The Business Proposition of Africa's Population Boom: Problem or Potential?

Originally published at www.afribiz.info.

Shashank Bengali of McClatchey Newspapers wrote “Africa is gripped by one of the greatest population explosions ever recorded” in a recent article entitled, “Africa’s Perilous Baby Boom.” In fact, while it is widely reported that India’s population (1.6 billion projected) will surpass China’s population (1.4 billion projected) by 2050, Africa will beat both with a population close to two billion according to the United Nations Population Division.

Bengali paints a picture of the horrible conditions under which and into which many children are born in Africa. However, the problem is the conditions not the population growth. Africa is a continent that has vast resources, which if managed effectively, can sustain a booming population. In addition, Africa as a region has one of the lowest consumption rates globally when compared to developed countries.

In fact, this population boom is a tremendous global business and economic growth opportunity. Dominique Strauss-Kahn, Managing Director of the International Monetary Fund, shares the world can no longer expect U.S. and Western households to drive global economic growth. Developing markets like China, India and Africa are the future economic growth engines.

This shift sounds frightening to many in the West, but no one has to lose. Businesses and entrepreneurs globally need to shift their strategy to account for this phenomenon. Remember, the United States served as a major channel for China and other countries to grow their economies. The pattern does not have to change, but the roles the actors play. Africa, China and India can be used to drive economic growth in the United States, Europe, and elsewhere, in the future.

Part of this shift requires a change in the way the African population is viewed. C.K. Prahalad, in “The Bottom of the Pyramid,” points out that businesses have traditionally treated the poor and disenfranchised as victims instead of consumers. Businesses tend to devalue these populations without taking into account the current and future value of these markets, if developed. Businesses have the opportunity to create their own consumer markets while solving endemic problems like poverty.

Once businesses see Africans as consumers, they need to consider the challenges faced by their consumers and those challenges in serving them, including those painted by Bengali. The key is to design a business model accounting for and overcoming these challenges.

For example, Africa lags far behind in broadband coverage, yet the World Bank noted that broadband coverage contributes to economic growth. Also, if it is available, it tends to be expensive. Two companies, SEACOM and O3B Networks, have taken on the challenge to cover Africa with affordable broadband within five years. SEACOM has already landed in over ten countries in Eastern and Southern Africa.

In addition to the potential, businesses need to consider the importance of timing and position. Now, is a perfect time for many businesses to position themselves in the African consumer markets. Nations recognize this. While China looks to Africa resources, it is not the only reason. John Lee, in “China Woos Africa” points out that China is positioning itself to take advantage of the growing (in size and income) African consumer market.

In another example, could the potential in the African consumer markets be one reason the U.S. government is shifting from supporting food aid in Africa to investment in agricultural systems? Remember, part of the role of diplomatic missions in foreign countries is to further the interests, including economic, of a nation.

On a final note, the issues and problems of Africa continue to provide fodder for the media more than the potential of Africa. But there is a hidden message in all of it for entrepreneurs. Entrepreneurs will recognize the challenge of Africa not as perilous or problematic, but as potential and powerful markets.

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