Klasha Business

    July 18, 2023

    How OECDs can benefit from selling into Africa

    In an era of globalised trade and interconnected economies, businesses constantly seek new markets and opportunities beyond their traditional boundaries. The Organisation for Economic Cooperation and Development (OECD), an international organization comprising 38 member countries, stands at the forefront of promoting economic growth, innovation, and collaboration. With footprints in 100 countries, the OECD hopes to improve citizens' economic and social well-being worldwide.

    With a population exceeding 1.3 billion, Africa offers access to a vast and diverse consumer base that presents a compelling opportunity for OECDs to tap into new markets and expand their customer reach.

    This article will explore how OECDs can benefit from selling into Africa, a continent experiencing rapid economic growth and transformative changes due to abundant natural resources, a growing middle class, and a young population.

    How OECDs can benefit from selling in Africa

    Growing demand for quality products and services: Africa's middle class is expanding rapidly, fueled by rising incomes and urbanization. According to a report from the  African Development Bank (AfDB), middle-class Africans have tripled over the last 30 years. According to them, the reasons for the expansion include strong economic growth and a move towards a stable, salaried job culture and away from traditional agricultural activities. As people's purchasing power grows, their demand for higher-quality products and services also increases. OECDs can capitalize on this trend by offering superior-quality goods and services that cater to the aspirations and preferences of this growing consumer segment. These goods and services can offer enhanced features, innovative designs, and reliable performance.

    Access to a large and diverse consumer base: Africa is known to have a young population, with an average age of 19. There is a prediction that the continent’s population will increase to 4.39 billion by 2100. This means many potential African consumers may adopt new products and services. Aside from a young population, Africa has a diverse cultural and linguistic culture. Each country and region within Africa has unique consumer preferences, tastes, and needs. This diversity presents a chance for OECDs to tailor their products and services to specific market segments and cater to the varying demands across the continent. Also, Africa has experienced significant advancements in digital connectivity and the growth of e-commerce platforms. Smartphones have become common. This has facilitated consumer access to products and services across the continent, even in remote areas.

    The abundance of natural resources: Africa is rich in diverse natural resources, including minerals, oil, gas, agricultural commodities, and renewable energy sources. For example, Nigeria dominates the crude oil sector, Kenya excels in machinery and consumer goods, and South Africa stands out in machinery, vehicles, refined petroleum products, and precious metals. The availability of natural resources in Africa creates opportunities for OECDs to engage in resource-based industries such as mining, extraction, refining, and manufacturing. Nigeria's dominance in the crude oil market is evident, as it is one of the largest oil exporters globally.

    Africa is also a promising market for renewable energy sources, including solar, wind, hydro, and geothermal power. By combining local resources with international expertise, OECDs can create sustainable business models contributing to Africa's economic development while maximizing their market presence and profitability.

    New Markets: Africa’s diverse culture means new markets, which can help OECDs diversify their businesses and reduce risk. Africa is often called the "last frontier" for business expansion due to its vast untapped market potential. By expanding into Africa, OECDs can tap into the diverse consumer base and young population, opening up new avenues for revenue growth and expanding their customer reach. This diversification reduces reliance on existing markets and helps mitigate risks associated with economic fluctuations in specific regions. Expanding into a promising economy leads to an increase in sales and profits.

    Examples of OECDs thriving in African markets

    There are several examples of OECDs that are currently thriving in African markets. Two examples will be highlighted in this article: Nestlé and Unilever.

    Unilever

    Unilever, a multinational consumer goods company headquartered in the Netherlands and the United Kingdom, has established a strong presence in various African countries. Unilever first entered the African market in the early 20th century. The company's presence in Africa dates back to the 1920s, when it established its first manufacturing operations. They are ranked as the number 1 top employer in Africa in 2021 by the Top Employers Institute. Unilever produces more than $5 billion in annual sales, employing 40,000 people on the continent in offices and building factories in more than  40 locations, including South Africa, Nigeria, Kenya, Ghana, Egypt, and Morocco. The company recognized the potential of the African market early on and invested in manufacturing facilities and distribution networks across the continent. Unilever offers various products, including personal care items, food, and cleaning products, tailored to meet African consumers' needs and preferences.

    Over the years, Unilever brands such as Sunlight soap, Closeup, Knorr, and many more have become household names. According to  Frank Braeken, Unilever's executive vice president for Africa, meeting the needs of people everywhere for balanced nutrition, good hygiene, and confidence is one reason why Unilever has remained relevant in Africa. Unilever has built strong brand loyalty in Africa by listening to the consumer, partnering with local suppliers, and adopting local strategies.

    Unilever’s top 4 strategy plans for a thriving market in Africa

    • Listening to the consumer

    • Partnering with local suppliers

    • Employing social and environmental sustainability initiatives

    • Localizing the products

    Nestlé

    Nestlé, a Swiss multinational food and beverage company, is another OECD that has a well-settled presence in the African market. Like Unilever, Nestlé has adapted its products to local tastes and preferences in Africa. For example, the company offers a variety of flavours of its Maggi bouillon cubes tailored to different African cuisines. The company has invested in local sourcing of raw materials, production facilities, and distribution networks, allowing it to adapt to local preferences and provide value-added products.  For example, 80% of the raw materials used by Nestle Nigeria are sourced domestically.

    Nestlé also implemented various initiatives to promote nutrition education and community engagement in Africa. The company invests in programs that educate consumers about healthy eating habits, balanced diets, and the importance of  nutrition. Asides this, the company invests heavily in training Africans and its employees. An example is in Nestle Nigeria; there is a training center at its factory in Agbara to help local students and employees develop hands-on skills in different areas of manufacturing engineering.

    Nestlé’s top 4 strategy plan for a thriving market in Africa

    • Utilizing the continent’s natural resources

    • Localizing the products

    • Invests in the community

    • local market research

    The untapped potential of African markets presents a compelling opportunity for OECDs seeking growth, diversification, and new customer bases. By exploring the African market, OECDs can tap into a young consumer base, benefit from emerging market potential, access abundant natural resources, access new markets, and make a positive social and environmental impact.

    Cross-border payments for OECDs

    One of the challenges faced by OECDs entering African markets is navigating the complex cross-border payment landscape. With Klasha, these payment challenges are solved.

    Klasha offers streamlined and secure payment solutions tailored for cross-border transactions. By partnering with Klasha, OECDs can benefit from seamless payment processing, currency conversion, and settlement services, simplifying the financial aspects of doing business in Africa.