AFRICA OR BUST
An increasing number of international networks are running their African operations from headquarters in Dubai. Why? And what potential does the African market hold for those agencies and brands searching for new consumers and increased growth in one of t
It is easy to see the attraction of Africa. The average annual gross domestic product growth across the continent stands at over 5 per cent, it is home to seven of the 10 fastest-growing economies in the world, has a growing middle class with increased disposable income and is experiencing rapid urbanisation. With more than 50 per cent of the population forecast to be ‘of working age’ by 2020 – representing a figure of 600 million people – it is extremely attractive to both advertisers and agencies.
As Daniel Thompson, global account director at MediaCom Dubai, points out on page 17 by 2050 the United Nations estimates that the population of Africa will have more than doubled from 1.1 billion to 2.4 billion. These are crazy figures and ones that are being closely watched by brands and their creative partners across the word.
“Most people compare the potential of Africa with India,” says Chris von Selle, chief operating officer at J. Walter Thompson Africa. “More than a billion people, a fast emerging middle class, urbanisation, improving infrastructure, better governance, all this drives growth. Nigeria’s economy alone is projected to grow from $525 billion in 2014 to $4.2 trillion by 2040. But this won’t be a straight line upward. It will be more like a roller coaster ride.
“Currently, we see markets slowing. Decreasing commodity and oil prices mean less money in government coffers. South Africa has just reported negative growth for the second quarter. Nigeria finances 90 per cent of its public spending out of oil, which hovers currently below $50 [a barrel]. Currencies across the region are under pressure. Growth in Africa is not a sprint, it’s a marathon. Only those who do their homework and are willing to invest and show persistence will have a chance to reap the benefits.”
“Africa is clearly a fascinating case study,” adds Mitchell Prather, managing director of Djembe Communications, which caters to the African market but has its centre of excellence in Dubai. “A growing middle class is becoming a key source for private sector growth in Africa, accounting for much of the effective demand for goods and services supplied. Technological developments are clearly evident and the continent has leapfrogged some of its global counterparts when it comes to smart phone penetration. Tech giants such as Google and Facebook are expanding their footprint in the market and developments such as these are likely to accelerate growth potential resulting in increased employment opportunities. More importantly, it will enable countries to diversify beyond oil and other traditional industries and focus on sectors such as manufacturing and technology, particularly mobile commerce.”
Africa, however, is vast and represents huge organisational and logistical challenges. There are also sizeable differences in levels of development. As von Selle points out, it is “easy to get lost on the African continent”. As such, agencies have created main centres of operation with some choosing to base their operational headquarters in Dubai. Most, however, have split the conti- nent into roughly four main hubs.
“JWT started this trend five years ago by establishing the Middle East and Africa (MEA) as a stand-alone region,” says von Selle. “Many clients and agencies followed. But let’s not fool ourselves. While Dubai is a fantastic service hub with great connectivity – similar to Singapore and Hong Kong – the true centres of gravity will be Riyadh, Cairo, Lagos, Nairobi and Johannesburg.”
Dani Richa, chairman and chief executive officer for BBDO Middle East and Africa, adds: “With many clients using Dubai as a regional office for MEA, it’s only normal for agencies to mirror their client’s structure. From a BBDO perspective, Dubai is the MEA HQ, given that it’s my base as the regional CEO. However, we operate in a decentralised manner with four key hubs. The North Africa region is led out of BBDO Egypt, East Africa is led out of BBDO in Kenya, West Africa is led out of Nigeria and South Africa is led out of our offices in Johannesburg, and Cape Town.”
With the exception of South Africa, which has a number of formidable local agencies, the big international networks dominate the continent. So far networks have followed their clients into new and emerging markets and together they have driven both the growth of the industry and the talent pool. Once the industry matures, however, it is expected that more entrepreneurial talent will drop out to set up their own shops. It is, says von Selle, “the never ending cytokinesis of creative industries”.
“Without focus nothing works,” he adds. “Egypt, Nigeria and South Africa combined are contributing almost 50 per cent of the African GDP. Together with Algeria and Ethiopia they make the so called ‘Big 5’. To reflect this, we have invested significantly in talent and capabilities in our hub offices in Cairo, Nairobi, Lagos and Johannesburg. Offices in smaller markets are focusing on mainly activation work.”
Prather continues: “Whilst the African market is very exciting, it is still in a developing phase and hence needs to be approached with a deep understanding of both the unique challenges and opportunities across business and cultural landscapes. For clients in Africa you need to have a lot of local insights but what you also need is to up-skill local teams. Teams that are passionate about communications. Dubai is a great place for doing that. From the digital to
Growth in Africa is not a sprint, it’s a marathon. Only those who do their homework and are willing to invest and show persistence will have a chance to reap the benefits.
Chris von Selle, chief operating officer at J. Walter Thompson Africa
creative sphere you can easily find the right kind of talent in Dubai. The second element you need to factor in is that most of the African governments and businesses are looking for international exposure and Dubai, due to its connectivity with the global finan-cial centres, is an incredibly important business hub to facilitate this exposure.”
The lure of Africa is significant. Smartphone penetration continues to grow and the continent has an incredibly young population with one of the highest levels of mobile phone penetration in the world. Between 2008 and 2020, consumer spending is predicted to rise from $860 billion to $1.4 trillion, according to the McKinsey Global Institute. This dramatic rise in consumer spending is also a key driver of growth in the service sector. Advertising spend rose by 14.6 per cent in 2014, against the global average of 3.2 per cent. “The fact is, any advertising agency looking for growth should be investing in Africa,” says Prather. “And as demand for consumer goods increases, so too does manufacturing and investment in business- critical infrastructure. This virtuous cycle of investment and spending presents commu- nications companies with enormous opportunities and the great news is that there is an increasing demand for the more sophisticated communications strategies.”
There are, however, numerous challenges. Political instability, corruption, regulations and poor infrastructure are some of the issues countries need to address to encourage inward investment. Identifying talent with the right kind of skill sets is another challenge. However there is a growing realisa- tion among nations of the need to overcome these issues. Countries such as Angola, Ghana, Mozambique and Nigeria are looking to foster an investorfriendly environment, says Prather, and they are among the top five destinations for capital investment. Angola is a particularly impressive story. It ended a decades-long civil war in 2002 and since then has enjoyed genuine peace and stability.
For growth to continue, an improvement in governance and compliance is needed, says von Selle. Tackling the fragile energy supply and developing the limited talent pool is also of paramount importance if Africa’s potential is to be fully met. What’s more, media to GDP ratios indicate that many markets are still underspent.
What is the biggest challenge the industry faces?
“Talent, talent, talent,” asserts von Selle. “According to the All India Council for Technical Education, India has almost 4,000 MBA colleges. Africa has less than 90. Africa has not a single university among the top 200 universities, as ranked by the Academic Ranking of World Universities. Expatriates cannot be the solution. Instead, every marketer and agency needs to focus on training and building the talent pool. Only in a joint effort will we be able to meet the talent demand on the African continent.”
Africa has cultural richness to draw on, which should in theory bolster creativity and increase the level of the continent’s creative advertising – with raw talent able to shine through. As Richa says: “The work is getting better and the recent Loeries awards show witnessed a creative leap and we as a group did tremendously well. What we are doing well is stretching the centres of excellence beyond South Africa and into the key markets where we’re starting to see great work come from Kenya and Lagos, and it gives me great pride to see this work developed by local talent.”
“Africa is a creative powerhouse,” asserts von Selle. “Hip-hop has its roots in African tribal music. West African fashion is conquering the catwalks in London and New York. Beyoncé integrates Ghanaian Azonto dance moves into her show. And Nigeria now boasts the second largest film industry in the world after India. All of this is evidence of the amazing creativity on the continent.
“But when it comes to advertising, this creativity is still very raw. It needs crafting. And even more importantly, it needs confidence. Too many creatives try to copy the West, rather than leveraging local insight, culture and heritage. But this will change. Nigeria will emerge as a creative centre. South Africa will need to shape-up to not loose its benchmark-setting role on the continent. It used to be strongly represented on international shows but it has been falling back for a couple of years now and has been slow in transforming its industry.”
With all this in mind, how does von Selle see the advertising industry developing in the coming few years?
“Africa will continue to de-centralise,” he replies. “We will see a fast growing and thriving industry in Nigeria. Nairobi will remain the ‘Silicon Valley of Africa’. And South Africa will continue its dominant role as the hub for pan-African businesses and production. All hubs will report directly into Middle East and Africa headquarters, which brings us back to your first question and the reason why we have established a hub structure in the MEA region.