Africa is not only a growing market for hi-tech products, but may soon be a base for a lot more hi-tech companies. The continent is expected to see growing competition to meet the needs of its rising young and middle class populations.
DHL calls itself the “logistics company for the world,” providing transportation via rail, road, sea and air. And Company officials see Africa as a place where its business can boom. For that to happen, though, more international companies will need to invest in the continent and base their operations there.
DHL’s Sumesh Rahavendra sees that happening. That’s one of the findings from a recent global technological conference sponsored by his company.
“There’s quite a bit of evidence to that in terms of global companies starting to set up base in Africa. If you look at the likes of SAP or IBM or Hisense, which is the Chinese company, all of them are setting base in Africa and looking at how specifically they can cater to the Africa market while being in Africa, as against getting to the African market while being in Europe or the Middle East.”
Rahavendra is the company’s head of marketing for sub-Saharan Africa.
“Specifically talking about emerging markets, you know, while Asia Pacific is still a fairly robust and stable growing electronics segment, we believe that there is a lot of potential in Africa. Africa could really be the next frontier for technology growth,” he said.
For technology companies to base operations in Africa is simply a matter of good logistics.
“As an example,” he said, “if you were a technology giant that had a distribution hub in the Middle East – and if you wanted to ship into African countries – you’d have to ship probably from the Middle East all the way down to South Africa and then consolidate and distribute from South Africa into the various African countries. That’s just one example, but that’s just how your cost of doing business increases if you don’t already have an existing base in Africa.”
A company has to be in the market, he said, to understand what the customer wants and needs.
“I travel a fair bit around Africa and so does the rest of our team and you can see the technology boom literally across every country in Africa. As an example, people who never had access to a desktop PC are now playing around with tablets – are now playing around with smart phones. And it just goes to show the level and speed of adoption has been significant as more middle class and upper middle class consumers in Africa get access to technology.”
Rahavendra described the continent’s one billion people as virtually an untapped market for many products.
“The purchasing power and the income disparity [are] quite different to that of the Asian countries, but it still represents a huge population simply because a majority of people are young people. And with a young population that’s going to adopt technology and commodities in the future, it represents a significant potential for any international company coming to Africa,” he said.
A recent report entitled The Rise and Rise of Africa’s Middle Class says more than 60 percent of the continent’s population is under 25 years old. The report says this means there is a “guaranteed customer base for years to come.”
And what’s good for companies, Rahavendra said, is good for DHL.
“As more and more companies are coming into Africa and setting up their distribution hubs here -- setting up plants to manufacture here – that represents a business opportunity for us to move more products across Africa. Look, DHL has been in Africa for over 35 years and we’re present in every single country across Africa, which means to a large extent really nobody knows Africa better than we do. And when companies come here they are going to look at who are the established players, who can help me with logistics,” he said.
Rahavendra said there is potential in every African country for growth, but some are more ready than others.
“One of the reasons why it’s hard to do business in African countries is just infrastructure and logistics. Because the cost of actually getting your product to its final place inflates it significantly because there are so much infrastructural challenges that isn’t getting you there. Second example is there are a fair bit of issues with political climate in some African countries. That needs to be made more conducive for business. The good news is signs all indicate towards a positive story going forward next five to ten years.”
DHL saID Africa is now the world’s second largest mobile technology market by connections after Asia, but the fastest growing mobile market in the world.