Africa’s potential and challenge of profit realisation

The long publicly held views about Africa’s potential are fast becoming monotonous. Of course, African markets, though represent a mixture of exciting investment and challenging growth opportunity for consumer products’ companies, may have been overdue for the achievement of the proverbial “food for the stomach” as opposed to food for thought.

Granted, reports and analysts have spotted the fact that doing business in Africa is challenging, but they have also affirmed that the assessed challenges are not overwhelmingly so. In fact, the challenges are even creating more opportunities for the realization of the potential.

In a new Survey by EY on ‘Consumer Products and Retail’, the company’s Leader, West Africa Consumer Products, Bunmi Akinde, noted that sustained growth rates, improving business conditions and a rising consumer class are driving increased levels of investment in Africa, but however, noted that the complexity of the region’s fragmented markets and diverse consumers means that it remains a real challenge to convert potential into profits.

The report, which explored both the opportunities and the challenges that Africa presents to consumer products’ companies, also examined Africa’s longer-term growth trajectory and, more specifically, Foreign Direct Investment (FDI) trends in the broader consumer products and retail sector over the past seven years.

“What our analysis shows is that, together with strong economic growth and rising levels of consumer spending, investment in the sector has been robust in recent years.

“Due to its size and complexity, Africa can be intimidating for those who do not have much experience of its business conditions or who are contemplating ambitious expansion plans after having operated in only one or two African markets for many years.

“EY’s own African growth journey, together with work we have done to support clients’ expansion, as well as focused analysis of growth leaders on the continent, has enabled us to distil insights and critical success factors that we believe will be useful to those who seek to unlock the potential of Africa’s rising consumer class,” Akinde added.

The survey noted that the basic message is that the African opportunity is real and there remains a window to act, although that window is now narrowing, and the cost of entering African markets is beginning to rise.

“Companies with an already established presence continue to expand and entrench their advantages. In our opinion, the risk of missing this window is likely to be far greater than any of the risks you will encounter in actually doing business in Africa,” the report said.