Transcript Joining hands to unlock Africa`s potential

Joining hands to unlock
Africa’s potential
A new Indian industry-led approach to Africa
Presentation by Rajat Gupta
McKinsey & Company
10 March 2014
CONFIDENTIAL AND PROPRIETARY
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For Africa, the path ahead provides great opportunities for the world to
contribute to its development
Africa today (2013)
Africa tomorrow (2025) India today (2013)
GDP
(nominal)
USD 2.1
USD 5.3
USD 1.9
trillion
trillion
trillion
Consumer
spending
(nominal)
USD 1.3
USD 3.6
USD 1.1
trillion
trillion
trillion
618
845
822
million
million
million
Cities with
>1 million people
541
103
511
Households with
discretionary
income
108
194
197
million
million
million
815
1,141
873
million
million
million
Working age
population
Mobile phone
users
1 The latest data available is for the year 2010
SOURCE: IHS Economics; C-GIDD; McKinsey Global Institute; Cityscope 2.2; Business Monitor International;
McKinsey analysis
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Drivers of Africa’s growth story
African green
revolution
Macro and
political stability
The
commodity
boom
Demographic
shifts
Ongoing
economic
reforms
Access to
international capital
SOURCE: IHS Economics; IMF; Business Monitor International; C-GIDD; World Bank Group doing business 2013;
UNCTAD – World Investment Report 2013; McKinsey Global Institute Cityscope 2.2; Press Search; McKinsey analysis
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More than half of Africa’s 55 countries are expected to grow
faster than 5% annually till 2025
Compound annual real GDP growth
2000–2013
>7%
5–7%
2–5%
Compound annual real GDP growth
2013–2025
Burkina
Faso
Cape
Verde
Libya
Central African
Republic
Mauritania
Mauritania
Niger
Chad
Nigeria
Ethiopia
Sierra
Leone
Uganda
Rwanda
Ghana
Burkina
Faso
Equatorial
Sao Tome
Guinea
and Principe
Congo
Tanzania
Angola Zambia
Niger
Gambia
Guinea
Senegal
Nigeria
Sierra
Leone
Liberia
Ghana
Congo
Gabon
Cote
Dem.
Rep.
d’Ivoire
Congo
Sao Tome
and Principe
Angola
Zambia
Ethiopia
Kenya
Uganda
Rwanda
Tanzania
Seychelles
Burundi
Malawi
Mozambique
Lesotho
Mozambique
8 countries (Nigeria, South Africa, Egypt, Libya, Algeria, Angola, Morocco, Ethiopia)
will account for ~70% of Africa’s total GDP growth between 2013 and 2025
SOURCE: IHS Economics
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30 cities across Africa will witness consumption growth of more than
USD 2 billion in the next 5 years
Top African cities by consumption growth, 2013–2018
Rabat
Casablanca
Tunis
Benghazi
Alexandria
Cairo
Tripoli
Consumption
growth, 2013–18
USD billion
Cities
Dakar
Khartoum
Ibadan Kano
Abuja
Kumasi
Lagos
Douala
Accra
Abidjan
Kampala
Poart
Yaounde
Nairobi
Harcourt
Kinshasa
>10
5–10
2–5
Luanda
Lusaka
Pretoria
Johannesburg
Capetown
SOURCE: Canback Global Income Distribution Database (C-GIDD)
Emfuleni
Durban
Port Elizabeth
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India and Africa can gain significantly from mutual cooperation
India’s value
proposition
Africa’s value
proposition
Africa’s needs
▪
▪
▪
▪
▪
India’s needs
Constructive FDI
▪
Employment and
job opportunities
Low cost innovation
and operating model
▪
Education
and skill
development
▪
Low cost
healthcare
solutions
▪
Infrastructure
and capital
SOURCE: McKinsey analysis
▪
Cultural affinity and
understanding
Suitable base for
globalisation for
Indian companies
▪
Skill and talent
development
Largest working age
population
▪
Entrepreneurship
and service
orientation
Huge untapped
opportunity in rising
middle class
▪
Vast resources
▪
High return and
growth
opportunity
▪
Hedging of
resources risk
▪
Base for
globalisation
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Some Indian companies are already participating in the
Africa opportunity
NOT EXHAUSTIVE
Energy and mining
Communication
Manufacturing
Agriculture
Services
Financial services
Pharmaceuticals
Consumer goods
SOURCE: Company websites
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Comparison of sectors by India’s value proposition
and Africa’s need for development
▪ Low cost
Telecommunication
innovation/
operating model
dynamics
▪ Entrepreneur-
Hotels &
restaurants
Low
Highly skilled
manpower
Engineering
consultancy
Automotive –
Automotive –
Passenger vehicles Commercial vehicles
▪ Similar market
▪
Detailed later
IT services
High
India’s unique
value
proposition
NOT EXHAUSTIVE
ship and service
orientation
Banking
Transport &
storage
Pharmaceuticals
& healthcare
Consumer
goods
Agriculture
Infrastructure1
Education
Resources
Real estate
Lead sectors
Low
Africa’s need for trade and investment
▪ Employment and job opportunities
▪ Infrastructure and capital
High
▪ Education and skill development
1 This report focuses only on the power sector opportunity
SOURCE: Expert interviews; McKinsey analysis
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Opportunity and India’s value proposition
in four lead sectors
Size of sector
6–7%
Consumer
goods
756
355
8–9%
80-95
25-35
IT and ITeS
5–6%
Infrastructure
(Power1)
48
5–6%
▪
▪
730
370
Agriculture
Compound
Annual Growth
Rate
2013 revenue, USD bn
2025 revenue, USD bn
India’s value proposition
▪ Low cost product innovation
▪ Efficient distribution model in a fragmented
market
▪ Service orientation
▪ Ability to set up SME manufacturing capacity
▪ Global companies with reputed brands
▪ Ability to train people at scale
▪ Innovative delivery models
▪ Successful track record in driving systemic
ICT adoption
▪
▪
28
xx
▪
▪
Success story in Indian market, adding 70
GW capacity in last 5 years
“Entrepreneurial mindset”
High quality engineering talent
Low cost, wide range agrochem/ fertiliser
manufacturing experience
Strength in distribution models
Low cost, robust farm equipment
manufacturing capabilities
1 Opportunity size is in 'power generation' space only and covers capital expenditure and not revenues
SOURCE: Expert interviews; Euromonitor International; McKinsey analysis
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India’s possible aspirations for Africa
All figures in USD
2013
India’s import from Africa
43 bn
300 bn
27 bn
130 bn
IT services
1–2 bn
7 bn
Consumer goods2
<1 bn
17 bn
Infrastructure
<1 bn
25 bn
Agriculture (and allied)
<1 bn
5 bn
35 bn
160 bn
High potential
sectors
India’s exports to Africa
Revenues1 for Indian
companies from Africa
2025
Overall
2003–2013
India’s FDI in Africa
60 bn
2013–2025
100 bn
1 Corporate sector revenues from exports and local sales from Africa
2 Includes only FMCG category
SOURCE: IHS Economics – World Trade Service 2013; McKinsey analysis
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India’s new industry-led “solutions partner” approach to contribute to
Africa’s development
Focus areas to successfully implement this approach
1
Joint vision
Create a joint vision with pilot countries or
Indian industry to contribute to the sector-wise
development
2
Continuous
engagement
Ensure intense and broad-based engagement
on development topics with pilot countries
3
Opportunity
identification
studies
Participate in pre-feasibility studies for relevant
projects. Also, conduct sector development
studies
4
Open consortium Indian companies from relevant sectors in
development discussions with pilot country
of Indian
companies
representatives
5
Revamped
funding model
Multilateral funding (allies with similar strategic
interest – e.g., JIPC); Seed funding (export
finance institution like EXIM)
SOURCE: Expert interviews; McKinsey analysis
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10 Imperatives for Indian companies to win in Africa
Strategy
Imperatives
Where to
play?
1
Prioritise early
2
Go granular
3
Expect to iterate
4
Distribution is the key
5
Aggressively build brands
6
Deliver value across price segment
7
Think long term
8
Involve locals and insiders as partners
9
Partner with local governments to create
opportunities
10
Invest in building local talent
How to
play?
Organise
to win
SOURCE: Expert interviews; McKinsey analysis
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Example: Cisco’s joint vision for IT development in multiple African
nations and Japan’s early participation in India’s development
Cisco’s joint vision with governments
in Africa to develop IT sector
Japan participated early in India’s
infrastructure development
▪
790
Training Academies
77,581 students
in the academies
1,570
instructors
Running in 40
countries
Since early 2000, Japan has
invested in various feasibility
studies and project reports in the
infrastructure space
– Feasibility Study for
developing a high speed
railway systems
– Identified freight corridors as
important sources of
Developed a skill building programme in Ethiopia
to develop >500 engineers to help lay down 2,500
kms of fibre optics in 3 years
SOURCE: Company website; web search
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