Doing Business in Africa: A Marriage of Social Investment and Strategy

With 200 million people between the ages of 15 and 24, Africa has the world’s youngest population. Each year between now and 2020, eleven million more are expected to enter the African labour market. On a continent that contains many of the world’s fast-growing world economies, there’s a palpable enthusiasm when you speak with many young people and social entrepreneurs. 
Yet, right now many young people either have no jobs to go to or limited skills to do the jobs that are available. The promise of Africa’s explosive economic growth points to a critical inflection point: Will the increasing population growth outpace the development of jobs and education necessary to accommodate the labour market?
By 2020, the global economy will also face a shortage of the skilled talent needed to drive prosperity and social security. According to the McKinsey Global Institute’s World at Work study, there will be 45 million “missing jobs” in developing economies, many in Africa. These are jobs for medium-skill positions that companies seek to fill, but for which qualified applicants will be unavailable. A lack of meaningful engagement in the labour market poses a tremendous risk for global security. Fuelled by social imbalance and poverty, this can, and in many parts of the world, has led to civil unrest.  
Corporations have the opportunity to step up and help fill this gap in ways that government cannot. For the companies that do, the benefits are compelling – a skilled and ready workforce, an increased social license to operate, and a competitive advantage in new geographies with substantive market potential.

Social Investment is a Strategic Lever
Private sector investment in Africa is about making smart social investments today as part of a sustainable and inclusive growth strategy that will pay off in economic growth – ultimately growing business while meeting a clear social need.
It’s not tenable, however, to take a business-first, business-only approach when entering developing regions. A company must take into account the macro socioeconomic needs facing these countries. Recognizing the inherent demographical challenges, for example, a critical mandate of SAP’s growth plan in Africa is to equip young people with the tools to thrive in the twenty-first century workforce – to bridge the burgeoning gap between supply and demand in the labour market.
SAP wants to create a full cycle of technology skills support by providing university graduates training and immediate job opportunities, while casting a wider net to include primary and secondary students. SAP’s Skills for Africa, for example, is a scholarship program that will train 10,000 technology consultants in Africa by 2020. After the program, trainees are guaranteed an internship or job interview with SAP customers or partners. Thousands of consultants are developing the new job skills in technology and SAP is gaining a pool of skilled candidates.
Last year, we launched Africa Code Week, a one-week program designed to introduce children to programming. 90,000 children, 3,000 parents and teachers and 100 partners participated across Africa – planting the seeds of digital fluency in the next generation. 
One company alone, however, cannot fill the gap. Many other companies like IBM, GE, Intel, and The Dow Chemical Company, are taking the lead in Africa through shared value initiatives. With a presence in 24 countries, IBM sends employees to Africa annually to provide pro bono consulting services for government agencies, research and academic institutions, and enterprises. The program fosters leaders with a newborn understanding of the nuances and challenges of doing business in Africa. In 2014, GE announced that it would invest $2 billion in Africa by 2018 to spur the development of infrastructure, human resources, and energy projects and subsequently launched a host of initiatives.
Building a presence in African markets taught us strategic principles that apply to anyone thinking about entering a new market:

  1. Go first, scale later. By the very nature of market development, you enter the unknown. Get to know the local context before going deep. Through initiatives like the Social Sabbatical, a program where high performing employees work on short-term pro bono assignments with social enterprises in emerging markets, employees bring back an experiential understanding that gives SAP a clearer view into promising opportunities and teaches us what to avoid.
  2. Know your strengths – and leverage them. Invest in social engagements close to your business expertise. If your expertise is water, focus your social impact efforts there. SAP is the largest business software company in the world – we know how to leverage technology and make enterprises successful. Our social investments mirror this.
  3. Bring a friend. Working with a partner who knows the terrain catalyzes all aspects of working in a new market. On the Social Sabbatical, we work with partners like PYXERA Global, an international NGO that brings an understanding of customs and business norms and a network of local contacts in the private, public and social sectors. A partnership approach will accelerate your organizational knowledge about a market. Your organization will have a reputable ally who has built trust—often hard-earned—with a community over time.
  4. Design initiatives to accelerate skills and market development. Design initiatives that develop an individual’s technical skillsets and her entrepreneurial abilities. In many cases, the number of jobs seekers exceeds the number of jobs available. By cultivating technical and entrepreneurial capabilities in a market where you seek to do business, you will help nurture a workforce and the local capacities to launch the new businesses that encourage a local economy to flourish.
  5. Leverage the power of leapfrog technology. The initial product development steps taken in a Western market may no longer apply in an African business context. Aluminum Greenhouses, for example, is a start-up in Nairobi, Kenya that sells smart, remote-controlled, solar-powered greenhouses. These solar-power sensors calculate the actual amount of irrigation needed, reducing water consumption by up to 60%. This approach bypasses the need to develop costly infrastructure like electrical grids. One of the greatest attractions for young farmers is that they can control their greenhouses using an app on their smartphone, freeing up their time to focus on other income-generating activities.

The GDP of 25 African countries is expected to grow 5% annually between now and 2025. 60% of African households will have discretionary spending power by 2020. The companies willing to take a shared value approach to African markets now will excel in the market of tomorrow.

Brett Parker is Managing Director of SAP Africa.



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