In to Africa: A Looming Imperative?

For global companies that aren't in the one-time 'Dark Continent,' perhaps now is a good time to look into it.
Timothy ChouJuly 17, 2014
In to Africa: A Looming Imperative?

Perhaps your perception of Africa was like mine: shaped by old Tarzan movies and New York Times reports of various forms of unrest. But I just returned from a three-week trip to the continent, and I can tell you a couple of things. One is that going on a safari in the Serengeti is very cool. Another is that if you’re operating a global business, you should get smarter and get into Africa. It’s going to matter in the future.

Timothy-Chou_ColumnistAccording to projections by the United Nations and the Institute of Security Studies, by 2050 Africa will account for 20% to 25% of the world’s population, more than either China or India. Africa’s population is expected to grow by more than 1% annually, well above the rate of other global regions. No global company will be able to ignore Africa.

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I came back from the trip with a few observations to offer that speak to the idea of Africa being near to turning the corner toward becoming a force in global business.

For one, like many I didn’t think there was much technology in Africa. Then I had the chance to meet with Sean Koo, chief technology officer of Olleh Networks, which is deploying a 4G LTE network across Rwanda. He said download/upload performance would be up to 90 megabits per second but more typically 10 to 20 Mbps per second, priced at $5 per gigabyte. That’s still fast, and very cheap. I told him my Silicon Valley home DSL performs at 3 Mbps download and 0.384 Mbps upload for $50 a month, and I felt lucky to get the family cellular plan with 10GB for $150 per month for five phones. “Could I be your customer?” I asked him.

Kenya is the mobile-payment capital of the world.

Kenya is the mobile-payment capital of the world.

Another observation: It’s easier to pay for a cab ride on your mobile phone in Kenya than just about anywhere else in the world. Almost 60% of Kenyans use cell phones for mobile payment and banking. Three quarters own cell phones. I met Maasai who still herd cattle on the Serengeti but own cell phones. Some sources estimate half of all mobile money transactions in the world take place in Kenya, where annual transfers have reached $10 billion.

Why has this happened? Look first at the financial flows in a typical household in East Africa. They differ significantly from those seen in more developed markets. Here, funding sources are very diverse: wages, crop income, remittance payments from family members, government payments and even public donations. Credit? Not so much. Clearly, the fact that the developers of the mobile money services understood a domain that was not credit focused enabled rapid adoption of a solution that many of us in the developed world would love to have.

But while European, Chinese and even Korean companies have been investing in Africa, few American ones appear to be paying much attention. One exception: General Electric.

At the 2014 World Economic Forum meeting in Nigeria, noted an article in The Economist, GE executives hosted policy discussions with government ministers and local and international business leaders on issues such as the future of African health care and the potential of distributed power generation. The goal: to build relationships that will deliver long-term rewards. “In 50 years, we will be doing business here that we built the foundations of now,” the publication quoted economist John Rice, who is vice chairman of GE, as saying.

Rice noted at the conference that GE employs twice as many people in Africa as it did three years ago, “including people with internal credibility and the authority to make decisions,” The Economist reported. With enormous power, health-care and other infrastructure needs, Africa is a “classic GE opportunity,” just as China has already proved to be, CEO Jeff Immelt observed at the conference, according to The Economist. “But you have to take some risks.”

What is your company’s strategy for Africa?

Timothy Chou teaches cloud computing at Stanford University. He is the former president of Oracle on Demand and the author of Cloud: Seven Clear Business Models.

Image credit: Erik (HASH) Hersman. CC 2.0. The image was unaltered from the original.