McKinsey & Company launches book 'Africa's Business Revolution'

McKinsey & Company has released a new book that highlight’s one of the 21st century’s great growth opportunities: Africa. By 2030, Africa will have 17 cities with more than five million residents, including five with ten million or more, household consumption is expected to grow at 3.8% a year to total $2.1 trillion by 2025, and meanwhile African businesses will increase their spending from $2.7 trillion today to $3.5 trillion by 2025. Acha Leke, Chairman of the Africa business unit of McKinsey & Company and one of the authors, reflects on Africa's economic potential.

Headlines about conflict and crisis have drowned out attention to Africa's remarkable economic progress – and the opportunities it presents for business. The facts are clear: Africa is home to more fast-growing economies than any other region, a consumer class whose spending outstrips India's, and hundreds of large successful companies. Fuelling this dynamism, Africa is adopting technology at a furious pace: It will soon have double the number of smartphone connections that North America has.

Africa shows every sign of being the world's next big growth market, yet it still faces serious challenges. Although incomes are rising, poverty remains widespread. Businesses must contend with infrastructure gaps, fragmented markets, and regulatory complexity. To translate Africa's opportunities into profitable, sustainable enterprises, executives need to recast those challenges as a spur for innovation.

That's what prompted three experts at McKinsey & Company [Acha Leke, Mutsa Chironga, Georges Desvaux] to write ‘Africa's Business Revolution: How to Succeed in the World's Next Big Growth Market’. This new book draws on interviews with 40 of Africa's most prominent executives and development leaders, as well as McKinsey's proprietary research, to offer a strategic guide to successful business-building in Africa. The book aims to help executives understand and seize the opportunities for building profitable, sustainable enterprises.

Acha Leke is a senior partner at McKinsey and chairman of the firm’s Africa offices. Leading the firm’s expansion across Africa, he has worked in more than 20 countries. Georges Desvaux is a senior partner at McKinsey and a former managing partner of the firm’s African and Japanese offices. Mutsa Chironga is an executive at Nedbank, one of South Africa’s largest banking groups. He was previously a partner at McKinsey and served banks in a dozen African countries.

The book highlights some surprising figures from McKinsey's database of large companies operating in Africa: 400 companies earning revenues of $1 billion or more and nearly 700 companies with revenue greater than $500 million. These companies are increasingly regional or pan-African. They have grown faster than their peers in the rest of the world in terms of local currency, and they are more profitable than their global peers in most sectors.

One of those big firms is Nigeria-based Dangote Industries, which manufactures commodities including cement, sugar, and flour in massive volumes. Founder Aliko Dangote has become Africa's richest person and the world's richest black man. Another is Ethiopian Airlines, which has driven an aggressive expansion strategy that nearly tripled its passenger numbers from 3.1 million in 2010 to 8.8 million in 2017. It is more profitable than many global airlines.

Despite some notable corporate success stories, however, Africa lags behind other emerging regions in hosting large companies. Excluding South Africa, it has just 60% of the number one would expect if it were on a par with peer regions. Moreover, Africa's big companies are smaller, on average, than those in other emerging economies. Africa's relative lack of large companies matters not just for shareholders, but also for society because these firms are the primary drivers of economic growth. That means that the continent's smaller, entrepreneurial firms need to think bigger – and shape expansion strategies explicitly targeted at addressing Africa's unmet demand. One example is Paga, a Nigerian mobile money start-up that has signed up more than 8 million users in less than a decade – and today processes $2 billion a year in payments. Another notable startup is Gro Intelligence, whose web application and tools provide a real-time picture of the factors influencing agricultural commodities.

There is space for many other startups to build scale in Africa – whether in retail, technology, manufacturing, agriculture, mining, or a host of other sectors. Africa's vast unfulfilled demand make it a continent ripe for entrepreneurship and innovation at scale.

Related: Africa's banking sector the second most profitable in the world, says McKinsey.