operations in more than ten countries, another third operate in four to ten countries, and the remaining third operate in one to three African countries. That picture is anything but static, however. Nearly half these large firms report that the number of countries they operate in has increased over the past five years, and most of them plan further geographic expansion over the next five years. Hardly any intend to shrink their African footprint. Smaller firms, though they are, unsurprisingly, present in fewer countries today, are just as ambitious in their expansion plans.

These findings are consistent with analysis undertaken by McKinsey on the expansion strategies of Africa’s hundred largest and most successful companies.² (We picked these “top 100” from the database of large companies described in chapter 2, using both published company information where it was available, and the insights of our colleagues working across the continent.) We got a rich sense of how winning businesses have expanded their African footprints over multiple decades. The large majority of these companies grew big by developing a strong position in their home market first. As they grew in scale, though, they drew their maps differently: half of them remained focused on one of Africa’s larger markets, while the other half steadily expanded to become regional or pan-African companies.

Several of the companies we looked at in the course of writing this book explained that they were deliberately keeping their geographic focus narrow. For example, Tayo Oviosu, CEO of the mobile payments startup Paga, said, “We’re not planning to expand beyond Nigeria at this stage; Nigeria is a very big market and we have a long road ahead of us here.” It’s a sound decision: Paga grew its customer base from nothing to 8 million in just a few years, but its potential market in Nigeria is many times that number.

The scale of your geographic expansion will in part be determined by your sector. Among respondents to our executive survey, more than 60 percent of retail and consumer goods companies plan to expand into additional African countries over the next five years, while fewer than 40 percent of financial services companies plan to do the same. Indeed, our research suggests that broad-based regional expansion has not always resulted in better performance in the banking sector. On average, banks with significant regional or pan-African footprints have underperformed the “national champions” focused on their home markets. We analyzed twenty-six national champions and found that their revenue grew at a compound annual rate of 20 percent between 2011 and 2016, while their average ROE in 2016 stood at 13 percent. Among the thirteen regional banks we studied, however, annual revenue growth was 14 percent and ROE in 2016 was just 8 percent.³ It is clear that companies in complex, highly regulated sectors such as banking must be careful in their choice of where to compete, and then be sure they have what it takes to go head-to-head with established local players.

EMPOWER TO EXPAND

That said, there is also a danger that you could be too conservative in your expansion strategy and let more aggressive competitors, like Coca-Cola and Saham, build a strong position in markets that look risky today but could be fast-growing tomorrow. Western firms are often more cautious than their African counterparts—and more risk-averse than the Chinese companies that are expanding rapidly across the continent. We found that around 70 percent of African- and Chinese-headquartered companies are planning to expand their footprint in Africa in the next few years, compared with barely 40 percent of North American firms.

As just one example of Chinese firms’ ambition in Africa, consider the CGCOC Group. This giant construction firm started its African business drilling boreholes in Nigeria, then expanded both up and down the value chain and geographically across the continent. As of 2017, it had subsidiaries in twenty-four African countries. Its businesses span real estate, manufacturing, green energy, agriculture, and mining. At the time of writing, it had more than 250 active projects—ranging from a water supply project near Douala, Cameroon, to a wind power project near Addis Ababa.

When we met one of CGCOC’s senior managers, Huang Shiyi, in Beijing, he attributed the company’s rapid expansion to its willingness to move fast to seize opportunities, and its readiness to partner with both African governments and Western financial institutions. Indeed, many of its current projects are funded by Western banks and agencies. Just like Coca-Cola’s, CGCOC’s bold expansion strategy has been enabled by a head office that’s been willing to let its Africa business take some risks. “That’s the best thing that ever happened to us,” Huang said. “We’ve pretty much always met our profit targets, so our shareholders in China have left us alone to make calls on the ground. That’s been a huge business advantage—you can’t work in a developing country and expect to always be able to ask HQ.”

Nadia Fettah of Saham echoes that sentiment: “We have a large portfolio of businesses in smaller countries, so we at headquarters can’t micromanage. Instead, we give our country managers a lot of freedom, and make sure the people we appoint to those roles are real entrepreneurs.” Saham issues guidelines on management and provides its country operations with technology-driven back-office support. “Beyond that,” Fettah says, “we let our local operations decide what to do and how to do it.” She gives the example of Burkina Faso, one of Africa’s smallest and poorest countries. Thanks to the energy and ideas of Saham’s local country manager, who targeted underserved business customers, it has become one of Saham’s fastest-growing markets.

You might be skeptical about Burkina Faso as your next growth market. But there is one more reason to make your African map broad rather than narrow: the need to diversify risk. This is a theme we return to in chapter 5. For now, it’s worth quoting an executive at a global resources company, who told us frankly: “We operate in around thirty countries in Africa. We know that every year as many as five of those countries will blow up, but the other twenty-five will do great. And for more than twenty years, we have done very well in Africa.” Our experience backs that up. We observe that, once companies have succeeded in three to five African countries, expansion becomes easier and risk typically diminishes. In a larger, diversified geographical portfolio, an unexpected political or financial shock in one country can be offset by businesses elsewhere.

NAVIGATION TOOL 2: PRIORITIZE THE MARKETS THAT MATTER MOST FOR YOUR BUSINESS

In a continent with Africa’s scale and geographic complexity, you need to be ruthless in prioritizing the markets in which you will focus your investments and management attention. Again, Coca-Cola provides a compelling example. Even though it is present across the continent, it has not taken a one-size-fits-all approach to Africa’s diverse markets. On the contrary, Alex Cummings’s leadership team weighed up the market size and growth prospects of all fifty-four countries and picked ten as priorities for growth—Egypt, Ethiopia, Ghana, Kenya, Morocco, Mozambique, Nigeria, South Africa, Tanzania, and Uganda. Within each of those countries, Coca-Cola focused on the big cities that accounted for the lion’s share of GDP, such as Lagos, Abuja, and Port Harcourt in Nigeria. “A big-city strategy made practical sense,” said Cummings, “because with many of our bottlers using returnable glass bottles, cities were just easier to get to.”

But what of the forty-four African countries and thousands of smaller towns that were not on Coca-Cola’s priority list? In smaller countries, the company offered a much simpler portfolio of products and packaging. In Cummings’s native Liberia, for example, the company until recently sold its sparkling beverages only in returnable glass bottles. In its priority African markets, on the other hand, it also offers the cans and plastic bottles familiar to Western consumers and produces a broader choice of brands, such as Dasani water and Minute Maid juices.

BET ON TOMORROW’S GROWTH MARKETS, NOT TODAY’S

As Coca-Cola’s experience suggests, the construction of a successful African portfolio depends heavily on picking the right countries. But that is often the starting point. Companies considering setting up business in Africa need to look not just at the spending power of countries today, but also at how their growth trajectories differ. For instance, annual GDP per capita ranges from around $10,000 in middle-income South Africa and Tunisia to $1,500 in Kenya and Zambia to less than $500 in the DRC. Africa contains some of the world’s fastest-growing economies, including Ethiopia, which grew its GDP at a compound annual growth rate of nearly 10 percent between 2014 and 2017.⁴ Countries such as Côte d’Ivoire, Ghana, Rwanda, and Tanzania have been growing nearly as fast. But two of Africa’s largest economies, Nigeria and South Africa, have seen growth slow in recent years. As a result, demand patterns are shifting: we expect East Africa and Francophone Central and West Africa to increase their share of Africa’s overall consumption significantly by 2025, while South Africa’s share will fall. Nigeria remains an essential component in most African portfolios: it represents nearly a quarter of the continent’s total consumer spending (figure 3-3).

Our executive survey suggests there is a next generation of African growth markets that are catching the attention of local companies, but that are still largely off foreign-based multinationals’ radar screens. These rising stars include Côte d’Ivoire, Ethiopia, and Ghana. Africa-based executives were twice as likely as their international counterparts to name these as top-priority countries. Conversely, nearly half of non-African respondents said South Africa was the country offering their company the biggest growth opportunities, but just 27 percent of African respondents agreed. As you draw your map of Africa, we suggest you take that as a reminder to focus on tomorrow’s markets, not just today’s.

THINK CITIES, NOT JUST COUNTRIES

Coca-Cola’s decision to prioritize major cities while maintaining a lighter-touch approach to reach consumers in rural villages makes a lot of sense: “Think cities, not countries” should be a mantra when working out where and how to win in Africa. As we pointed out in chapter 1, Africa’s population is expected to almost double by 2050. As it does so, more than 80 percent of that growth will occur in cities.⁵ Each year for the next twenty years, an average of 24 million Africans will move to cities. By the end of the next decade, Africa will have nearly ninety cities with at least a million inhabitants. The number of cities with more than 5 million inhabitants will more than double, from six to seventeen. The population of Lagos, Africa’s fastest-growing city, is increasing by an astonishing seventy-seven people every hour, according to United Nations data.⁶

Rapid urbanization is one good reason why consumer-facing companies should make cities a central focus of their African growth strategies. But there’s a second good reason: Africa’s urban dwellers have much higher incomes than their rural cousins. In fact, per capita consumption in Africa’s large cities is nearly double the average of these cities’ host countries. In Nairobi, and in the Nigerian cities of Abuja, Ibadan, Lagos, and Port Harcourt, per capita consumption is close to three times the national average. The largest three cities in Angola and Ghana account for more than 65 percent of national consumption. Indeed, Africa’s overall consumer spending is highly concentrated in a small number of urban centers—just seventy-five cities across Africa account for nearly half of the continent’s total consumption. As urbanization progresses, their share of spending will only increase.⁷

RESOURCES: CHOOSE THE RIGHT SPACE TO WIN

Companies in the resources sector will need to map the potential and ease of extraction of the relevant commodities. For mining companies and oil and gas players, this task is made all the more complex by the sheer scale of the minerals opportunity across the continent and by the fact that such a large proportion of Africa’s mineral resources is still to be discovered. As we discussed in part 1, the growth in oil and gas in particular will come from an increasingly diverse group of nations. Companies in the agriculture value chain will need a clear understanding of the distribution and productiveness of Africa’s cropland and how that will be affected by factors such as climate change. Such companies need to locate where there are resources, but they also need to understand how the regulatory environment and competitive landscape is shifting in each market they operate in.

Consider the example of SIFCA in Côte d’Ivoire. In partnership with France’s Michelin, it has become one of the world’s largest natural rubber producers, with plantations and industrial plants not just in its home country but also in Ghana, Liberia, and Nigeria. It has also achieved a leading position in palm oil, for which there is rising demand across Africa. In that commodity, it has developed major plantations, along with Africa’s biggest palm oil refinery, in Côte d’Ivoire. From there, it exports the oil across West Africa. It has also partnered with Singapore-based Wilmar International to grow and refine palm oil in Ghana, and is planning to expand production into Nigeria.

Yet SIFCA was once a major player in cacao, too, but had to exit that commodity when global players like US-based Cargill ramped up their presence in West Africa. SIFCA’s former CEO, Jean-Louis Billon, told us: “Côte d’Ivoire used to be a fairly protected market, but liberalization brought in the big players and pushed down the cacao price. We just couldn’t compete, and in 2000, we recorded our biggest-ever loss.” That chastening experience has guided SIFCA’s approach to constructing its country and commodity map ever since. The company has carefully chosen the places and products where it can be big enough to compete and has found strong global partners to bolster its position. “When you have a partner that’s active on the international market, that makes things much easier,” said Billon. “While our international partners have benefited from our local knowledge, we have benefited from their expertise.” For example, SIFCA’s partnership with Wilmar boosted the output of its palm oil plants considerably.

NAVIGATION TOOL 3: DEFINE HOW YOU’LL ACHIEVE SCALE AND RELEVANCE ACROSS YOUR AFRICAN MAP

Drawing your company’s map is a first important step in building a winning business in Africa—but you also need a clear plan for how you will achieve relevance, scale, and customer loyalty in every territory you play in. As the experience of Coca-Cola shows, there are a few essential components to that plan.

The first is your brand. “African consumers are as brand conscious as consumers anywhere,” Alex Cummings says. Because African consumers and businesses must navigate greater uncertainty in their daily lives than their counterparts in developed markets do, they place great value on brands they can trust. As Cummings emphasized: “We wanted to make it totally clear that our brand was something they could rely on, and that we were here for good.” That philosophy helped the Coca-Cola Africa team make some tough decisions. In the DRC, for example, a bottler wanted to put Coke in standard plastic bottles instead of the company’s iconic curved ones, to make the beverage more affordable. Coca-Cola answered with a flat no. “We insisted that our brand standards were the same everywhere,” said Cummings. “The notion that a lower-spec package was ‘good enough for Africa’ really irritated me.”

A much harder test came when the Ebola epidemic hit the West African nations of Guinea, Liberia, and Sierra Leone in 2014. The disease not only took thousands of lives, it also devastated those countries’ economies—and Coca-Cola’s businesses. “When everyone else was running away, I got onto a company jet with my colleagues and headed to Liberia and Guinea,” recalls Cummings. “It was important that people saw we were committed.” Although sales were down by 60 percent, the company made sure that all of its employees were paid their salary on time, and were trained to avoid getting infected with Ebola. Not one of them contracted the disease. Coca-Cola also contributed water and drinks, medical equipment and supplies, and financial support to community relief efforts.

As these stories suggest, Coca-Cola’s success in making its brand so widely loved in Africa has been underpinned by deep commitment on the part of its executives: Cummings recruited a leadership team that was 75 percent African. “We knew more about the continent than anyone else, we had passion, and we cared,” he told us. That rubbed off on the company’s hundreds of millions of customers across the continent. Cummings recalls a party the company organized to celebrate its fiftieth anniversary in Kenya. A young man approached him and asked in all seriousness: “Is Coke sold in America too?” To Cummings, that was a sign that Coke had truly become a local product. “That was when I knew that our African customers had really taken ownership of the brand,” he told us.

Building off that brand strength, Coca-Cola embarked on a second key step: tailoring its offering to Africa’s diverse consumers, country by country and city by city. (We explore this theme in more depth in chapter 4.) In the company’s priority African markets, it conducted a careful customer segmentation exercise, then both evolved its traditional products and created new ones to target each segment. In Lagos’s low-income neighborhoods, for example, it sold Coke in returnable glass bottles at low prices. For middle-income consumers who shop in supermarkets, Coke was sold in plastic bottles and cans, which across the continent are seen as higher status and come at a premium.

That same differentiation extended to its portfolio of brands. Some, like Stoney Tangawizi, are carbonated soft drinks targeted to local taste. Others, like its growing range of fruit juices and waters, are aimed at Africans who are following global wellness trends. “There is more money in Africa than many people realize,” said Cummings. “Categories like juices might not be big volume drivers but they will be big profit drivers, as they have healthy margins.”

The third key step was to expand Coca-Cola’s on-the-ground presence in its markets—through acquisitions, partnerships, or a combination of the two. Once it had identified its priority Africa countries, Coca-Cola took a hard look at its existing partnership network: in Morocco, for example, it changed its bottler. In other markets, achieving greater local relevance and scale meant acquiring new brands and facilities, setting the pace for a buying spree that continues to this day. In 2016, for example, Coca-Cola announced it was paying $240 million for a stake in Nigerian juice and dairy company CHI.⁸

Depending on your industry and your starting point, you too will need to determine how to play across your African map. To achieve rapid pan-African scale, Saham chose to become a serial acquirer of small insurance firms across the continent. Another firm, Liquid Telecom, has become the largest pan-African broadband infrastructure and data services company, with more than thirty thousand miles of fiber across twelve countries, through both organic growth and acquisitions. It has been willing to pay real money to build scale: in 2017, it bought South Africa’s Neotel for some $430 million.⁹

NAVIGATION TOOL 4: IDENTIFY, AND HELP BUILD, THE ECOSYSTEM YOU NEED TO THRIVE

Your strategic map of Africa should also highlight the places where you have strong partners who can help you succeed—and those where you’ll need to invest in building out your business ecosystem. The guiding question here is: Who will we work with to win? Your ecosystem must be broad enough to provide all the elements you need to run your business in Africa. These include reliable power and water supply, appropriately sited land, a robust supplier base for everything from raw materials to business services, and a distribution network that can get your product into towns and villages across the continent.

For global businesses investing in Africa, the trick is often to find local partners who understand the lay of the land. That has been the approach of many of the multinationals featured in this book. One example, cited earlier, is Singapore-based Wilmar, whose partnership with Côte d’Ivoire’s SIFCA has created highly successful palm oil operations. Another, discussed in chapter 4, is the US-based Kellogg, which views Africa as a key growth market but needed local expertise to market and distribute its food products to African consumers. It partnered with Nigeria-based Tolaram Africa, which is also the West African distributor for Denmark-based Arla Foods, one of the world’s largest dairy companies.¹⁰ These Western consumer-goods firms benefit not just from Tolaram’s tried-and-tested sales and logistics infrastructure, but also its integrated supply chain and close relationships with African governments.

Even companies with a close knowledge of Africa need a robust ecosystem of local partners—and pay the price if that ecosystem is found wanting. One example is South Africa’s Public Investment Corporation (PIC), which manages the pension funds of the country’s civil servants. It invested hundreds of millions of dollars in firms in other African countries, but saw some of those investments run into trouble. CEO Dan Matjila told us that had been “a real eye-opener.” He explained: “We found out later that some of the domestic companies we mandated to conduct due diligence didn’t dig deep enough to uncover some of the issues we are dealing with post-investment.” Matjila remains convinced that Africa outside his home country remains a promising bet: “We’re not retreating. We’re shaping a different partnership approach. We realize now that we have to be present on the ground in the countries in our portfolio, and active inside the companies we invest in, with a real seat at the table. That makes us much better able to detect and manage risk.”

As that example suggests, selecting the right partners is not enough. You also need a smart way to mobilize them around your business objectives. Again, Coca-Cola provides a compelling illustration of the approach needed. “You can find a Coke in every village in Africa,” Alex Cummings is proud to affirm. To achieve that feat, the company relied on its bottler, distributor, and retail partners and designed the economics so that each one of them was incentivized to get its products into consumers’ hands. “Everyone made a buck along the way, so we could rely on our distribution network to cover the rural areas while we focused on the cities,” Cummings told us.

Other multinationals have adopted similar approaches to distribution—and supported the emergence of a cohort of African entrepreneurs skilled at “last mile” delivery of beverages, pharmaceuticals, cleaning products, cigarettes, and a host of other consumer goods. One of them is Kenya-based Kaskazi Network. Its founder, Ng’ang’a Wanjohi, recognized a business opportunity in Africa’s tangled city centers and remote rural areas, where residents shop almost entirely at hard-to-reach informal shops and kiosks. Kaskazi’s five hundred sales representatives deliver goods via motorcycle from fast-moving consumer goods companies to informal shops and kiosks across Kenya. Supply is only part of Kaskazi’s value proposition. Its sales reps also become a vital source of market intelligence, feeding back insights on competition and counterfeiters, tips on promotions, and information on why products are moving quickly or slowly.¹¹

As we pointed out in chapter 2, poor connectivity in many of Africa’s cities means that businesses, particularly manufacturers, can struggle to find reliable suppliers and other partners to build and sustain large-scale businesses. As Oxford University economist Paul Collier explained it to us: “The miracle of productivity is driven by scale and specialization. And the two go together, because the more scale you’ve got, the more specialization is feasible.” That, he emphasized, requires clusters of connected, efficient firms. “In order to achieve scale and specialization, you need a lot more connectivity than if you’re just operating solo,” he says. Collier’s thesis is that the “congested sprawl” of African cities has hampered the development of clusters, which in part explains why Africa has been slow to break into global manufacturing. Scarce availability of industrial land, he added, just deepens this problem: “Land markets are probably the most important thing that’s gone wrong in African cities.”

As you build your own ecosystem, you need to think carefully about how to get around these obstacles. One approach is to pick the cities and countries where connectivity is strongest and efficient clusters of suppliers and business partners are forming. Donald Kaberuka, former president of the African Development Bank, points to his native Rwanda as one such country. Excellent transport, easily navigable regulations, and major focus by government on education and training have made the East African nation a natural business cluster. “In Rwanda, we have built businesses around other businesses,” Kaberuka told us. “We are building a value chain that one day could support big companies like Boeing.”

Another approach is to locate your business in one of Africa’s growing number of greenfield industrial hubs—several of which are being built away from major urban centers in partnership between governments and business. Hawassa in Ethiopia (see chapter 2) is one of those. Ethopia’s strategy to create a global apparel manufacturing hub in this once-sleepy backwater appears to be working, backed as it is by infrastructure investments in airports, highways, and a modern rail link to the Port of Djibouti. (In fact, as Donald Kaberuka points out, Ethiopia and Djibouti are “the extension of one region” for manufacturers.) A McKinsey survey conducted in 2017 found that large global apparel companies see Ethiopia as the most attractive country for future sourcing opportunities—ahead of Asian competitors such as Bangladesh and Vietnam.¹²

There are several other established industry clusters that bring together suppliers, enabling infrastructure, and skilled workers. In Morocco, for example, Tangier is home to a thriving free-trade zone established as part of a government-backed industrial plan launched in the early 2000s. The cornerstone of this plan has been the creation of export-focused special economic zones supplied with top-quality infrastructure and located close to major ports. Morocco offers significant financial incentives to manufacturers who invest in these zones, including exemption from corporate tax for the first five years (and a flat tax rate of 8.75 percent for the next twenty years), as well as exemptions from customs duties, value-added tax, and local and personnel taxes.

Today Tanger Automotive City is home to more than thirty multinationals—including a $1 billion Renault auto plant. In 2016, Renault produced more than 270,000 vehicles at the plant and employed around eight thousand workers. The plant gives Renault access to both Europe and Morocco, where its brands have a leading position in the market. It is also a gateway to the rest of North Africa. Tanger Automotive City has become a training center and a center for research into next-generation digital technology as the companies that have located there compete with, supply, and collaborate with one another.¹³

Of course, not all centrally planned hubs take off, and companies considering locating within them need to carefully evaluate their potential. In particular, Africa’s experience with special economic zones (SEZs), which typically provide simplified access to land and infrastructure along with favorable labor and trade regulations, has been disappointing. The World Bank has described African SEZs as “underperforming” compared with their Asian and Latin American counterparts.¹⁴ African nations have too often followed the “build it and see what comes” approach to SEZ development. Zones targeted at and tailored for a specific cluster of industries—like Tanger Automotive City and Hawassa—have been much more successful.¹⁵ You need to tread carefully in picking a hub that truly supports your business growth.

We should emphasize that not all successful hubs are government-planned. In your search for an ecosystem to support your business, you should also weigh up the industry clusters that have developed informally. In Kenya, for example, a thriving information and communication technology sector has grown up around Nairobi’s Ngong Road. iHub, an incubator and co-working space in the heart of Nairobi, has supported some hundred tech startups over the past seven years.¹⁶ One such is iCow, an app to help farmers track and manage poultry, livestock, and other aspects of their business. On the other end of the spectrum, IBM operates a $10 million research lab in Nairobi. Google, Microsoft, and Intel also have operations in the city.

Africa’s rapidly growing local and national economies offer enormous opportunities. As companies consider entering those markets or expanding across the continent, they need to carefully craft a geographic portfolio strategy that takes into consideration current and future conditions, as well as the rapidly evolving competitive landscape. Choosing the cities and countries to compete in is just the starting point in mapping your Africa strategy. You also need a clear plan to build scale and local relevance in your African markets, and to find the partners who will help you win in each of them.