Understanding Africa Better

Think Tank explores “real and practical” approaches to challenges for business

23/11/2015 Barcelona

Bramwel W. Kisuya

Kenyan Ambassador, Bramwel W. Kisuya: “It is very important that we gain knowledge from each other. We need to develop new opportunities to address our challenges” / Photo: Jordi Estruch

When it comes to research on Africa, there are two approaches, both of them extreme: there’s the macroeconomic approach with its broad sweeps; then there’s socioeconomic research, which is largely driven by NGOs.

African diplomats, researchers and academics joined co-Director of the IESE African Initiative, Alejandro Lago, on campus in Barcelona to explore the ‘middle ground’ – to attempt to identify what needs to be done to address Africa’s challenges in “real and practical terms,” and provide insight and knowledge relevant to managers and organizations doing business in Africa.

The IESE Africa Think Tank brought together Kenyan Ambassador, Bramwel W. Kisuya, and the Nigerian Embassy’s Minister of Chancery, Safiu O. Olaniyan. Joining them from the world of research was João Terlica, partner and MD of Sagaci Research, a pan-African research body.

Terlica pointed to the pendulum swing of perceptions about Africa as a place to do business. He described international press focus on the continent as a narrative that shifts from the “hopeless continent” to describing Africa as the “land of opportunity.”

These perceptions, he said, may be true in general terms. However the situation in Africa is not yet “equal for all companies.”

And things are further complicated by a general misunderstanding of what “middle class” means in Africa.

Defining the African Middle Class

While historically, multinationals have been seeing an increase in revenue in African countries, performance and market share remain low – their growth hampered, says Terlica, by their failure to grasp how the middle class consumer is evolving across the continent.

“Most people think that the African middle classes have happy families, buy houses and shop in supermarkets. In reality, being middle class in Africa means that you have a regular income, a decent home, you can eat a variety of food products, own a smartphone and pay your medical fees. However, you may not yet be able to buy a car, go on holidays or own mainstream appliances”.

He shared the example of Nairobi, where most householders own a TV, a DVD player, a stove and an audio system – but where only around 30 percent of people own a fridge or a car.

Ownership of appliances is a good indicator of household affluence, said Terlica.

An income of $700 a month was a typical middle class income in Nairobi – but a household income of around $1000 per month is “where affluence really starts to take off,” he explained.

Western Brands in High Demand

That said, African consumers do recognize and desire international brands, said Terlica.

In general, consumers see ‘international’ brands as higher quality products – products for which they are prepared to pay more.

He shared a number of examples of brands that are seeing high demand. European diapers, for instance, are in higher demand than local products, despite little difference in quality.

Brand power is increasingly important,” said Terlica. “Price is not everything.”

“In our research, household names like Ariel and Ono sit at the top of the price and brand preference charts. The leaders in preference are oftentimes the more expensive brands.”

Adapting Marketing Strategy

Marketing to African consumers is not the same as marketing to other demographics. Terlica cited the example of advertising spend in Nigeria.

Below the line activity such as events and promotions are disproportionately important in most African markets, and they allow companies to connect with consumers in a real and personal way.”

Retail models are evolving and will impact marketing strategy, he added. “We predict an 85 percent increase in shopping mall space over the next three years.”

As models and behaviors evolve, Terlica predicts “significant changes over the coming years.”

Sharing Ideas to Close Gaps Between Continents

Responding to Terlica’s remarks, Olaniyan pointed to significant changes in demographic structures and behaviors across Africa.

“Our biggest resource is our human resource and in Africa we are seeing the generation gaps being breached, which is a wonderful thing. Different generations working together will help us make the essential leap into the future. Connecting with international colleagues and networking also has its place,” he said.

“Though all networking and sharing needs to be sustained and meaningful.”

Kisuya agreed.

“My work as a diplomat is to develop connectivity and to help business people from Africa to interact with other communities to close the gap between continents,” he said.

“It is very important that we gain knowledge from each other. We need to develop new opportunities to address our challenges and we need to be creative in conquering them by bringing people with high level and low level technology together. We need to share information to bridge the gap and then disseminate it to our own communities.”

Lago described the Think Tank as “good news for us all.”

“Networking events like this allow us to take advantage of the strong programs that IESE already has in place in Nigeria and Kenya, and give us a platform to coordinate the many activities that we carry out on the African continent to support knowledge development and connectivity between businesses in both directions”.