Africa from a marketing perspective (Vijay Mahajan, Africa Rising)

Vijay Mahajan, author of Africa Rising: How 900 Million Consumers Offer More Than You Think (Wharton School Publishing, ) is interviewed in Knowledge @Wharton (pdf; mp3):

…the population of Africa — at about 950 million — is comparable in size to the population of India. And if you look at growth rates, the population could be equal in size in a few years to the population of even China.

The next point is about market opportunity. Are there consumers in Africa who have the resources to buy products like consumers in India and China do? The fact is that the GDP of Africa — that is, looking at the continent as if it were a sort of United States of Africa — is actually higher than India’s. If all the countries in Africa combined forces, they would be the 10th largest economy in the world, one notch above India, and ahead of the other big emerging economies, Brazil and Russia…

…Why has Africa been ignored? That has puzzled me. When I travelled from Southern Africa to Northern Africa, I was surprised that I didn’t see more U.S. or Western European companies than I did. One U.S. multinational with an exceptionally big presence is Coca-Cola. It has been there more than 90 years. Another company with a big presence there is Unilever, the Anglo-Dutch consumer goods producer. So while there are some multinationals, it’s not to the same extent as what I saw in India and China when I was researching my previous book, The 86% Solution.

The other thing is that here in the United States and in other developed countries, we get nothing but bad news about Africa in the press. Not to criticize CNN, but you know how badly the Africa that is portrayed in the media like CNN is. The CEOs I was interviewing were so happy that, for the first time, a professor from America was interested in learning about what they were doing.

But it could just be a matter of time. When I started working on The 86 Percent Solution 15 years ago, I used to hear the same stories from many Indian and Chinese entrepreneurs…

…The market is not different from any other developing country. After speaking with a lot of advertising agencies, multinationals and local entrepreneurs, I decided that there are three major groups in Africa, which I refer to in the book as Africa 1, Africa 2 and Africa 3. The terminology is actually taken from an Indian entrepreneur mentioned in the book.

Africa 1 comprises between 5% and 15% of the population of each country. These people could be from anywhere in the world. They may be senior government officials, expats, people working for [non-government organizations], people working for large, international banks. This segment was not as interesting to me as the others.

The segment that really was interesting is what I call Africa 2. People in this segment are neither poor nor rich; this segment comprises average people living from month to month. They may have some savings. And you can guess that these people are civil servants — hardworking nurses, hardworking teachers and so on — or work in the hospitality industry.

This segment has very high aspirations. These people believe Africa is going somewhere, and they are upbeat. I spend a lot of time in the book on what a big opportunity Africa 2 is. The size of this group is between 35% and 50% of a country’s population, the equivalent of between 350 million and 500 million people. Divide that number by 5, which is the average size of a family in Africa (in the U.S., it is 3; in India it is 4)…. So there is a very viable Africa 2, which is really going to drive the economy and the consumer markets.

Now, Africa 3 — the remaining 35% to 60% of an African country’s population — is the one that is struggling. These are the stories that you typically hear about. But that number is not any different from other developing countries. After all, there are 700 million people in India and 750 million people in China who do not have access to a toilet. What’s interesting about Africa 3 is that many of them work for Africa 2 and Africa 1, as maids and the like, and they aspire to perhaps one day be part of Africa 2…

…Another thing to keep in mind there is that Africa has a young population. A little more than 40% of the population is younger than 15, compared with about 30% in India…

…diaspora is involved in Africa. According to estimates based on formal and informal remittances, Africa gets about $40 billion a year, the same amount that India gets…There are an estimated 100 million Africans living away from home. But the immigrants who are still connected to their homes — like the immigrants from India and China — are sometimes very innovative. I’ve been seeing some very clever ways that the diaspora is involved in talent, in helping their families to start businesses back home…

…if you really want to understand Africa, you have to go on "consumer safari". You have to go and see with your own eyes what is going on…If the top management is not there, they do not really understand the market themselves, and they do not get involved with the local institution. So the good advice that I was given was to "walk the market"…

The situation in Africa is not any different from India and China. You have to really get to know that continent and see for yourself what opportunities exist there.

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Read or listen to the whole interview in Knowledge@Wharton (pdf; mp3):

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4 thoughts on “Africa from a marketing perspective (Vijay Mahajan, Africa Rising)

  1. Jeff says:

    This article is both upbeat and well researched. I would venture that the reason why more multinationals are not present on the continent (particularly outside of high-risk/high-reward industries like mining, oil and gas,…) is because there are many more structural risks in African countries than in India or China. Most African countries have weak institutions, a weak judiciary and are unable to cope with even minor crisis (like a body with a weak immune system).

    I am the author of Fixing Africa, once and for all (free download at http://www.fixingafrica.com). The main theme of my book is to combine these weak countries into viable federal political entities. Once the structural risks have been dealt with, economic growth can be massive and sustainable.

    • Ben says:

      Jeff (Tidjani), I’m not sure what to say in response. By the title ‘fixingafrica’ and the really strange borders you draw for the “super states” I would have never guessed you were half Malian–though perhaps the grandiose philosophy part has resonance with some of my experience in France. I skimmed through your “book” quickly. While I definitely see problems, I’m not sure I share your alarming pessimism. Like I said, I’m not sure where to start, but for one, your proposed borders made no sense to me. Why put Morocco in the West African state instead of North Africa where it already has affinity? Why not split Sudan (as is already happening), and have the South join Ethiopia? How can you separate Kenya and Uganda? Already more natural alliances are in place–e.g. ECOWAS. I could go on.

      Anyway, I’m afraid to say that I found it hard to take your suggestion seriously.

  2. Jeff says:

    Thanks for checking out the book Ben. I’m not going to defend my breakdown of countries within the federations, that’s not really the point. It should be taken a starting point for discussion, debate, improvement, etc. I’m not arrogant enough to think that one guy can go into his office and write the definitive solution to all the problems of the continent.

    The biggest surprise I have found so far is that the reactions to my initiative don’t depend so much on race, country or education level. The main discriminant is age. Reactions from young people (let’s say under 25) are almost unanimously enthusiastic and positive. For people over 25 (group to which I belong 🙂 ), it is much more mixed. The most negative/violent reactions come from those who claim to “know Africa and African values” (and pretty much imply that I don’t know what I’m talking about).

    Overall I’m very happy that (many) younger people, Africans in particular, see value and hope in what I propose. Progress often comes from those who don’t know better, not from those who think they know it all.

    Nobody knows what the continent will look like in 20 years. But we need proposals and positive visions, and it should be welcome news when it comes from Africans themselves.

    Your feedback is noted, any contribution is helpful and healthy for the debate.

  3. Ben says:

    That’s very interesting about the demographic age breakdown in response. So much of Africa is young, so this is important.

    The younger generation is definitely getting fed up with the incompetent and corrupt leadership . . . it won’t be long. I do believe that Africa will be radically different in 20 years, but I think it will evolve more along the lines of the regional groups that are already forming ECOWAS, the East Africa Union (Kenya, Uganda, Tanzania), the South African States, etc.

    Keep me posted on any developments.

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