Business Outlook

 

It seems like just yesterday when we were making predictions for 2014. As 2015 gets into full swing, the past year has been one of great progress and tough challenges for Africa. While factors like manufacturing & energy output can be predicted or “guesstimated”, no one could have ever predicted how bad an impact the Ebola outbreak in West Africa could be on the continent’s growth trajectory. Over and above the people affected by the outbreak, business events, whole investments, and tourism tumbled as news of “the outbreak in Africa” dominated mainstream media. Without underestimating the gravity of the situation, lack of information about the continent in general didn’t do it any justice as it began reflecting on the economic and negative perception toll.

Every single state in Africa suffered as a result of the Ebola outbreak in 2014 as each nation was painted with the same brush, that of a no go zone. What does this mean? Well for us it means that Africa’s vast & diverse states need to do more to market the continent or ultimately surrender to the perception of “Africa As A Country” by setting up a Pan African Trade, Tourism & Investment Board that turns perceptions into opportunities to inform. Perhaps this can be done at AU level. On one hand we trump up the vision of a connected continent based on the clear advantages such a reality present, yet on the other hand we’re quick to unbundle this idea during difficult times…

In 2015, we’re looking forward to the following developments:

Manufacturing & Services:

A number of landmark investments were made across the continent in 2014. Two exciting developments in our opinion, hail from the automotive sector. Nissan and a host of other automotive brands, invested in assembly plants in Nigeria, creating jobs & adding value to the booming sector.  In East Africa, Mobius Motors attracted more financial backing in its bid to build a robust vehicle made in and for Africa. Buoyed by continued economic growth and rising consumer demand, 2015 should witness more investments into the manufacturing sector, with FMCG sectors gulping the lion’s share of this.

The key challenge for manufacturers in 2015 will continue to be access to reliable and consistent electricity. A number of nations & regions are taking steps to address this perennial power challenge with initiatives such as the ZTK (Zambia Tanzania Kenya) regional power Interconnector, Nigeria’s Independent Power Producers going live and Eskom South Africa’s investment bid to construct two new power stations. These projects will likely go live around 2016/17 and thus power constraints will have manufacturers still sulking in 2015. For consumers, Alternative energy projects will continue attracting more investments as ever growing urbanisation increases energy requirements.

Where services are concerned, 2015  will continue to be dominated by big companies as small companies start embracing cross border business opportunities in Africa. The usual suspects that will consolidate their positions and opportunities in the new year will be the financial services & telecommunications sectors. Each will see an increase in value added services and M & A activity as competition heats up and growth prospects attract more money.

Esaja.com’s 2015 Manufacturer To Watch: Bakhresa Group (Tanzania) 

Azam
Tanzania’s President, Jakaya Kikwete Tours Bakhresa’s Soft Drinks Factory

 

The Bakhresa Group is one of Tanzania’s biggest companies, It employs over 8000 people and has an annual turnover of over $1 billion. Through it’s Azam brand, it has influenced Tanzanian life for over 30 years. As the nation rapidly opens up to become a  free market based economy, Bakhresa Group has gone on to expand its tentacles beyond its traditional focal areas of agro processing, milling, transportation & FMCG. By foraying into Pay TV Services, it has demonstrated an entrepreneurial energy few FMCG conglomerates can demonstrate globally, shrewdly picking up over 150 000 customers selling Pay TV services under the same brand as it sells rice, fizzy drinks and even ice cream. It’s no secret that advertising is one of the biggest areas FMCG players invest their money in, perhaps Pay TV could be part of a bigger plan of creating a self sustaining value chain.

Bakhresa is a group whose approach is highly entrepreneurial and one that is rapidly expanding across the continent. It currently supplies over 120 000 Metric tons of flour in Rwanda, operates milling plants in Mozambique, is setting up Pay TV services in Kenya, and  is also targeting the entire Central, East & Southern African block. The Bakhresa Group is set to accelerate its goal of becoming a Pan African titan in 2015.

Active Markets: Tanzania | Kenya | Rwanda | Uganda | Burundi | Malawi | Mozambique |  South Africa

Esaja.com’s 2015 Services Sector Player To Watch: Equity Bank (Kenya)

James Mwangi (Equity Bank CEO) & Dr Jim Yong Kim (World Bank President) look on as a customer demonstrates the banks mobile banking services.
James Mwangi (Equity Bank CEO) & Dr Jim Yong Kim (World Bank President) look on as a customer demonstrates the bank’s mobile banking services.

 

In 2014 counter disruption received an entirely new meaning as Equity Bank Kenya proved that an old dog can learn new tricks. Having ignored the bottom of the pyramid, banks across Africa are scrambling to compete with the new standard that is mobile money/ mobile banking. Equity Bank is different in that it has grown to serve over 8 million customers on the back of focusing on the very market traditional banks ignored. Perhaps fittingly, it’s response to the M-Pesa boom in Kenya is as classic as it is innovative. Equity Bank has developed a thin sim layer that sits atop a phone’s sim card and offers banking services in addition to the usual bag of mobile phone functions. This move riled Safaricom, Kenya’s largest mobile operator & initiators of the legendary M-Pesa. It’s very rare for traditional industry players to be taken to court and vilified by tech savvy upstarts (comparatively so). Such a scenario is akin to Uber taking the world’s taxi industry to court and not the other way round… Having won in the courts and also received regulatory approval against Safaricom’s accusations of security flaws, 2015 is a year in which the bank’s executives are keen to put into motion. (Update: this fight is still in the courts after a “Christmas ruining” suspension by the Supreme Court of Kenya)

Fast Facts:

  • Founded in 1984 as a building society
  • The bank has over 8 Million customers
  • Its CEO was the first African to receive the Ernest & Young World Entrepreneur Of The Year Award in 2012

Active markets: Kenya | Uganda | Tanzania | Rwanda | South Sudan

Transportation:

We look at transportation in its own silo due to the challenges and opportunities that exist when moving goods & people across the continent. In 2014 the much anticipated negotiations for the Grand Free Trade Area connecting 26 nations across East & Southern Africa, were shifted to February 2015 as nations weigh this up. Small nations fear that opening up their markets will result in unfair competition from bigger and more industrialised markets in the bloc. While this fear may not be unfounded, protectionism without focusing on competitive advantages has been proven to only harm economies. A development that needs to take root in Africa is specialisation. Most nation’s can become prosperous in the grander scheme of things, by focus on that which they are best positioned to focus on. Africa needs education & training, manufactured goods, business services, shipping & transportation, food security and much more. Each nation on the block is capable of dedicating itself to at least one core area. Malawi for example is one of the smallest nations in the block (on a GDP basis) but has punched above its weight where agriculture is concerned. The nation has thus attracted agro related business from as far as Angola & South Sudan with Governments of nations like Botswana even buying food relief from the nation. Once nations and regions consciously define their focal areas, distribution becomes less of a challenge. Fighting over crumbs is not sustainable.

A number of railway projects & roads will go live in 2015. A highly anticipated railway link connecting Mombasa & Nairobi in Kenya, is expected to reduce the costs of moving goods from East Africa’s largest port to Nairobi and inland nations like Uganda, Rwanda & South Sudan. In 2015, an increase in infrastructure projects will take place as crippling infrastructure continues to remain a threat to continental growth. Where people are concerned, 2015 should witness the growth of low cost carriers in Africa’s aviation industry gaining popularity and promoting the movement of more Africans across regions.

Esaja.com’s 2015 Transporter To Watch: Fastjet Plc

Fast tracking trade...A Fastjet ad targeted at East African farmers & traders
Fast tracking trade…A Fastjet ad targeted at Tanzanian farmers & traders

 

Fastjet is rapidly becoming the pan African low cost carrier. In just two years, the airline has carried over 880 000 people. With shareholders like Sir Stelios, the founder of Easyjet (The Pan European low cost airline), 2015 is set to be another year filled with growth for the AIM listed airline. It received the green light to operate domestic services in Zambia and is also looking into the West African market. In 2015, Fastjet is a name that you must expect to keep popping up. An interview we had with its head of commercial proves just how big their ambitions are.

Active Markets: Tanzania | Zambia | Uganda | Zimbabwe | South Africa

Marketing

This is a tough topic to have to make predictions or provide commentary on as Africa simply struggles with defining and controlling its narrative/s. This reality is something that needs to be changed as it comes to the fore during unfortunate times like the Ebola outbreak in West Africa. A top African internet entrepreneur once lamented on his disappointment regarding just how little young Africans know about their continent. I was in Lusaka at the time and this comment couldn’t have been more apparent as I interacted with young Europeans, Indians & Chinese. Like Jason Njoku said, Africa’s future still aspires and does every possible thing to land in Europe or America…As a young African myself, I can fully relate to the challenges but am motivated by the much bigger opportunities/problems waiting to be solved here at home. We can never fully know the economic cost of Africans not knowing enough about Africa, but the flipside presents a compelling scenario. Pan African business is becoming an aspiration for entrepreneurs and traders across the continent.  For this we have brands like MTN, DSTV, Airtel, Ecobank, FNB & DHL Africa amongst others to thank. Entrepreneurs like Dangote, Strive Masiyiwa, Tony Elumelu & others have also played a big roll in raising awareness about “Pan Africa”. This is attractive not only because of scale, but because of the compelling benefits it can bestow on the continent’s people. Bigger markets equal bigger opportunities, bigger employment prospects and bigger potential. A lot more awareness is required.

 

Esaja.com’s 2015 Marketer To watch: Young Nigeria

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Nigeria is making some serious moves…

 

In 2014,the nation of Nigeria not only became Africa’s biggest economy after a GDP rebasing, it also continued to aggressively define and take the lead in telling its story. Despite daunting challenges like the threat of terrorism and little to no grid fed electricity, Nigeria is emerging as a nation brimming with enough entrepreneurial energy to lead Africa forward. Following the lead of entreprenurial stalwarts like Aliko Dangote & Tony Elumelu, young Nigerians are redefining what the world thought it knew about the nation. Take Andela for example; the startup has set up an ambitious endeavour to train computer engineers for the world market, attracting the backing of prestigious African & Silicon Valley investors in the process (Disclaimer: Esaja & Andela share a common Angel investor). Where Nigeria & computers/the internet once stood for 419 scams, the nation’s brimming entrepreneurs are shifting the narrative, Over $300 million dollars went into Nigeria’s startup scene in 2014, a figure that likely trumps investments into the rest of the continent’s combined ecosystems. Oil might continue to define Nigeria’s old world, but don’t make the mistake of underestimating the new world. It’s young, confident and has determined to succeed, even against daunting odds. From Nollywood, to Agriculture, Banks & Internet Startups, Naija’s place as the giant of Africa is here to stay.

Active Markets: Naija bedey everywhere!

 Mobile Communications

 

Last but certainly not least is the mobile revolution, this is a new topic this year due to the sheer importance mobile telecommunications is playing in the lives of millions of people across the continent. Having reached a milestone of over half a billion unique connections in 2014, the second chapter of mobile connectivity swung into motion. Operators are increasingly shifting away from legacy voice & SMS based businesses to data and value added services. Mobile money is the star in this push as it connects markets traditional banks have ignored for decades, very large ones for that matter. 2015 will witness more African nations joining Kenya, Zimbabwe,Tanzania, and Uganda among others, in having more people with mobile banking accounts than traditional bank accounts.

In 2015, the search for VAS fortunes will see the migration of traditional sectors like insurance, medical aid towards a mobile first focus. A rapid upshot in smartphone usage, buoyed by cheap Chinese stock android phones and low cost local brands like Mifone, Tecno & Gtel, will lead to an upshot of utility apps. If trends in India are anything to go by, the smartphone war of 2015 in Africa will have traditional brands increasingly take the back seat to cheaper OEMs such as the aforementioned. (Over The Top) players like Whatsapp, Viber & Wechat will consolidate their reach. Homegrown messaging players will continue to struggle against these global players, perhaps needing to take a bigger cue from the Mifone brand’s Oju Africa branded emoticons; simple but local and therefore relevant. The space in 2015 is wide open for localised apps that add a layer of efficiency to the lives of Africa’s emerging middle classes and the wider population. Simplicity and local relevance will be key to their success. There’s currently very little of this happening.

Esaja.com’s 2015 Mobile Industry Player To Watch: Safaricom

2015 will have a lot more offerings for consumers to "byte into"...Expect Safaricom tolead the way. Image Credit CIO East Africa
2015 will have a lot more offerings for consumers to “byte into”…Expect Safaricom tolead the way. (Image Credit CIO East Africa)

It leads, others follow. Safaricom ushered in the mobile banking revolution in Africa with its M-Pesa product. In 2014 it went a step further by setting up a $1 million fund to invest in greenfield technology startups, something no mobile operator in Africa has done before. It’s committing up to $200 000 on the platforms that could define the future. Such a bold move should see operators across Africa following its lead but this could only begin gaining traction beyond 2015 as fence sitters wait for signs of success. Safaricom has already acquired M-Ledger, a startup it helped nurture through it’s App developer competition. Safaricom is our mobile play to watch as a result of its consistent ability to change with the times. It’s gone from being the “monopoly player” towards an era of collaboration and value added services, something akin to Microsoft’s (late) evolution. It’ll be very interesting to see what the “M-Pesa masters” have on the menu in 2015.

 

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