Why the corporate sector is critical to Africa

January 8, 2017
The Citizen (Tanzania)
Content provided by Asianet-Pakistan
There is indeed a corporate sector in Africa and it is thriving. According to a report by McKinsey, there are 400 companies on the continent with annual revenue of $1 billion or more.

Another 700 enterprises have revenues of more than $500 million. Yet these numbers only tell part of the story. For Africa to continue its progress, Africa’s large companies need to expand, and small companies need to get bigger.

Large companies constitute the main drivers of economic growth. They tend to pay higher wages and taxes, as well as foster innovation and the use of technology.

They also drive productivity, tend to attract greater amounts of capital, and facilitate the creation and growth of vendors and small businesses that work with them.

For these reasons, the corporate sector is critical to Africa. And the indicators remain extremely positive. Africa’s large companies are growing faster, and are more profitable, than their global peers.

Half of the largest companies are African-owned and 40 per cent are publicly traded. Companies are flourishing in a variety of diverse sectors beyond natural resources, including financial services, food and agricultural processing, manufacturing, telecommunications and retail.

But there are gaps where Africa lags behind other emerging markets. No African-owned company has made the Fortune 500. Brazil and India have GDPs similar to that of Africa and each has seven Fortune 500 companies, and China nearly 100.

But Africa has only 60 per cent of large firms as compared with peer regions, with average annual revenue half that of large companies in Brazil, India, Mexico and Russia.

Africa also has fewer family-owned businesses than other regions, presenting a growth opportunity. Family businesses comprise 10 per cent to 20 per cent by revenue of Africa’s locally-owned companies, compared to 50 per cent to 60 per cent in Latin America, 35 per cent to 45 per cent in Western Europe and 15 per cent to 25 per cent in China and Southeast Asia, according to McKinsey data.

How can Africa’s corporate sector develop? One key area, which applies to all companies, no matter where they’re based, is to leverage innovation.

Only about a quarter of the top 100 African companies have expanded by adopting innovative new technology or business models. Compare that scenario with Asia, where half of all companies make innovation in technology, business models or products a priority. Mobile technology has allowed Africans to “leapfrog” poor landline infrastructure, according to Deloitte.

Uber has taken advantage of minimal public transportation and the difficulties of car ownership to delivered a million rides on the African continent.

African companies can explore and embrace “disruptive” technologies to make up for gaps in traditional supply chains, distribution networks and infrastructure, both to expand their own operations and to serve burgeoning consumer demand.

Talent is another key component for companies’ growth. By mid-century, Africa will have the world’s largest and youngest workforce.

Companies that have the resources need to invest in education and training so they have the skilled workers they need to succeed.

As an investor in African companies, I can say that it is necessary to have a long view.

But the picture is bright for Africa’s corporate sector. Africa’s large companies have real potential for growth as we progress in the 21st century. (The Huffington Post)

Zandre Campos is chairman and CEO of ABO Capital, an international investment firm that invests in companies in the healthcare, energy, transportation, hospitality, technology and real estate sectors throughout Africa. ABO’s mission is to create global value for developing countries in Africa, while contributing to their economic development.

When retail meets innovation

Self-service shopping is no longer a concept of the future. Early last month, an image of a self-service check-out machine at a Pick n Pay  (the second largest supermarket retail chain store in South Africa) was circulated on social media and sparked widespread debate.

Concerns were raised by the South African Commercial, Catering and Allied Workers Union and the Congress of South African Trade Unions. They expressed that the implementation of self-service tills could lead to tremendous job cuts for South African retail workers.

According to Statistics South Africa, the current unemployment rate in South Africa is 26.6%.

Pick n Pay has however come out to dismiss these claims, saying that the self-service machines are being put to the test at a single store in Ottery, Cape Town and will operate in addition to cashier-manned check-out counters as we know it, thus not negatively impacting on employment.

Pick n Pay’s Group Executive: Retail Office at Pick n Pay, Cobus Barnard said that the trial could take up to six months to produce consumer insights worth measuring.

He said: “We’re always looking for new ways to help our customers make their shopping easier and more convenient, so yes, we’re testing it out in one of our stores to see how customers would react. Customers are time-strapped, so this is a nice way to help them when they are in hurry.”


These technological advancements are part of the many that form part of the 4th Industrial Revolution, which is extensively uncovered in the second edition of BRICS Journal.

-Bizcommunity; Primedia Podcast

BRICS Bank prioritises raising funds for infrastructure

SABC News reports that the Brazil, Russia, India, China and South Africa (BRICS members) New Development Bank (NDB) has its sights on raising 2.5 billion US Dollars within the next year, to put money behind infrastructure projects.

The 8th BRICS Leaders Summit took place at the Indian south west resort of Goa this past weekend (12-14 October) where President Jacob Zuma joined leaders of India (Prime Minister Narendra Modi), Brazil (President Dilma Rousseff), Russia (President Vladimir Putin) and China (President Xi Jinping) for the gathering.

The main aim behind the establishment of The BRICS New Development Bank was to assemble resources that would enable infrastructure for development projects in BRICS member countries.

The BRICS New Development Bank has been described by economists as a “game changer” in the evolution of financing, as well as a tool to “rebalance the global order with respect to development finance”.  The bank’s founding members have pledged to sow 100 billion US dollar capital base into the bank, China being the single largest contributor.

While many eyebrows have been raised about its existence, the bank believes that it is not  a substitute for the established multinational institutions, e.g the World Bank, African Development Bank, Asian Development Bank or the Development Bank of Latin America. Instead, Leslie Maasdorp, Deputy Chairperson of the New Development Bank says the NDB will work hand in hand with institutions already established.

“So we have got structured partnership with multinational banks and there is so much we can learn from these institutions. We were not set up to compete with these institutions but we can learn from them. It has been an exciting year but there are challenges ahead,” Maasdorp told SABC News.

The bank (headquartered in Shanghai, China) has already secured a rating from local rating agencies in addition to raising capital through the bond market and will also look to the private sector for resources into infrastructure development. The Chairperson of the Indian Chapter of the BRICS Business Council, Onkar Kanwar said: “Agriculture and energy are priority area of cooperation of our economies.  We should also collaborate in developing energy efficiency technologies.”

The bank’s Africa Regional Centre will be headquartered in Johannesburg within the first quarter of 2017. “Our Africa Regional Centre is expected to open this quarter and I assure President Zuma that it will work with the objectives he articulated. We are targeting lending of about 2-point-5 billion US dollars for the next year.  Providing local currency financing minimises currency risk for our members,” says President of the BRICS New Development Bank Kundapur Kamath.

All the BRICS leaders are in full support of the bank, looking at it as a reliable tool to strengthen business opportunities, build investments and promote innovation and growth.

-SABC News

BRICS Journal TV: In Conversation With Brian Molefe

BRICS Journal Managing Editor, Vuyo Dlamini caught up with BRICS Business Council Chair of South Africa, Mr Brian Molefe to chat about the role of media within BRICS.