Pioneering One Africa: The companies blazing a trail across the continent
African business is integrating Africa – economically and otherwise. It has been a long time coming, and plenty of hurdles remain, but the economic integration of the continent, which many see as key to its continued development, is manifest. Driving it are indigenous entrepreneurs and fast-growing African companies, as well as multinational corporations (MNCs).
Since 2010, BCG has been tracking business and economic development in Africa, with a focus on the roles of leading African companies and MNCs. Our first report examined global competitors newly emerging from Africa. Our second report looked at the changing development model of Africa and how companies needed new approaches in fast-changing business environments. And our most recent previous report analyzed how nimble, agile, and fast-growing African companies were often beating MNCs at their own game.
This report continues to track the progress of African companies, focusing on how they are driving the continent’s economic integration by expanding their operations and their capabilities. Their activities are starting to overcome the barriers that have long restricted African nations from greater business and economic interaction.
African companies look to Africa first for growth, and removing barriers is crucial to their strategies. Their primary goal, of course, is to build value for their owners, but they understand that their activities also further economic and social development, and that this dynamic creates environments in which their businesses can thrive. Integration is therefore both a strategy and a highly desirable outcome.
Fragmentation: A barrier to business
Businesses often mention fragmentation, in its many forms, as a problem in Africa:
“It costs less to ship a car from Paris to Lagos than from Accra to Lagos.”
“Getting visas in Africa, especially for my African staff, is a nightmare.”
“Africa is an interesting market – but so fragmented. Many countries are just too small. How can I generate critical mass? Where should I start?”
“There is no ‘One Africa,’ but a collection of many different markets.”
Start with simple geography – that’s far from simple. Africa is vast, but only a handful of its cities have populations of 4 million or more, and they are dispersed across the continent. Direct flights are few, and flight times are long – the longest in the world, on average, at 12 hours between cities, including connections.
From any city in Europe, you can reach the countries aggregating 70% of Europe’s GDP in 3 hours or less. In Southeast Asia or Latin America, a comparable trip takes 8 hours. It Africa, a similar journey requires 15 hours – one full waking day.
Then there’s the issue of geopolitical and economic fragmentation. Africa has 54 sovereign countries – more than four times the number in South America and triple the number in East Asia. Most African countries are small in population and economic activity, if not in landmass. It takes 24 African nations to aggregate $1 trillion in GDP – far more than any other region of the world.
More important, most of Europe has combined into a single trade zone, the EU. In contrast, Africa has 16 trade zones, many more than South America (which has 6) and East Asia (which has 1). Four-fifths of African nations require a visa to visit. The Abuja Treaty, signed in 1991, contemplates an African Economic Community, but progress toward continent-wide free trade has been slow and uncertain and involves multiple steps, including the creation of multiple regional economic communities in 1991, a continent-wide customs union in 2019, a common market in 2023, and projected economic and monetary union in 2028.
Logistical fragmentation is yet another concern. Despite many new infrastructure initiatives, Africa lacks major road and rail networks to connect people and businesses across the continent – and many of the roads and rail lines that do exist are in poor repair and end at nations’ frontiers. This greatly increases the cost of doing business. We calculate that the average cost of shipping and distributing goods to market in Africa is equal to 320% of their value, compared with 200% in South America and 140% in East Asia and North America.
Fragmentation in Africa is much greater than anywhere else in the world, and it adds significantly to the economic challenges facing countries that typically lack the critical mass to compete globally.
Continued growth and integration
Despite the barriers of fragmentation, economic integration in Africa is not only taking place, but also gathering speed. We see more signs of this progress with each passing month, quarter, and year. The primary drivers come from within the continent, led by African business. Africa invests more in Africa, Africa trades more with Africa, and Africans travel more to Africa.
Four statistics – covering foreign direct investment, goods trade, M&A, and people – provide insight into the key advances. Between 2006-2007 and 2015-2016, the average annual amount of African foreign direct investment – money that African companies invested in African countries – nearly tripled, from $3.7 billion to $10 billion. Over the same period, the average number of yearly intraregional M&A deals jumped from 238 to 418, with African-led transactions representing more than half of all African deals in 2015.
Meanwhile, average annual intra-African exports increased from $41 billion to $65 billion. And the average annual number of African tourists (Africans traveling in Africa) rose from 19 million to 30 million. African tourists made up more than half of all tourists on the continent in 2015-2016.
Introducing 150 Pan-African Pioneers
We have identified 150 companies that are blazing a trail toward a more integrated Africa. They consist of 75 Africa-based companies and an equal number of MNCs that have established impressive track records in Africa and are contributing to further integration. The African pioneers come from 18 countries on the continent: 32 are based in South Africa and 10 in Morocco; Kenya and Nigeria are home to 6 each; 4 are from Egypt; and 2 each come from Côte d’Ivoire, Mauritius, Tanzania, and Tunisia. The MNCs are a global group, with France, the UK, and the US most strongly represented. At the same time, a dozen MNCs from China, India, Indonesia, Qatar, and the UAE are active across Africa.
In our 2013 Winning in Africa report, we highlighted characteristics that winning companies had in common. Many of these factors define how the pioneer companies expand, grow, and create value – not only for their owners and employees, but also for the countries in which they do business. African pioneers do eight things:
They actively expand their footprint.
They make greenfield investments.
They use M&A to expand.
They build brand recognition.
They innovate locally.
They develop a people advantage.
They build local ecosystems.
They connect Africa by facilitating the movement of people, goods, data, and information.
Connecting the continent
A number of companies operating in the telecommunications, media, finance, and transportation sectors (among others) are contributing to the integration of Africa in varied ways. They facilitate communication, interaction, and the movement of people, goods, information, and money among African countries and between these countries and the rest of the world.
One of the largest companies on the continent, with a market cap approaching $70 billion, is South Africa’s Naspers, which provides television, print media, internet services, technology products, and book publishing in multiple countries. Its digital satellite TV platform serves 8 million subscribers in sub-Saharan Africa, and it launched a budget option, GoTV, to bring digital TV within the means of millions more.
Ethiopian Airlines flies to more destinations in Africa than any other carrier, and it currently serves about 100 international destinations from its hubs in Africa. The airline is also the continent’s largest cargo operator, as measured by volume. The inauguration in 2017 at Addis Ababa Airport of Ethiopian Airlines’ $150 million, state-of-the-art cargo terminal, with the capacity to handle 1 million tons of cargo per year, enhances the carrier’s ability handle fresh produce and pharmaceutical products.
The challenges ahead
African Lions and MNCs alike face plenty of challenges, starting with fragmentation in all of its manifestations and extending through the difficulties of attracting and retaining talent and managing a plethora of local stakeholders. But if the past decade has demonstrated anything, it’s that these companies can overcome adversity masterfully.
They’ve built impressive track records of creating value for themselves and advancing the development of the continent – and its many economies – against the odds. They have a strong tailwind of momentum. They understand the challenges ahead, and they know that continuing to drive the integration of the African markets where they do business is one key way to pave the road to greater success. By trailblazing the much-needed economic integration of Africa, these companies are making a difference for African business and economic development.
This article was first published by The Boston Consulting Group. Visit the BCG website to view the full publication.
 See The African Challengers: Global Competitors Emerging from the Overlooked Continent, BCG Focus, May 2010.
 See Winning in Africa: From Trading Posts to Ecosystems, BCG Focus, January 2014.
 See Dueling with Lions: Playing the New Game of Business Success in Africa, BCG Focus, November 2015.