What is your Africa Strategy

What is your africa strategy

Two decades ago, the big question on the minds of Boards, C-suite executives and investors was - What is your China Strategy - and companies that had a well articulated China strategy were big winners. The big question this decade is going to be - What is your Africa Strategy.

This may seem unlikely given stalled growth in the last 5 years after 15 years of rapid economic expansion driven by a commodity super-cycle. As we enter a new decade Africa is the final frontier and it's at the beginning of a new economic cycle with Nigeria at the vanguard. This time it's different

Growth will not be driven by commodities but by appropriate technological innovations in light manufacturing, services and agriculture. FinTech is going to play a key role in this transformation.

Why

Improvement in Capital Stock
The Nigerian Diaspora remitted $27B dollars in 2019, the Kenyan diaspora also remitted record sums last year. A glut of capital has led to asset price inflation and low bond yields in the US and other developed markets. Marginal return on capital will continue to diminish in the West and Capital will flow downhill to Africa. This trend will continue to accelerate over the next two decades. The new rail lines and ports being built will make it easier to evacuate manufactured goods and raw materials, and better integrate Africa with global supply chains.

Improvement in Labour Stock
Africa is about to reap a demographic dividend. The young population is increasingly well educated including a repat community that has studied in the best schools all around the globe. As population growth slows in India and China, and developed economies grapple with a declining population, the focus of multinationals will necessarily shift to Africa. Africa’s value proposition becomes even more compelling due to escalating confrontation between China and the West, as well as pandemics like the Corona virus that bring to fore the global economy’s unhedged exposure to China risk.

What about

Political uncertainties and conflict
A legacy of colonialism and the cold war was incessant conflicts on the African continent. The number of conflicts on the continent has reduced drastically and there are fewer catastrophic conflagrations. African countries are getting increasingly democratic with stronger institutions.

Headwinds
The 800 pound gorilla in the room is Climate Change, while Africa has a small carbon footprint, it will bear the brunt of the impact of climate change. Technological solutions will be critical to cushion the effect of climate change and build up climate resilience, unfortunately this is not on the front burner for most African governments.

Summary

It is clear that corporations need to start start thinking about Africa and positioning themselves by having a well articulated rigorous and robust Africa strategy.

What is your africa strategy

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