Brand owners positive on Africa

14 May 2012

JOHANNESBURG: Major brand owners are becoming more positive about the prospects for success in Africa, with Ford, DHL and Nestlé among the companies making progress in the region.

Ernst & Young, the services firm, polled 505 executives, 60% of which agreed Africa was a more attractive place to do business than three years ago. Another 73% predicted this trend should continue in the next three years.

Upon being asked what changes would enhance Africa's appeal, greater political stability registered 87%, less corruption hit 82% and easing obstacles to business generated 67%, easily the top three here.

"When it comes to the African continent as a whole, we have encountered some challenges regarding the regulations - not only their onerous nature but also the variation that exists in enforcement - from country to country and within countries," said Jeff Nemeth, CEO of Ford Southern Africa.

In reflection of the present potential for brand owners, Ernst & Young revealed Africa's 54 states collectively housed 1bn people and boasted a combined $2tr in annual GDP.

Some progress is tangible, as the number of local foreign direct investment projects climbed from 675 in 2010 to 857 in 2011, although this did fall behind the 901 logged in 2008, before the recession.

From 2003 to 2011, 24.6% of these projects sought to enhance manufacturing capabilities, with business services recording 20.5%, and sales, marketing and other support functions posting 17.9%.

Elsewhere, the study pegged annual consumer spending in Africa at almost $1tr, with the relatively affluent "consumer class", earning between $2 and $20 per day, now making up 40% of the population.

"We're ... concentrating on a 'go to' strategy which targets the 80-90% of the African population who live outside of urban centres. If you can tap into this market, and create the infrastructure and accessibility, then the sky is the limit," said Charles Brewer, DHL's managing director, Africa.

The top three investors in Africa from 2003 to 2011 were Banco BPI, Ecobank Transnational and BNP Paribas, the financial services groups. Tata Group, the Indian conglomerate, was fourth.

"Looking forward, I think the greatest opportunities will lie in the mass retail segment," said Arnold Ekpe, CEO of Ecobank. "Less than 20% of the African population has access to formal banking facilities - which represents a huge opportunity."

Also featuring in the top ten on this metric were IBM, the services firm, Nestlé, the food expert, SAB Miller, the brewer, Coca-Cola, the soft drinks manufacturer, and Total, the energy giant.

Data sourced from Ernst & Young; additional content by Warc staff