By Karen Nickel Anhalt
You know that times have changed when you see "Africa" and "Geldof" (as in Sir Bob) in a headline and the story is not about starvation, refugee camps or debt forgiveness. These days if you Google those two words you'll find that Geldof has changed his tune on Africa.
Africa is not about Live Aid anymore; it's about "8 Miles," which is the shortest distance between Europe and Africa and, more significantly, the private equity fund that Geldof is backing, which invests in promising consumer-driven businesses and service providers. "Africa is now a continent of extraordinary business and investment opportunity.
Private equity is one way to support the enterprise and dynamism of the people of the continent and help provide the jobs and skills that are needed," proclaimed Geldof earlier this year, announcing "Africa is seriously Open for Business."
Africa is more than just open for business—it is experiencing solid economic growth. At a time when the U.S. economy is lukewarm on a good day, real GDP growth in sub-Saharan Africa (SSA) has been compelling. In the first decade of this millennium, GDP growth in the G7 averaged 1.4 percent. In SSA it averaged 5.5 percent.
The growth in SSA is not just about commodities—it's about consumers. Having a wealth of natural resources hasn't hurt, but the real news in Africa is the growing size of its middle class. Since 1980, five years before Geldof launched Live Aid, the middle class in SSA tripled in size.
Sir Bob isn't the only one to notice the change of storyline in Africa—in fact; he's not even one of the first. Stephen Jennings, billionaire founder Renaissance Capital famously quipped to Bloomberg, "If Russia was a once-in-a-lifetime opportunity, Sub-Saharan Africa is a second once-in-a-lifetime opportunity," just before upping his investment in Africa to $1 billion in 2007.
ennings is still a believer and his firm is one of the largest real estate holders on the continent. Renaissance developed six new cities in Kenya, Ghana, the Democratic Republic of Congo, Zambia and Zimbabwe from the ground up, making a big bet on increased consumer spending power with plenty of middle class and high-end housing. He has likened the growth opportunity in Africa to boom time in China and the Asian tigers.
The comparison to China is apt. China is a major long-term investor in the continent and Western companies are only now waking up to the urgency of developing a course of investment action—before Chinese investors get all the good stuff.
Indeed, the McKinsey Global Institute concluded that "Africa's economic growth is creating substantial new business opportunities that are often overlooked by global companies" in its 2010 report on the potential of SSA. MGI focuses on consumer industries, but substantial new business opportunities have been overlooked across the board. Foreign investors want in to Africa, but have no clue on where, how and when.
MGI's report was a call for action to those global companies—and the consultants who should be helping to identify all those opportunities that will give them profitable access to an honest-to-goodness growth market—or, rather, markets.
In the burgeoning excitement over sub Saharan Africa's growth prospects, it's easy to forget that the region is made up of 48 highly differentiated country markets. Africa is indeed Open for Business. The challenge for consulting firms and their clients is in deciding where to enter.
Karen Nickel Anhalt is an Associate Director of Kennedy Consulting Research & Advisory. She can be reached via e-mail at customercare@alm.com. For information on KCRA, visit
www.alm.com.
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