For most multinational corporations (MNCs), Africa is the forgotten continent. Characterized by the media mostly in terms of political turmoil, malnutrition, and AIDS, Africa seems inconsequential as a potential market or as a low-cost manufacturing source. Yet several MNCs enjoy good, sustained profitability from their African operations. In addition, substantial political and economic changes now underway in many African countries prompt a closer look at the business opportunities in this emerging continent of forty-nine very diverse nations.
Our purpose here is to highlight these changes and to provide practical advice on business strategy, marketing, and organization to companies doing or considering doing business in Africa. We focus on sub-Saharan Africa and therefore exclude the Arab countries of North Africa that are more often identified with the Middle East. We studied a variety of firms, representing leading consumer, industrial, and service companies that are marketing and, in some cases, manufacturing in Africa.
Small but Growing Involvement
The commercial importance of Africa to multinationals is limited but increasing:
- Exports to Africa from the United States are small but expanding rapidly. In 1991, exports rose 18 percent to $4.8 billion with 60 percent going to Nigeria and South Africa, which account for 28 percent of the continent’s population. This growth rate was two and a half times that of total U.S. exports. Between 1988 and 1991, exports to the region rose 70 percent.1
- Of the United States’ $11.7 billion imports from Africa, almost all were oil and other commodities. Africa accounts for only 2 percent of U.S. trade, but, put in perspective, it still exceeds that with the former communist countries of Eastern and Central Europe. Europe’s trade with Africa is almost double that of the United States, given the traditional ties with its former colonies.
- Most North American and European multinationals generate less than 1 percent of their revenues and income from African operations. However, there are important exceptions, such as the Coca-Cola Company, whose African operations account for 5 percent of revenues.
- In 1992, multinationals invested $2.1 billion in Africa. While this amounted to only 5.8 percent of the total direct foreign investment in developing countries, the growth rate of foreign investment during the 1981–1992 period in Africa exceeded that in all other regions.2
- Demographically, the African continent represents the fastest expanding marketplace. Its 600 million people are growing at an average annual rate of 3 percent, compared to 0.5