AFRICA is attracting investor interest as growth outstrips that of many developed countries, but the picture on the ground is a bit more complicated.
On the one hand, African and international businesses are expanding on the continent, spurred by the opportunity for growth in a vastly underserved market.
A recent consumer retail report by market researchers A.T. Kearney underscored as much; many global retailers consider sub-Sahara Africa the “next big thing.” With a 1 billion-strong population, mobile phones and the Internet are proliferating quickly across the continent, and it is urbanising at a rate of 3.61%, faster than any other region in the world.
But even as the sometimes breathless narratives on “Africa Rising” swirl, some are finding it a tough market to crack. South African guitarist and singer Syd Kitchen famously said it in the title of his 2001 album Africa’s Not For Sissies, and today, some companies are finding things aren’t quite so rosy after all.
Last week for example, Nestlé announced it was cutting 15% of its workforce in its equatorial Africa operations, admitting it overestimated the rise of the middle class in the region.
Chief executive of Cornel Krummenacher told FT that turnover in the region had failed to deliver initial growth forecasts set out in 2008, when Nestlé stepped up its expansion in the region, when it began building a clutch of new factories, aiming to double its business every three years.
Instead, the company is now having to draw money from its Swiss headquarters to pay wages and suppliers, it recently closed its offices in Rwanda and Uganda entirely, and might close some of its 15 warehouses before September (it seems the middle class is growing alright, but it’s drinking lots more wine and whisky than hot chocolate).
The headline figures might remain promising, but businesses that actually operate on the ground may have a different story.
To help you navigate your way, Mail & Guardian Africa created a (very unscientific) index of business attractiveness, by putting together a basket of 10 major consumer-facing companies - five African, and five international - and seeing where these businesses have chosen to operate.
The ten companies are: Multichoice (DStv), Dangote Cement, Ethiopian Airlines, pan-African financier Ecobank, brewer SAB Miller, Marriott Hotels, Etisalat, Google, Nestlé and fast food company KFC. In the case of SAB Miller, Dangote Cement and Nestlé, we only focused on the countries where the companies actually have factories - and so a “substantive” presence - not just distribution operations.
Etisalat was chosen over its much bigger telco counterpart MTN in order to bring more nuance and inclusivity in French and Arabic-speaking north Africa; MTN tends to be concentrated in Anglophone Africa and particularly in southern and eastern Africa.
Nigeria gets a perfect 10 score, with all ten companies investing in the country. Second-place is Ghana, with nine firms present, and third place is a two-way tie between South Africa and Tanzania with eight companies operating.
Position five is a three-way tie between Kenya, Uganda, and Zambia, which have seven firms present, while eighth place Egypt and Malawi are tied.
23 countries had at least two firms present. By this measure, Ethiopia is at the bottom of the list, with just three firms- its own Ethiopian Airlines, Dangote Cement and DStv having a substantive presence.
It puts a damper on Ethiopia Rising - despite the very robust growth in headline economic growth, state-controlled Ethiopia is still quite a closed economy with little presence of international businesses.
Ethiopia ties with Morocco at the bottom, despite the two countries being very different structurally, demographically and in per capita incomes. Morocco is a rich country with a highly developed retail sector, but quite disengaged from wider Africa - none of the African brands have a presence in the country, the three firms included for Morocco are KFC, Nestlé and Etisalat.
Still, in terms of the firm with the biggest footprint in Africa, Ethiopian Airlines is tops, flying to all top 10 countries on the Index.
There’s a bunch of another 31 countries which have two or fewer brands in the Index operating substantively in their country. This may not necessarily be a bad thing, as some are small countries that get much of their supplies from larger neighbours.
But it also serves to highlight just how fractured the African market is.