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Billion Faces of Africa

Vijay Mahajan
McCombs School of Business, University of Texas


My book Africa Rising: How 900 Million Consumers Offer More Than You Think was released in late 2008. In the preface of that book I wrote:

I am not a political scholar. I am not an economist. I am a marketing professor, so my focus is on the market opportunity. There will soon be a billion consumers on the continent of Africa, and this is one of the fastest-growing markets in the world. Every day, they need to eat. They need shelter. They want education for their children. They will like to have soaps to wash their clothes. They desire cell phones, metal roofs for their homes, televisions, music, computers, movies, bicycles, cosmetics, medicines, cars, and loans to start businesses. They celebrate marriages, births, and religious holidays and commemorate death. 

In fact, borrowing a term from Unilever’s marketing campaign in Harare, I had suggested that Africa was launched on a consumer safari that presented as big a market opportunity as India and China. During the recent global recession, Africa continued to hold its own. Consider the following:

In 2010, World Bank reported that the size of the African economy was $1.361 trillion the previous year. In the same year, the size of the Indian economy was $1.362 trillion. Africa and India had populations of 1.07 billion and 1.15 billion, respectively. Hence, the per capita income of Africa was more or less the same as that of India.

A report by the United Nations noted that the average household consumption expenditure across all African countries accounted for around 63 percent of the continent’s economy in 2009. For India this figure was 57 percent. The economies of Africa and India were more consumer-driven than that of China. The household consumption expenditures accounted for 37 percent of the Chinese economy, which had a GDP (Gross Domestic Product) of $4.8 trillion for a population of 1.331 billion. This number is 71 percent for the US, the world’s largest economy with a GDP of over $14 trillion and a population of 307 million.  

A 2010 report, authored by Professor Friedrich Schneider and his associates from the Johannes Kepler University in Austria, estimated that the average size of Africa’s shadow economy, as a percentage of its GDP, for the period 1999 to 2006/2007, was 40 per cent for Sub-Saharan Africa and 35 percent for North Africa. This number was 22 percent for India, a mere 12 percent for China. In other words, the actual African economy is bigger than it looks.

Make no mistake, African’s billion consumers are driving the local economy in exactly the same manner as aspiring consumers anywhere else in the developing world.

Among the seven billion of us who live on this earth, 86 percent or six billion, live in developing countries, where the GDP per capita is less than $10,000 per annum. This means every sixth consumer in the developing world is located in the African continent.

But who exactly are these African consumers? What is their identity? Well, they speak more than 1,000 languages, including some of the European languages because of their colonial past. They are Hindus, Muslims, Christians, Jews and many other religions beside. They are white, black and brown. It has been estimated that the African Diaspora, with perhaps 100 million members around the globe, is one of the largest. The same number for India is around 25 million. African immigrants send home $30-40 billion through remittances. The same number for India is about 40 billion. On an average, their family size is larger — five persons per household, as compared to India’s four. Like India, a majority of the population is young. In fact, Africa is one the youngest markets in the world, with 41 percent of its population under the age of 15. The same number for India is 33 percent. African consumers deal with the same environment that the consumers in any developing countries deal with — lack of infrastructure, clean water, sanitation, quality education and abundance of diseases. Therefore, there are market opportunities in every sector.

Like India, there are two consumer groups that are shaping the African markets: Youth and Middle Africa.

In almost every country that I visited in Africa, entrepreneurs and executives talked about the Cheetah generation (younger) as compared to Hippo generation (older). I consider myself a member of the Hippo generation. I was born in Jammu, India, a few months after Mahatma Gandhi was assassinated and India became a Republic. I grew up hearing stories from my father about the “British Raj” and how everything that was going wrong in India at that time was the result of some “British Policy”. I inherited that legend first hand.

But the young generation, like my brother’s children in Jammu, is very different, the Indian equivalent of Africa’s Cheetah generation. For them, the British Raj is something that you read about in history classes. They are optimistic, technology-savvy, and well informed  and want India to go someplace. Whereas I instinctively blamed the past for what I did or did not have, my nephews and nieces only saw a future full of opportunities. As a Hippo, I justified why something could not  be done. As Cheetahs, my nephews and nieces wanted to know why it could not be done.

It is the same story in Africa. The Cheetah generation there sees the continent not through the prism of its colonial past but as a land of opportunities. One of my favourite stories in ‘Africa Rising’ is about a very happy young man I met at Goree Island, located about a mile at sea from the main harbour of Dakar, Senegal. This small island, with about a thousand inhabitants, is known for one of its oldest houses, the House of Slaves. It is a popular tourist spot and a visit to this house highlights the sad history of  the slave trade throughout the Atlantic world. This young man approached me after my ferry landed at the island. He spoke several languages learnt from tourists and offered his services as a tour guide. He was born, raised and studied on the island, like his parents, and naturally seemed to know everyone. He introduced me to another guide who was the official guide for the House of Slaves. The visit to the house is a very emotional experience. You learn how the slaves were punished in a dark cave-like structure, and how the women pregnant from the Europeans would not be shipped as slaves and freed. But, then you learn about the `Door of No Return’. Some of the slaves would jump off this door to escape, only to be eaten by the sharks circling in the water. By the time I left this house to meet the young man waiting outside to finish the rest of our tour of the island, I was totally distracted. “Professor, get over it, this is history,” he said. This young man had not only moved on himself but wanted the rest of us to do the same. Later, I learnt that his wife, also from Goree Island, had gone to New York on a scholarship given by an American black women’s organisation to study medicine. So, here a daughter of Goree Island had gone to America not as a slave but as a bright international student full of possibilities.

The second consumer group that is pushing the frontiers of the African economy is middle Africa, what I call Africa Two. This insight did not occur to me until I had done all the interviews and market visits for ‘Africa Rising’. In almost every country I travelled in Africa, companies divided the market into five segments (A, B, C, D, and E) based on income and other indicators, as is common practice in other parts of the world. The exact definitions of these segments and the percentages allotted to each segment varied from country to country, but the overall picture was the same.

What attracted me to this classification was the middle Segment C. I termed it Africa Two as opposed to Africa One (the rich A and B segments) and Africa Three (the poor segments D and E). In an inclusive economic growth, you expect upward segment migration. Segment E moving to D, D moving to C and so forth. In a recession, downward migration can be expected, especially segment B moving to C, C moving to D and so on. The size of segment C or Africa Two is critical.

Africa Two represents 350 million to 500 million consumers or 70 million to 100 million households. These household numbers are very much comparable to the estimates that have been developed for India and China. So, what are the faces of Africa Two? They are civil servants, school-teachers, nurses, and people working in the African hospitality industry, small entrepreneurs and others. They are neither rich nor poor. They are optimistic and want to give their children more than what they had.

More importantly, they are people who see a bright future of Africa through their children.

I come from one of these families in India. My father was a small entrepreneur with high school education. My mother was a housewife with 8th grade education. My siblings and I are the first generation from my father’s side to get college education.

Africa is rising. A billion people in Africa are asking for their rightful place in the global marketplace.

 
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