Spotlight on Africa: Multinational Expansion Trends

Spotlight on Africa: Multinational Expansion Trends??????

Global business expansion has become a widespread practice for organisations seeking a faster growth rate than their national markets. Moreover, it is an opportunity for international businesses to gain a significant competitive advantage through market diversification. This provides them better access to talent, improves brand reputation, increases profit and broadens their target market. For owners and stakeholders in these businesses, a persistent question is which market to penetrate next, one that offers both growth opportunity and a high Return On Investment (ROI). A standout answer is Africa.

Africa is undergoing several significant transformations and rapid expansions in demographic, economic, socio-political, technological and urban realms. These transitions are interconnected and collaboratively, will shape the future of the continent. Africa is multidimensional and often considered a promising continent – McKinsey & Company predicts $5.6 trillion in African business opportunities by 2025. ?

There is a rise in an urban workforce for new businesses. The quick rate of urbanisation in Africa compounded by an upcoming young population has indicated an increase in demands for jobs, products and services. More than half of the continent's current population is under the age of 18, and McKinsey & Company predicts that its workforce will amount to 1.1 billion by 2034, larger than that of China or India. This paints the picture of a host of local talent enthusiastic to learn, develop their skills and earn – a positive indication for global businesses searching for new staff.

?Trends to watch:

?Consumer spending

In the last two decades, Africa has experienced a surge in the middle-class groups across several of its countries and, subsequently, increased consumer spending. The continent's growth is reflected in countries like Nigeria, Ghana, Kenya, Tanzania and Zambia. Notably, the largest consumer markets in Africa by 2030 will include Egypt, Nigeria and South Africa. Consumer spending patterns documented in 2019 indicate optimism and willingness to spend – 86% of Africans equated their ability to purchase new items with happiness. Should Africa sustain and boost structural reforms, The World Economic Forum (WEF), 2020 imagines that the continent can emulate China’s rise of the last fifty years.?????

Digitisation

African tech start-ups had an impressive run with funding in 2019, having raised $334.5 million in investment. This reflects the continent's consumer market potential. This further indicates that these companies are assisting Africa to overcome gaps in infrastructure and improve consumer information and product accessibility.?????

The internet

According to a 2019 study by Statista, Nigeria led with the highest number of internet users at 126 million, followed by Egypt at 49 million and Kenya at 16 million. Africa is a broad continent with cultural and socio-economic nuances and should be engaged as such.??????

Consumer growth

Organisations have realised that local demand is valuable. A 2019 Nielsen Africa Prospects Indicator (API) Report placed consumer demand at second in business priority and product innovation at third. While Africa's growth is not solely consumer-driven, investors are showing great interest in the region.???

Investment

Over two-thirds of investment stock is from the Netherlands, concentrated in Egypt, Nigeria and South Africa. Technological advancements such as access to the internet in African countries and large-scale foreign investment have significantly contributed to consumer spending. The promise of financial stability and consumer market potential is set to attract more investors.

?Organisations enjoying the advantages of expanding into Africa hassle-free, are those with targeted efforts in knowledge, support and planning. Although the full impact of the COVID-19 pandemic on private investment activity in Africa is uncertain, the long-term outlook for the continent remains bright.

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