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Africa’s need is good for business

Africa may be a needy continent but this need offers rich rewards for businesses that are daring, innovative and flexible enough to grapple with poor infrastructure, underdeveloped markets and volatile politics.

This is the premise of a new book, “Africa Rising: How 900 Million African Consumers Can Offer More Than You Think” (Wharton School Publishing).

Author Vijay Mahajan, who holds the John P. Harbin Centennial Chair in Business at McCombs School of Business, University of Texas at Austin, debunks traditional stereotypes about a continent that is starting to beep ever louder on the radars of global investors. His book, published this month, is built around interviews with African and expatriate business people across the continent, including producers of consumer goods, alcohol, soft drinks, airline firms and retailers.

“(Many entrepreneurs) were tired of the media reporting too many negative stories about Africa ... if something happened in one country, all Africa was on fire. They were saying ‘how come our story doesn’t get out?’” he told Reuters in an interview. High commodity prices, greater political stability in many countries, fewer wars, better communications and economic growth of around 6.5% have helped lure new investment, often from China and other emerging countries, primarily for resources such as oil and gas.

Mahajan says Africa’s 900 million plus people in 53 countries offer much as a market -- they need to eat, they need clean water, clothing and medicine and they want cell phones, bicycles and computers. If Africa were a single country, according to World Bank data, it would have had $978 billion total gross national income in 2006, placing it ahead of India. “You cannot ignore that chunk ... if you are a company that has ambitions of being global,” he told Reuters. But you have to be nimble.

 
“HIDDEN IN PLAIN SIGHT”

His book is at its best when it exposes the nitty-gritty of marketing, distributing and selling in African countries. He cites the example of Zimbabwean company Innscor which operates the restaurant chain Steers in that country. Short of foreign exchange, it got into crocodile farming and became one of the world’s biggest producers of crocodile meat and skins.

In Zambia, he writes, Gillette put some 18,000 young men on bicycles to sell small cards with five of its inexpensive double-edged blades -- they took the product all over the country, increasing sales from 5,000 to 750,000 units in 2004. “Entrepreneurs solve problems,” writes Mahajan. “Take away electricity and they sell generators. Take away a stable financial system and they make their money on speculating on foreign currency. Take away their employment and they set up kiosks in the street.” And he argues that the development of consumer markets through this kind of innovation may be a more powerful driver of long-term progress than political reform.

The book is timely, tapping into investor optimism about Africa -- a feeling that does not seem to have been badly dented by political crises in Zimbabwe and Kenya, war in Somalia or a coup in Mauritania. Mahajan wants to open people’s eyes to Africa’s rise, which he says is “hidden in plain sight.” He also cites the importance of the vast African diaspora, both for marketing and because of the billions of dollars they send home each year.

Some might argue that businesses alone cannot lift Africa out of poverty, especially multinationals which are sometimes accused by African politicians and others of neo-colonialism. Mahajan acknowledges his vision is “very optimistic” and he is aware of the obstacles to development: HIV/AIDS, the lack of clean water, diseases like malaria, not enough schools. He says those who want to do business in Africa need to recognize that social entrepreneurship and involvement in local communities must be part of their business plan.

 
The book’s tone is upbeat, but there is also caution: Africa is not for the faint of heart. “It is for entrepreneurs and companies that recognize that where there are obstacles that might discourage others, there are opportunities for those who can persevere,” Mahajan writes. Or as Mo Ibrahim, the Sudanese-born founder of one of Africa’s most successful companies, Celtel International, is quoted as saying: “In business, when there is a gap between reality and perception, there is good business to be made.” (Reuters)