Africa: The new frontier in export
The new frontier has risen. Thirty years ago, global trade was all about an emerging China. Twenty years ago, India took the stage. Today, all eyes are on Africa: a continent with a rapidly growing, youthful population, a collective GDP of more than $1.6 trillion and a collective economy which has grown by five percent every year this decade. But the real reason to look to Africa? “One billion consumers,” says Greg Hull, Austrade’s Senior Trade Commissioner in Africa. “Unfulfilled demand. The third reason is Australians are relatively new, untainted and generally have a very positive image on the continent.”
There’s never been a better time. The flow of foreign direct investment into Africa has risen from just $9 billion in 2000 to $62 billion in 2008 (McKinsey), and it is projected to reach $150 billion by 2015 (Ernst & Young). The return on foreign investment is higher in Africa than anywhere else in the developing world. The emergence of a 300 million-strong middle class is a huge opportunity for Australian exporters, according to Amadou Diallo, CEO of Africa and South Asia Pacific for DHL Global Forwarding. The spending power of the consumer class is growing at more than double the rate of annual GDP growth. Africa already has more middle class households than India, and by 2030, Africa’s top 18 cities will have a combined spending power of $1.3 trillion. “You’re starting to see more educated people conscious of the new Africa, conscious of the awakening, conscious that the economies are on the move and therefore creating that consumer demand,” Hull says.
A big opportunity…
Due to the relatively low competition Australian companies face in Africa (compared to Europe or Asia), there is a first-to-market advantage on the continent, and significant partnership opportunities. But significantly, Hull warns businesses should not look to Africa as their primary market. It’s also not a place for new players to test their offerings. “It’s an extension market. A significant extension market.”
Diallo is less measured in his assessment of the opportunity. “Africa’s 300 million middle income earners all need basic goods, healthcare (Australia seems to be very well organised in that area), cars, any appliances people need in their houses, they need to have telecommunication tools.” Beyond that, there are countless opportunities for Australian expertise to assist African countries to develop better governance, health and education policies and facilities, he says.
Most countries are still looking for energy providers, Diallo explains. “We have roughly 700 million people using mobile phones, most of the households in Southern Africa now have TVs, which use a lot of energy.” There is significant unmet demand for renewable energy. While Hull says you can forget entering the fast moving consumer goods (FMCG) or telecommunications markets in Africa (“the mobile telecommunications market as a model is probably one of the most fiercely competitive in the world”), there are plenty of areas in which Australian companies have expertise or products that Africa needs.
Firstly, as Africa develops, governments are catching up in terms of infrastructure development. Therefore, Australian expertise in terms of railways, ports and roads infrastructure and supporting services could be valuable. Secondly, Australia could play a major role in the development of Africa’s agribusiness. All facets of agriculture that improve productivity, efficiency and the dimensions of production are areas where Australia excels and Africa needs assistance, Hull says.
Australian companies are already working in the education services sector, with Monash and Curtin present in Africa and other universities coming through seeking full-fee paying students and longer-term partnership development, Hull says. “It’s a good time to look at universities in Ghana, Nigeria or Tanzania, not just in South Africa.” There are a range of opportunities in the financial services sector for fund management, infrastructure funds and small boutique investment funding. “We’re not talking big banks so much as those smaller professional Australian companies that are in the financial services sector, may have already gone to Hong Kong and should now look to Africa.”
Africa’s wealth of resources is well known and a ripe opportunity for Australians who specialise in mining and resources trading, Diallo says. “We have 88 percent of the world’s platinum, 40 percent of the gold, and to date 10 percent of the oil consumed around the globe comes from Africa.” Australians have proven themselves good at exploiting resources through mining and offering opportunities to local people, he adds. Australia is already well represented in the mining sphere, with 200 companies operating 600 projects across 42 African countries, as of January 2011.
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