Market Intelligence in Africa

By: Wean Visser, w.visser@primeafrica.net

The Sub-Saharan African (SSA) economy achieved an annual average growth rate of 5.7% per year over the last 10 years, exceeding not only the global economic growth of 3.9% per year, but also that of the USA of 1.6% per year (Source: International Monetary Fund (IMF) database, constant prices).

SSA is forecast by the IMF to continue to grow by 5.1% per year to 2020, exceeding the global forecast of 2.8% – 3.3%, and also that of the USA of 2.5% per year. This is in spite of recent headwinds such as the decline of crude oil and commodity prices.

In general, this growth is driven by foreign investments in natural resource extraction, infrastructure development and agricultural production. In addition, growth has been supported by development of various key sectors, including telecommunications (especially mobile), financial services, retail, manufacturing and other tertiary sectors. The services sectors have outperformed average GDP growth over the last decade.

However, SSAs markets are not homogenous, with many different country and sector specific influences and risks affecting growth in the component markets. Diverse economic development histories; diverse natural resource profiles; varying economic profiles of mega-cities and other large urban centers; and various country-specific socio-economic characteristics contribute to the importance of having comprehensive understanding of the various markets.

And in addition, there is a dearth of reliable market intelligence on SSA markets. As a result, successful SSA investors, to gain competitive advantage, have developed proprietary market intelligence tools to quantify and track market opportunities and key risk factors. Market intelligence starts with an understanding of the unique markets and economies of SSA member countries:

  • The young and the restless: The SSA population in 2015 is estimated to exceed 900 million people, nearly 3 times that of the USA. By 2050 the United Nations forecasts the total SSA population to be 2.1 billion, roughly 22% of the world’s total. This will result in the African continent having the youngest population in the world, with a very large, young workforce. These favorable demographics, supported by increasing urbanization, will drive high demand for goods and services.
  • Different baskets: Economic growth in the region has historically been driven by natural resource extraction. This growth has, through the raising of incomes created a growing middle-class, supporting demand for more diverse goods and services. Key areas of growth have been the financial, retail, telecommunications and utility sectors. These sectors and their contribution to GDP continue to grow as the economies further mature.
  • Build it and they will come: Spending on infrastructure is a priority for African governments as they seek to grow their economies and provide services to citizens. Infrastructure spending in SSA is projected to grow by 10% a year over the next decade. Key focus areas for infrastructure investment will continue to be in energy, urbanization, transport, and resource extraction.
  • Taking the lead: Governments in Africa are increasingly aware of the importance of their role to create stable macroeconomic conditions. Policies that promote private sector development, bridge the infrastructure and human capital gaps, tackle labor market rigidities and support stronger trade ties will be required to capitalize on the positive demographic outlook (source: IMF Regional Economic Outlook).
  • Profit in peace: Political stability, or lack thereof, is often cited as a key deterrent to investment in Africa. As such, much of SSA’s recent growth has been underpinned by increased political stability. Between 2000 and 2012, 89% of African countries improved their development capacity, 67% of countries made progress in fostering political participation, gender equality, and human rights; and 40% of countries strengthened their safety and rule of law (source: African Development Bank).
  • Different strokes: Although Sub-Saharan Africa’s growth prospects are bright, the region is by no means homogenous, with the economic growth being highly country and sector specific.

With the knowledge of the unique markets and economies of SSA, the next step is to identify appropriate data sources that will deliver accurate and updatable intelligence. The first step in doing this is to identify the salient market features that need to be measured, e.g. market size; consumer profiles, including consumer purchasing power; competitor strategies covering both their positioning and price, policy environments and economic conditions. Various unique and powerful data sources are required from trade databases, country statistics, surveys and spatial data sources.

These sources can be augmented with smart surveys and smart sampling techniques which requires smaller, but still significant, sampling sizes which is due to the trade and spatial data allowing the identification of the key topics and destinations for the smart surveys.

Market intelligence also requires that the data is applied in a smart manner. Using an array of algorithms and econometric or statistical techniques the above data can be analyzed and combined to form a thorough understanding of the markets. Through the various sources and techniques that is applied triangulation allows for more confidence in and higher accuracy of the results.

Market intelligence studies can also lead to market trackers. Appropriate market intelligence provides decision support to maximize competitive advantage and reduce investment risks. Trackers allow investors to retain these benefits and are measures or indicators that signal trends and changes in the market that would not be detected through a snapshot study of a market. Due diligence when making investments often includes tracking information on macro-economic performance, market size, competitor activity and consumer profiles. It also requires strategic planning in relation to the timing of investments and the selection of partners.

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Prime Africa Consultants, based in South Africa, offers a bridge to Africa for foreign investors and partners through the provision of market intelligence services such as macro-economic analyses, industry specific market sizing, SWOT analyses and the identification of consumer trends. In addition to these services, Prime Africa have a number of tracking tools in place allowing market intelligence services to include recent as well as potential shifts in the markets. Prime Africa has been conducting tailor-made market intelligence studies for significant global investors in Africa since 2007, offering their clients strategic information on unique opportunities and risks in sector and country specific contexts.

Prime Africa consultants will be in the United States in October and will be presenting market and economic analysis techniques for assessment of risks in acquisitions in Africa and other emerging markets at numerous forums. Prime Africa completes African market analysis for numerous multinationals and has conducted major economic and business risk analysis projects for private sector clients and investment banks for African projects. EHS Support and Prime Africa are available for an in-person meeting. For more information on market intelligence in SSA, please contact Kevin Simpson, or Jackie Crafford at j.crafford@primeafrica.net or +27 82 319 2929.

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