The Rise of African Multinational Enterprises and their contributions to the development of Africa

By Ebimo Amungo

African Founded Multinational Enterprises have been doing majority of the work that is accelerating the development of Africa in the past two decades. This includes increasing food and agricultural production, increasing value added manufacturing, building infrastructure, increasing access to finance and capital for entrepreneurs, creating pathways for African integration through increased intra-African trade and foreign direct investments while also attracting capital to Africa from foreign financiers who have long shunned the continent. These insights form the crux of my new book titled “The Rise of the African Multinational Enterprise” published by Springer of Switzerland.

The book was released under the Management of Professionals series of Springer, one of the largest publishers of academic and professional books and journals in the world and it is a 310-page ode to Africa’s private sector enterprises. The book is the culmination of several years of research in a topic that has formed the plank of my academic interest. In the book, I outline the contributions of African Multinational Enterprises, which I call the African Lions, to the various economic sectors and segments and enumerate how these contributions are accelerating the development of Africa.

The Rise of the African Multinational Enterprise: The most authoritative book on private enterprise in Africa. Get a Copy from SPRINGER

Africa is a continent with crippling shortages, shortfalls in agricultural output has led to food insecurity and a yearly bill of $30billion spent of food imports according to a report by the Food and Agriculture Organization. Shortages in value added manufacturing means most of Africa’s commodities is exported in their raw form. The World Bank notes that on a comparative basis, manufacturing contributes only 10 per cent to Gross National Product, GDP, in sub- Saharan Africa. Lack of infrastructure means businesses are hobbled as they have to invest in providing their own electricity, water and even security. Additionally, Africa ranks low on logistics performance index, thus making it hard to get goods to markets. A report by the Center for Global Development, however noted that the most challenging obstacle facing private  enterprises in Africa  is the lack of access to finance and the high cost of capital.

The path leading to these damming statistics were paved by Africa’s history, politics and policies of her fifty-four sovereign states. Africa’s colonial history meant for a large period of time local manufacture of goods was discouraged. Following independence, several countries tried to stimulate local productions of goods and services through initiatives like the import substitution and industrialization programs that led to the establishment of state-owned enterprises. These programs not only failed; they left several African countries embroiled in debt. The biggest long-term damage to African economies were, however, the nationalization and indigenization policies that stripped foreign multinational corporations of their investments, thus casting the region as a high-risk continent with policy uncertainty. Today, African governments and corporates buy capital at the highest interest rates and yields, while the continent has only been able to attract an average of 3-5% of global capital flows in the period since 1970.

Yet in the past few decades, Africa has experienced explosive growth in population and rapid urbanization prompting an increased demand for food, goods and services. Africa’s population was estimated at 220 million in 1950 but has ballooned to 1.2 billion at present, and is projected at 1.5 billion by 2025. Meanwhile, Africa’s urban population has been growing at a very high rate from about 27% in 1950 to 40% in 2015 and projected to reach 60% by 2050.

So as demand increased for goods and services and foreign multinationals limited their investments on the continent, it fell to indigenous businesses to meet Africa’s needs and take up the invitation of African governments for investments. Starting out first as small and medium scale mercantile and service companies, Africa’s private sector has grown to be veritable providers of goods and services and major contributors to GDP, employment and tax revenue of governments.

Companies like Bahkresa in Tanzania, Bidco Africa in Kenya, Cetival in Algeria, Mansour Group in Egypt, Mukwano in Uganda and Dangote in Nigeria started out as trading and mercantile companies, importing and distributing essential products at a time government had balance of trade limitations. Today, several of these companies have grown into multinational conglomerates driving foreign direct investments within the continent.  

African Lions have been particularly active in the agriculture value chain.  They have been involved in the production of agricultural inputs, engaged in mechanized farming, invested in processing, milling and storage and they are giving farmers greater access to the market foreign and domestic markets. Morocco’s OCP, Egypt’s OCI international and Nigeria’s Dangote have made huge multibillion-dollar investments to improve availability of fertilizer for farmers, while companies like Optorg and Kanu Equipment are selling and leasing agricultural machinery in several African countries. In the same breath, AMNEs like Tiger Brands, Cevital, Madhvani, Ciel and Qalaa Holdings are involved large scale mechanized farming, storage and processing. Market access for farmers has improved due to the investments of firms like Eastern Trading Group, Bidvest, Stallion Group, Olam and Shoprite.

Over the past two decades, there has been a marginal growth in value added manufacturing on the continent as AMNEs invests not only in the agribusiness, but also in construction and building materials, textiles, pharmaceuticals and even vehicle assembly. This has stemmed the tide of deindustrialization that followed the failure of import substitution policy. Today, manufacturing contributes 6% to GDP in Africa as companies like Kenya’s Comcast, Egypt’s Elsewedy, Nigeria’s Dangote Cement, Mauritius’s Ciel, and South Africa’s Aspen have bolstered local manufacture of cement, electrical components, textiles and pharmaceuticals.

It is in the delivery of services that African Lions have made the most impact. Deregulation and liberalization of certain segments like financial services, infrastructure development and trade has led to birth, growth and expansion of some of Africa’s biggest companies. Services now contributes 60% to African GDP, prompting scholars to  query if Africa is leapfrogging from an agrarian to a service economy in its development path.

The overhaul of Africa’s infrastructure, especially telecommunications, has been led by companies like South Africa’s MTN, Nigeria’s GlobaCom, Egypt’s Orascom, Morocco’s Maroc Telecom, Zimbabwe’s Econet and Gambia’s Africell. According to the Brookings Institution, over $60 billion has been invested in providing submarine cables, telecommunication towers, base stations, data centers and fiber optic networks  in Africa over the past two decades. Most of these investments were undertaken by African Lions and these investments have created a vibrant mobile economy that has made Africa the largest market for mobile money products in the world. Today, there are 750 million telephone subscribers in sub-Saharan Africa and mobile tele-density has moved from 2% in 2000 to 80% mainly because of the investments of AMNEs.

Even then, it is the financial services sector that has benefited the most from the investments of African Lions including banks, insurance companies, private equity firms. Banks like Togo’s Ecobank, South Africa’s Standard Bank, Nigeria’s Guaranty Trust Bank, Morocco’s Attijariwafa Bank and Kenya’s Equity Bank have taken banking services to several African countries and helped Africa move up indexes that measure financial inclusion and credit to the private sector. They have also accumulated over $1 trillion dollars in capital assets undermanagement.

Meanwhile, airlines like Ethiopian Airlines, Kenyan Airways and Royal Maroc Airlines are improving interconnectivity within Africa while media juggernaut, Naspers, with its subsidiaries Multichoice and DSTV have facilitated cultural integration across the continent.

African Lions were nurtured by a new crop of entrepreneurs who have been resilient and dogged in overcoming Africa’s myriad challenges. They have been able to attract capital to their businesses, innovate to overcome infrastructural deficiencies, prodded governments to improve institutional frameworks and developed the strategies that have won market share for their companies from established incumbents. Entrepreneurs like Aliko Dangote, Koos Bakker, Issad Rebrab, Manu Chandaria, Strive Masiyiwa and Naguib Sawiris have staked their money in Africa and by their success have spawned the African Multinational Enterprises.

Today, African Multinational Enterprises provide a large proportion of the goods and services needed on the continent. They are significant foreign direct investors in several countries within and outside the continent and through their investments, these Lions are accelerating the development of Africa.

Dr. Ebimo Amungo is the managing partner of Amungo Consulting Limited

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