The Louwdown on Africa - Opinion & Commentary

There is an Opportunity in Africa for Companies with the Right Mind Set

Nestle has just cut 15% of its workforce across 21 African countries. The company claims that the middle class in equatorial Africa is “extremely small and not really growing”. The company said that it would be lucky to reach 10% growth in future years. Nestle has struggled in markets that are dominated by family run businesses that thrive on local know-how and cheap products tailored to individual countries.



Nestlé’s woes in Africa are shared by Coca-Cola, Cadbury and Eveready, which have all cut jobs or factories in Kenya in recent months. On the other hand Weetabix is seeing double-digit growth year-on-year in Kenya while Wal-Mart and Carrefour are becoming anchor tenants in various new retail developments across the country. We feel that it is overly simplistic to believe that certain companies are just better equipped than others to deal with Africa’s systemic problems such as poor infrastructure, social unrest, political instability or corruption. Our view is that multinationals need to steer away from a “drag and drop” approach that simply seeks to take advantage of a growing middle class and focus more on the individual characteristics the African consumer. In the FMCG space, multinationals should learn from local retailers that are successfully launching quality private label products, fine-tuned to local markets. In a recent meeting with a prospective client (who has close ties to their target market), the phrase “township-economics” came up numerous times in the conversation.  This summed up beautifully how their business plan was focussed on meeting the well-understood needs of a specific group of customers; as opposed to aiming a retail offering in the general direction of the clichéd South African “emerging black middle class”.

What Greek Crisis? …Thoughts on the Impact of Perception on Risk and Return

The potential for Greece to default on its debt obligations and leave the euro does get coverage in South African newspapers, but certainly not to the extent that it does elsewhere. In fact, Greece has hardly come up in any of our recent business conversations in South Africa. This is surprising given that the EU is SA’s largest trading partner. In our view, South Africans in general need to become more aware that factors outside the country are often more important for exchange rates and stock market values than internal factors. For example, the US Federal Reserve’s interest rate policy has a far more powerful effect on the rand-dollar exchange rate than local economic data. Conversely the way in which investors group together disparate emerging market countries means that local nuances and opportunities are often missed. Eskom and the South African power crisis has already added one exciting opportunity to our pipeline. In our view the decline in FDI in South Africa and negative international headlines about the country simply means that opportunities like this are less likely to be crowed out by other players. 

Out of interest, here is the BBC’s game theory analysis of the Greek Crisis. (Greek Finance Minister Yanis Varoufakis was a professor of game theory). Zero is the most negative outcome for a player and one is the most positive. The first number is the outcome for Greece and the second the outcome for the rest of Europe.


OpinionAndrew Louw