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Is Africa the next BRIC phenomenon?

Is Africa the next BRIC phenomenon?

Is Africa the next BRIC phenomenon?

Brazil, Russia, India, and China (BRIC) might have gotten all the attention during the last decade, but a great deal of economic expansion has also been taking place in Africa. The continent has been in transition, with urbanization and the rise of the middle-class consumer fueling its growth. Today, after a decade of economic expansion, Africa is rapidly going digital. Only 16% of the continent’s 1 billion people are online, but that is rising quickly as mobile networks expand and the cost of Internet-capable devices continues to fall.

More than 720 million Africans use mobile devices, with 167 million people already use the Internet, and 52 million of them are on Facebook. Evidence of what is to come can already be seen in Africa’s major cities, where consumers have increased disposable income, more than half have Internet-capable devices, and 3G networks are now up and running.

There is a growing wave of innovation as entrepreneurs and large corporations alike launch Web-based ventures, from e-commerce sites and digital entertainment platforms to mobile health technologies and online educational content. Governments have placed Internet-driven growth firmly on the agenda. Rwanda, Morocco, and Nigeria, for example, have ambitious plans to expand high-speed Internet access to most of their populations.

According to McKinsey & Compan’s Africa team, Internet matters a great deal in Africa because “it will enable Africans to keep in contact with friends, relatives, and customers; access pubic information and services; manage their health; and advance their education. As Africa grows more connected, millions will tap into information and opportunities that were once beyond their reach. They will gain a greater voice in their communities and enrich the world’s flow of commerce and ideas.” In essence, Africa will digitally progress the same way that many developing regions have evolved before them.

What industries will be affected most?
We believe the following 6 sectors will not only experience great economic growth, but will also be most beneficial to our clients and potential clients:

Financial Services – More than three-quarters of adults in sub-Saharan Africa still lack accounts at formal financial institutions. The Internet is expected to be a huge accelerator of financial inclusion as it reduces transaction costs and brings financial services to people. By 2025, more than 60% of Africans could have access to banking services, more than 90% could use mobile wallets for daily transactions, and revenues from mobile financial services could increase from below $1 billion today to $19 billion.

Healthcare – While Africa has only 1.1 doctors and 2.7 nurses per 1,000 people today, Internet could improve the efficiency of health spending – reducing the cost of treating chronic disease by 10% – 20%, reducing drug counterfeiting by 80% or more, and saving nurses’ time. Remote diagnostics and telemedicine could address 80% of the health issues of patients in rural clinics, which are typically the most poorly staffed, thereby revolutionizing health care for large portions of the population while reducing costs and travel time. The Internet will enable widespread automation and centralization of patient admissions, health records, and supply chains.

Retail – Besides South Africa, the formal retail sector is relatively underdeveloped across most of the region. But e-commerce will open up a new shopping experience for Africa’s growing middle class, giving consumers access to more choice, better quality and convenience, and lower prices. By 2025, e-commerce could account for 10% of retail sales in Africa’s largest economies, which translates into roughly $75 billion in annual online sales. E-commerce allows entrepreneurs and SMEs to connect with a large customer base and scale up rapidly.

Government – The Internet is a powerful tool to improve transparency, provide citizens with access to information, and automate revenue collection. By 2025, half or more of all government departments in Africa could have automated information systems—and all customer-facing government departments could have an online presence, allowing citizens to access services at the touch of a button. Potential technology-related productivity gains in government are estimated to be $10 billion to $25 billion, enabling more effective service delivery.

Agriculture – Growth from agriculture is at least twice as effective in reducing poverty as growth in other sectors. Huge efforts are under way across the continent to grow agriculture’s output, value, and social impact—and the Internet will accelerate those efforts. It can connect farmers with expertise and information on everything from weather, crop selection, and pest control to management and finance. It can also improve their access to markets and increase their pricing power. Agricultural exchanges are growing in breadth and sophistication; the East Africa Exchange, for example, provides a virtual trading platform as well as support services and market intelligence. Nigeria has used mobile technology to revamp its system for delivering fertilizer subsidies.

Its “e-wallet” program has already achieved major savings, eliminated opportunities for corruption, expanded the number of farmers served, and far exceeded its production targets. Internet technology can drive up to $3 billion in annual productivity gains in the sector.

Education – The goal of delivering a high-quality education to many children in Africa remains unfulfilled. But new digital tools have the potential to deliver rapid gains in access to education, teacher training, and learning outcomes. Students who once had few textbooks can log on and learn with the world’s best educational content on affordable tablets or e‑books. Education spending accounts for a sizable portion of most government budgets, and now Web-based school management systems and online testing can support standardization and monitoring of school performance that will make this public expenditure more effective.

Africa may be the next BRIC!

Africa may be the next BRIC!

Part 2 of Africa opportunity will be posted next week. Stay tuned!

Research reports from U.S. Commercial Service:

  1. Country Commercial Guide for Nigeria 2013
  2. Country Commercial Guide for Ethiopia 2013
  3. Country Commercial Guide for Morocco 2012
  4. Country Commercial Guide for Kenya 2013
  5. Country Commercial Guide for Tunisia 2013

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