Looking ahead to Davos 2013 and an update on Klaus Schwab’s pragmatic Afro-Optimism
Next month, I’ll be attending my tenth World Economic Forum meeting in Davos. It’s a significant investment, especially as the restraint precludes me from writing or broadcasting about the event. But the gathering is like a university And I can’t wait to hear whether optimism about Africa is growing.
Five years ago, I discovered Elisabeth Kubler-Ross. An extraordinary woman who dedicated her life to researching what happens after death, her writing has brought comfort to millions struggling to make sense of the passing of loved ones. On a broader scale, through, she is best known for model called Five Stages of Grief – denial; anger; bargaining; depression; and only then acceptance.
Kubler-Ross’s process has been adapted by psychologists into four stages all humans need to move through before embracing change – first denial; then rejection; followed by acceptance and finally commitment. Business scientists apply the same principles, explaining ahead of any major change that understanding this process is critical for the success of any proposed realignment of strategy.
There are no short cuts. We all need to go through the stages. It’s hard wired into us; part of the human condition. But for ages, those who run their own shops have been nimbler and more open minded than corporate executives. As entrepreneurs they are able to derive advantage by moving rapidly through these stages. And they’re doing so in growing numbers right now into Africa, abandoning pre-conceived that still bedevil continental growth strategies of many corporates where it is still viewed as the “Dark Continent”, a place where disease, corruption and mis-governance is endemic.
Founder of the World Economic Forum (WEF), Swiss polymath Prof Klaus Schwab describes the mind-set change process well. Last time I heard him was when he told the WEF’s gathering in Addis Ababa in May that in his view the world’s perception of the continent has moved from cynicism to pessimism then realism and now pragmatic optimism. Among the reasons I’ll be travelling to Davos, Switzerland in January is to hear whether Prof Schwab has become even more optimistic.
He’d be in good company. Shoprite CEO Whitey Basson’s foresight has ensured his group is now far and away the biggest retailer on the continent. He told me during a radio interview back in 1997 that his biggest regret in buying OK Bazaars for one rand (the bargain of the century) was that it would force him to put his Africa expansion on hold. Fortunately for Whitey, competitors slumbered on, giving Basson the time to bed down OK Bazaars and still grab the plums of the African adventure while Pick n Pay played in Australia and Walmart took its time before deciding to buy Massmart.
Mr Basson wasn’t at the WEF’s Summit in Ethiopia. But for those, like me, who were there I doubt whether there was a single Afro-Pessimist left after the 700 participants were exposed to the latest developments on a continent whose time has clearly arrived. Re-inforced by some strong statements by those who should know. Like the head of the China Investment Corporation telling us Africa today reminds him of where his country was in 1980 and is on the same growth trajectory. Or another podium occupier who described the continent as being where Brazil was in 1974.
This excitement was shared by top executives from multinationals Walmart and General Electric and African veterans Lonrho and Diageo whose CEOs shared stories of booming business opportunities. The CEO of Lonrho summed up the mood when explaining that while executives in Europe and North America plot strategies around winning a one percent market share gain from competitors, the challenge in Africa is how to manage 30% a year growth.
Having absorbed three days of intense discussion and information sharing, what struck me was how the best business opportunities are in the $5m to $15m investment range. There is plenty of money available for bigger investment ideas and extreme competition in the small business environment. But African entrepreneurs complain loudly and often about the scarcity of capital in the mid-range.
Sector-wise, the obvious entry points are the unexploited areas of mining and corporate agriculture. But abundant opportunities are available in manufacturing, distribution and retailing of consumer goods; using technology in financial services, especially banking; and helping to deliver on vast infrastructure programmes all over the continent. Studying the experiences of JSE-listed pioneers with successful African activities, like Tongaat Hulett, MTN, Shoprite and Barloworld is inspirational.
For the moment the most popular destinations for investors are Ghana, Rwanda, Kenya, Nigeria and Ethiopia. Many in Addis agreed that Zimbabwe was a fabulous medium-term bet (ie post Mugabe). But where such great rewards are offered, risk remains high. The advice from those bearing financial scars is to arrive early and take a long-term view; engage a local partner; be financially vigilant by paying attention to the details; and diversify by taking a number of bets.
Africa still isn’t for sissies. And probably never will be. But right now it offers entrepreneurs the best potential of any region on earth. South Africans even more so. The only thing standing in the way, perhaps, is an inability to shrug off preconceptions, an unwillingness to migrate one’s thinking through those four stages. A trip to any number of cities up north will quickly change that. Despite SAA’s predatory pricing, it’s should be top of any serious entrepreneur’s list of investments.
