The True Size of Africa(s)
We often get asked about the challenges of doing business in Africa, of which there are indeed many.
However, one simple one that often gets overlooked is size. At Energy Access Ventures, we believe we do business in “the Africas”. In a fascinating graphic created by Kai Kruse (below) the true scale of the African continent can be seen quite easily. Coming in at a whopping 30.2 million km2 Africa can swallow up China, the contiguous USA, India, Europe and Japan with 100,000 km2 left over for good measure.
Most of us are aware that Africa is large but the extent to which it dwarfs all these other countries and regions is likely a surprise given the ‘immapancy’ instilled in all of us from a lifetime of viewing the Mercator projection of the world. All maps contain distortions as it is not possible to depict a sphere accurately on a flat surface. However, while Mercator’s projection has the useful property of showing a line of constant bearing as a straight line (which was vital for 17th century sailors) it also increases the apparent size of objects the closer you get to the poles, where the scale becomes infinite. This makes Africa look about as big as Greenland despite being 14 times larger.
The long-term political implications of having a map which shows mostly developed nations as being much larger than their less developed brethren are perhaps beyond the scope of this post (although have a look at the discussion around the Gall-Peters projection on Wikipedia if you’re interested: https://en.wikipedia.org/wiki/Gall%E2%80%93Peters_projection).
More important for us are the deleterious effects that:
- Common misrepresentations of the diversity of the African countries have on investors and entrepreneurs’ perceptions of their target markets; as an example, if 600m people in sub Saharan Africa do not have access to electricity, the national electrification rate varies widely from Kenya to the Democratic Republic of the Congo, and the off grid market size may shrink in one country while it grows fast in another.
- Distance and topography have on business operations and being able to scale effectively.
Coupling these with the various other issues faced by African business, such as corruption and existing deficiencies in infrastructure, regulation, bureaucracy and skills (in themselves also in part a function of size given the post-colonial legacy of artificially large states, weak central governments and strong local/traditional fealties hindering development along sensible policy-driven lines) and you can begin to understand the challenges that entrepreneurs face when seeking to build companies in the region.
One of the key advantages of the mobile revolution in Africa is that it helps overcome this tyranny of distance, allowing (amongst other things) individuals and businesses to avoid and even do something about some of the petty officialdom and infrastructural issues that have plagued them in the past.
Emerging technologies such as decentralized energy generation, connected assets or drones may also help at the margin going forwards; although again given the inherent constraints that such technologies face in terms of capacity and range, it is difficult to see these being revolutionary in Africa in the foreseeable future. Growth in distributed generation capacity, digitally and remotely managed, as well as digital payments, are huge positives given that it reduces the requirements for i) hard to maintain transmission and distribution networks to be built at huge expense through deserts, rainforests and mountain ranges, ii) hard-to-manage manual payment collection processes.
However, despite these advances, until the day when everything we need can be delivered by an affordable and locally available 3D printer, most businesses in Africa will still need to manage effective supply chains and distribution networks in vast countries with incredibly challenging topographies. As assets and goods are more and more connected, responsibilities, ownership and value share agreements among the value chains are being re-shuffled. Although governance is undoubtedly improving across the region, companies will often need to manage high-touch supply chains and distribution networks whilst at the same time dealing with the same old issues of cultural differences, high price for talents, corruption, bureaucratic inertia and poor infrastructure.
All this places increased pressures on the start-ups we look at to be incredibly lean and focused on the suitability of their products and cost structures. If it’s hard for early stage companies to succeed in Silicon Valley where you have a supportive regulatory environment, billions in available venture funding and a wealthy customer base, it’s ever so slightly harder here in Africa.
By Sebastian Donnelly