Africa – the 10th largest economy in the world Africa has more than 900 million consumers. Despite the challenges, every day they need to eat. They need clean water. They need shelter, clothing, and medicine. They want cellphones, bicycles, computers, cars and education for their children. Businesses are already seizing these opportunities to build markets across Africa. This is the message of a recent book on the “dark continent”.

Is the wealth of Africa all from diamonds and oil? Perhaps, but not always the diamonds and oil that you may think. Although mining and oil are important industries historically, there are more opportunities for Africa than just the natural resources. While petroleum production has grabbed the headlines, Bidco Oil Refineries Ltd in Kenya has created a business with a turnover of more than US$160 million based largely on a different kind of oil: cooking oil. It began producing oil in 1991 at its Thika factory. Through effective marketing and packaging, with products sized for any budget, it became the leading manufacturer of edible oil, fats and soaps in East and Central Africa. Bidco understands the market, from the low-income customers in Kibera who buy oil in small packages, to the upper-income consumers who log on to its Jikoni.com website to download recipes. With over 51% market share in Kenya, the company exports oil, detergents and other products to more than a dozen African countries, including Tanzania, Uganda, Rwanda, Burundi, Ethiopia, Sudan, Eritrea, Zambia, Malawi, Madagascar, Democratic Republic of Congo, Zanzibar and Somalia. Not all valuable oils in Africa come out of the ground. In South Africa, companies are mining a different kind of “diamond” – the so-called Black Diamonds, an emerging middle-class that is driving economic growth. Discussing this new segment, Melanie Louw, an economist for ABI, a bottler of Coca-Cola beverages in South Africa, noted that the Black Diamond segment has created a fundamental shift in the economy. “This has had a multiplier effect that has boosted the economy up to the point, I believe, that our economy has structurally changed,” she said in an interview in her offices in Johannesburg. “We have lifted up to a whole new realm of economic growth.” The study by the University of Cape Town’s Unilever Institute that identified this Black Diamond segment called it “the most exciting market opportunity in our history.” It is another sign of Africa’s rise. Although South Africa’s market is further along the curve than most of sub-Saharan Africa, the roughly 400 million people in the middle segment of the market are increasing everywhere in Africa. Some marketers break South Africa into lifestyle segments (LSMs) on a scale of one to 10. They have had to recalibrate their scales over the past five years as LSM 5 has moved up to consumption patterns that were once associated with higher segments. In December 2007, Cape Town hosted the first “lifestyle festival” for the Black Diamond segment (followed by similar festivals in Johannesburg and Durban in 2008). The festivals celebrated what organisers call the “Afropolitan” products and brands that cater to the lifestyle of South Africa’s black middle class. This emerging middle class, which is growing at an estimated rate of 30% per year, is also driving up housing prices in the country. “The past 10 years have been the most exciting years we have had,” said Louw. “We’ve seen amazing changes in consumer behaviour. In terms of lifestyle, trends such as health and wellness and even packaging preferences have changed completely. The economy structure and labour structure have changed profoundly.” Although the top four companies on the 2007 list of the largest Africa companies, as ranked by African Business, are in metals and mining or oil and gas (Anglo American plc, BHP Billiton, Anglo American Platinum and Sasol), among the top 20 companies are consumer goods (SABMiller MTN Group, Orascom Telecom, Itissalat Al Maghrib and Telkom SA), banks (Standard Bank, FirstRand and Absa), and real estate companies (Liberty International Plc). There is still tremendous interest in Africa’s natural resources, but could cooking oil and Black Diamond consumers be the oil and diamonds that will be most significant to Africa’s future? Trade not aid Africa is receiving unprecedented attention from the West for its health, political and humanitarian crises. Philanthropists and celebrities have been crisscrossing the continent drawing global attention to African challenges. The musician Bono, in a special issue of Vanity Fair magazine that he co-edited in July 2007, wrote: “Africa is the proving ground for whether or not we really believe in equality”. Many important African initiatives play vital roles in drawing attention to the plight of Africa’s most vulnerable populations. But an unfortunate byproduct is that they also reinforce a perception that Africa is nothing but a continent of war, disease and begging bowls. This makes it easier to overlook the business opportunities that are also there, and growing. Although charity is important, it is not enough. Africa, like many emerging economies, has serious problems that cannot be ignored by businesses operating there. Companies such as Coca-Cola, Unilever, Novartis and many others are leading the way in addressing disease, poverty, corruption and other challenges. Some of these activities, such as distribution of condoms to prevent HIV/Aids, are either the result of corporate citizenship or enlightened self-interest. No company can stay in business for long anywhere without being concerned about the problems facing its employees and customers. This makes corporate social responsibility essential. Africa’s challenges, like any consumer needs, can also create business opportunities. The lack of reliable electricity in many parts of Africa created a market for generators and solar cells. Unstable financial systems have led to systems for bartering cellphone minutes, microfinancing, and cellphone-based banking. Health problems from Aids to malaria created a demand for new treatments, generic drugs, testing equipment and insurance. Concern about the environment has led to opportunities in eco-tourism. The challenges often require blended solutions of public and private co-operation, leading to successful businesses that address real societal needs while building viable long-term economic value. Where African nations have been able to create positive and stable governments, their economies have flourished in countries such as Botswana, Mozambique, Mauritius and even Rwanda – a country best known in the West for chaos and genocide. Rwanda’s leaders have announced aggressive plans to raise per-capita GDP from US$230 to $900 by 2020, using information technology to transform the nation into an “African Singapore”. Despite the dire situation in Sudan’s western province of Darfur, the country has one of the fastest-growing economies on the continent, with multibillion-dollar office towers, hotels and other additions to the skyline of Khartoum inviting comparisons to Dubai. In Somalia, while the war-torn capital of Mogadishu is a focus of international concern, Somaliland in the north is thriving and stable. Through setbacks, wars and turmoil, the continent’s overall market development has moved in one direction and it’s rising. From the book “Africa Rising” by Vijay Mahajan; Published by Wharton School Publishing in August 2008. Although charity is important, it is not enough. Africa, like many emerging economies, has serious problems that cannot be ignored by businesses operating on the continent.