The Hopeful Continent

After being previously labeled “the hopeless continent” by the publication The Economist, Africa has grown to become an industry hotspot. Today the region has been aptly titled “the hopeful continent.” Jean-Louis Warnholz has been witness to this transformation as founding principal of Blackivy, an investment company doing business in Sub-Saharan Africa. Warnholz recognized Africa’s promise early and spoke to IN about the opportunities for expanded commerce.

How will Africa’s emerging middle class drive the consumer market?
Africa has the fastest-growing middle class in the world. The growing incomes for young professionals and families alike have sharply increased demand for a wide variety of consumer goods, ranging from decent housing, smartphones and appliances to fashion and luxury items. McKinsey research found that these emerging consumer groups are brand loyal, creative advantages for brands that move early, invest in understanding local preferences and cement a strong presence in the market. The growing demand also triggered a wave of innovation to capture this market, including mobile banking and a rethinking of distribution channels, as well as product engineering.

What are the biggest stimulants and threats for growth in Africa?
Growth in Sub-Saharan Africa is increasingly driven by consumer spending. The growing middle class is now increasingly urbanized, concentrating spending power in cities and making it easier for companies to reach their consumers. Sub-Saharan Africa’s untapped mineral resources and vast fertile lands will also continue to be a major driver. African nations, particularly in East and West Africa, are also renewing a focus on greater regional integration to break down barriers to trade among them. If these efforts create common, well-connected markets, it would further improve the ease of doing business in these regions and other added expansion opportunities.

On the other hand, African economies are in need of continued foreign investment to accelerate and sustain the rapid economic growth we have witnessed over the past years. These uncertainties and the mixed economic growth outlook in the U.S., Europe and parts of Asia could also dampen demand for Africa’s goods and services.

What factors are coming into play in terms of the ever-growing market opportunities?
I anticipate companies will innovate and start producing a larger share of the final product in Sub-Saharan Africa, relying on a more reliable power supply, a competitive workforce and locally available resources and intermediate inputs. Our company, for example, is developing state-of-the-art commercial and industrial zones in Ghana and Tanzania and many prospective tenants highlight the lack of modern packaging facilities as a key challenge to their productivity. A thriving packaging industry would not only help the bottom line of existing manufacturers and traders, it would also improve local supply chains and attract other investors in its wake.

How have you seen the international investment market change over the last decade?
Ten years ago, Sub-Saharan Africa was off the map for mainstream investors. In 2009, when Paul Collier and I made the case for investing in Africa in the Harvard Business Review, the magazine hailed it as a breakthrough idea. Today, the success of many economies in Sub-Saharan Africa is much more widely understood and I anticipate this trend will continue. The financial and economic crisis at the end of the last decade also meant that investors and companies had to look globally for opportunities. The crisis has also challenged notions of risk, as purportedly risky assets in Sub-Saharan Africa have done spectacularly well while supposedly safe assets in established markets defaulted.