PREFACE

As global business interest in Africa has blossomed, we have found ourselves traveling the world to help executives understand where the true opportunity lies, and how their businesses can seize that opportunity before their competitors do. A few years back, one of us (Acha) found himself in Seoul, presenting to the chairman of one of the largest Korean conglomerates. At that stage, the company had almost no presence in Africa and its executives were concerned that their Chinese competitors were stealing a march on them.

As always, the McKinsey team arrived at the meeting armed with a PowerPoint presentation, the first page of which was a map of Africa. We’d intended to flip quickly past it, but the chairman stopped us in our tracks. “You’ve made a mistake,” he exclaimed. “You have two countries called Congo!” In fact, there are two countries named after the mighty River Congo. One is the mineral-rich but conflict-ridden Democratic Republic of the Congo (DRC), with a population of around eighty-seven million and a land area eighty times that of Belgium, its former colonial power. On the other side of the river is the Republic of the Congo, with a population of just 5 million but a GDP per capita ten times that of its neighbor, reflecting its position as a significant oil producer.

“Yes, there are two Congos. Why not? There are two Koreas!” we told the chairman. There were laughs all round, but this moment of confusion underlined a real issue facing any company seeking to build or grow a business in Africa—how to navigate the continent’s bewildering scale and complexity. Africa has fifty-four countries with a combined population of 1.2 billion (figure P-1). It has over a thousand languages and huge diversity in income levels, resource endowment, infrastructure development, educational attainment, and business sophistication.

It’s one thing to get a handle on the physical map of Africa, but it’s an even greater challenge to create an accurate mental map of the continent. In our experience, the instinct of most businesspeople is to underestimate Africa’s size and potential as a market, and overestimate the challenges of doing business there.

Let’s test your own perceptions: How many companies in Africa earn annual revenues of $1 billion or more? Take a guess.

If you guessed fewer than fifty such firms, you’re in good company. We surveyed over a thousand business executives across Africa and the world, and fifty was the maximum number chosen by most respondents. Several said “zero.” When we asked the same question at events such as the World Economic Forum, participants were only slightly more optimistic: most put the number of billion-dollar firms at between fifty and one hundred. The reality? There are four hundred such companies—and they are on average both faster-growing and more profitable than their global peers.¹ Africa’s banks, for example, grew their revenues at double the global average between 2012 and 2017—and on average were more than twice as profitable as those in developed markets in 2017.²

You might need to reset your mental map of Africa in other ways too. Perhaps you see it as a continent of villages and smallholders; in fact, it will soon be the fastest-urbanizing region in the world. Africa already has as many cities with more than one million inhabitants as North America does, and more than 80 percent of its population growth over the next two decades will occur in cities. The income per capita of Africa’s cities is more than double the continental average, making them attractive markets for many businesses.

How about technology? Like many observers, you might assume that Africa lags the world. But the reality is that this young continent, with a median age of around twenty, is an eager adopter and innovator in all things digital and mobile. There are already 122 million active users of mobile financial services in Africa.³ The number of smartphone connections is forecast to double from 315 million in 2015 to 636 million in 2022—twice the projected number in North America and not far from the total in Europe.⁴ Over the same period, mobile data traffic across Africa is expected to increase sevenfold.⁵

Why are our mental maps of Africa so faulty? In part, it’s because so much of the news about Africa is negative. In a single week in 2017, for example, the New York Times ran the following articles: a profile of four boys from a village in Nigeria who had been abducted by Boko Haram; a report on the drowning deaths of migrants from Senegal in their desperate attempts to reach Europe; a new story on corruption in Angola; another on corruption in Tunisia; and a report on alleged government-sanctioned killings in the Democratic Republic of Congo. Is it any wonder that executives from developed countries may have skewed notions of what the environment is really like in Africa?

All of those stories were accurate and important to report, but such coverage needs to be balanced with other sources of information to gain a full picture of the actual conditions a business might face. Consider the following: While media accounts lead to a perception of widespread conflict, Africa has in fact become steadily more peaceful since 2000.⁶ Armed conflicts persist, but there are fewer of them and they are more contained. Africa is often seen as synonymous with poverty, yet the share of Africans who are poor fell from 56 percent in 1990 to 43 percent in 2012, according to the World Bank.⁷ Adult literacy rates have climbed by ten percentage points since 1990 to 63 percent—still too low but improving rapidly; and again, wide variations exist across Africa.⁸ Health is also improving, with life expectancies rising and infant mortality falling.

We’ve written this book in part to help leaders everywhere draw a more accurate mental map of the continent—the first critical step to seizing the opportunities for building profitable, sustainable businesses there.

WHAT YOU WILL GET FROM THIS BOOK

The idea for this book was sparked by a challenge from Harvard Business Review Press, who told us there was a need for a comprehensive book on the African business opportunity by people with deep experience in the continent. We leaped at the chance, and immediately began distilling the insights from over three thousand McKinsey consulting engagements across Africa over the past twenty years. We drew on our extensive research library—including the McKinsey Global Institute’s Lions on the Move reports on Africa’s economic progress, as well as studies on digitization, job creation, the African consumer, the continent’s electricity sector, and women’s advancement.⁹ We commissioned the executive survey mentioned earlier, gauging the views of over one thousand business practitioners in every region of the world. Most importantly, we interviewed dozens of successful CEOs and entrepreneurs, as well as leaders of major development institutions, to learn from their own stories of the peaks and pitfalls of business building in Africa.

One such business builder is Nigeria-based Aliko Dangote. Of all the executives we asked, he was the only one to guess correctly that Africa has four hundred billion-dollar companies. Perhaps that is testimony to his confidence in Africa’s business prospects and the boldness of his own growth vision. From a trading company started with a small loan from his uncle in 1978, Dangote has built one of Africa’s largest industrial firms, which manufactures commodities including cement, sugar, and flour in massive volumes. By 2017, the Dangote Group’s annual revenues exceeded $4 billion, and Dangote had become Africa’s richest person and the world’s richest black man. Yet he continued to aim high. His new growth projects include the world’s largest single-train petroleum refinery, scheduled to open at the end of 2019. It is being built near Lagos, Nigeria’s bustling commercial capital, at cost of $12 billion.¹⁰ Dangote’s philosophy is: “Think big, dream big, and do big things.”¹¹

This book tells the stories of many companies that are thinking big in Africa. Some are African-born champions like Dangote, Kenya’s Equity Bank, and South Africa–based mobile telecoms operator MTN. Others are global multinationals like Coca-Cola, GE, and Total. Several are startups that are bringing together global and African expertise and investment to build fast-growing businesses in new industries. One example is Jumia, one of the continent’s leading e-commerce players. Another is M-Kopa, which has sold off-grid solar-power kits to six hundred thousand rural households, and financed them via mobile money.

Though these companies differ widely in their geographic and sector focus, what they have in common is the imagination to see Africa’s unmet needs as opportunities for entrepreneurship, and the long-term commitment required to build businesses of meaningful scale. Although each is a commercially successful enterprise, their innovations and investments have also created real social impact by connecting people to services that were previously unavailable, boosting productivity and growth, and creating large numbers of jobs.

Indeed, the fastest-growing and most profitable businesses in Africa typically see challenges as a spur for innovation and unmet market demand as room for growth. For example, Africa faces huge gaps in education, health systems, electric power, and transport infrastructure and lags in global ease-of-doing-business rankings. These issues might scare off the fainthearted, but they make Africa a fertile arena for entrepreneurs.

It is for such entrepreneurs, as well as executives seeking to expand their operations in Africa or access the market for the first time, that we have written this book.

In the first part, we set out to answer the question: Why Africa, why now? We challenge you to reset your mental map of Africa and take a fresh look at the opportunities presented by the continent’s growing markets. We spell out how much room there is for businesses to grow, and we highlight the long-term trends and untapped opportunities you can harness to build a successful enterprise.

In part 2, we present a strategic guide to translating those opportunities into enduring business value—a guide that is just as relevant for Africa-born companies seeking to expand across the continent as it is for companies coming to Africa from other regions. We home in on four imperatives to win to Africa: choosing the right geographic portfolio, innovating your business model, building resilience and managing risks, and unleashing Africa’s talent.

The purpose of this book, however, goes beyond creating value for shareholders: we want to show you not just how to profit from Africa’s future, but also how to help shape it for the better. We are convinced that business has a profound role to play in accelerating Africa’s development and enabling its people to live better, more fulfilling lives. This is truly a continent where businesses can do well by doing good—whether by connecting people with technology, supplying a wider choice of manufactured goods at lower prices, helping build expanding cities and vital infrastructure, or nurturing skills for a young and fast-growing workforce.

Is now the right time to build a business in Africa? For all three of us, that question has been a very personal one. Acha and Mutsa left behind promising careers in the West, returning home to Africa to pursue the uncertain but passion-imbued task of building McKinsey’s practice here. Georges left Asia to do the same. We’re thrilled to be part of Africa’s exciting story of business and economic growth. We hope this book inspires you to join us.