The report “Local champions in Africa: Emerging global enterprises” will be launched in Q3 2017 to shed light on the hidden potential of African champion companies – mature companies that have had a successful business trajectory in their home markets, are under local management and operate in growth industries. Typically, companies profiled have been in business for a minimum of 10 years – the report highlights the success factors of their commercial model in a detailed case study, introduces the country context the company operates in and discusses key policies that were of determining nature in the respective industry. Industries covered in the inaugural version of the report are agriprocessing, consumer goods and financial services. Amongst others, it aims to equip investors with a better understanding of what makes local companies successful and what it takes to scale them.
Why local economic value creation in Africa matters
Africa is a continent with some of the globally fastest-growing markets and has an annual GDP of approximately 1.8 trillion USD. It is estimated that between 25 – 50% of this GDP is produced by non-African companies, with profits largely expatriated and value-adding activities moved off-shore. As larger African companies improve their local supply chains we will see decreased prices for consumers, faster scaling of innovative talent, and enhanced returns for investors.
The case for investment in local economic value creation in Sub-Saharan Africa stands despite recent economic downturns in some of its largest economies. Indeed, leveraging and understanding the underlying factors driving local success stories is essential to creating robust African economies, poising them for sustainable growth and returns.While many Sub-Saharan economies are open to the inflows of goods and services from abroad, local champions are currently a comparative scarcity.
A 2014 analysis by McKinsey & Company shows that the overall proportion of large companies in Africa that are family-owned is 50% lower than the proportion in South East Asia, Latin America, or Western markets.
Despite increased investment interest in Africa, data available on companies across the continent is limited due to a scarcity of listed companies and activity on local stock exchanges, lack of online presence of many local industries, and lack of distribution and marketing presence outside local economies.
While the relative scarcity of local champions poses an investment challenge, lack of access or exposure to international investors dampens the potential impact of true success stories that do exist and flourish.
Specific factors drive success of local champions
Darko Farms, as one of the oldest family businesses in Ghana, owns six farms with a joint capacity of 300,000 chickens, a hatchery which can produce up to 5 million day-old chicks, and a feed mill with a production capacity of 10 tons feed/hr. Darko Farms employs 90 staff members, and has remained the biggest poultry business in Ghana to date with revenue ranging from 5-10mn USD p.a.
Project Champion researchers find the success factors driving Darko Farms to be integrated vertical maize production and a unique employee retention policy.Despite relatively un-mechanized processes (the farm employed more than 800 workers), Darko Farms managed to significantly cut down feed input costs by acquiring and developing land for feed production; an integration shift that proved successful and lucrative. Moreover, Darko Farms created a company culture rarely seen in agribusiness.
This people strategy of providing staff with a variety of unusual benefits allowed Darko Farms to have incredibly high employee retention, with many employees reaching a tenure of 30+ years. The Local Champions in Africa report explores the business and policy factors driving private sector success stories in 12 countries across Sub-Saharan Africa.
Zachary M. Bucheister is the Client Development Manager at Africa Foresight Group (AFG), a young, innovative advisory firm founded by two McKinsey alumni from Ghana and Nigeria that aims to support the growth of global African companies by providing world-class strategic advisory and market research services at fee levels accessible to local companies.