Big firms latch on to Africa's boom time

Zambia is one of many sub-Saharan nations on the up and its middle class is growing

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The Independent Online

There is little of the hustle and bustle of Lusaka's city centre to be found in the business district of the Zambian capital. Here, traffic jams and street traders are replaced by calm streets and modern office blocks, while nearby hotels play host to businessmen talking deals or relaxing after a round of golf.

a number of Western companies are basing themselves in this part of Lusaka in their quest to plug in to one of Africa's fastest-growing economies. It is not hard to see why; Zambia is expected to be among the top 10 fastest-growing economies in the world between 2011 and 2015. In fact, according to forecasts from the International Monetary Fund, it will be one of seven sub-Saharan African countries on that list, making Africa the fastest-growing continent over that time.

No surprise, then, that with little to cheer in Europe and the United States, multinationals are increasingly recognising the potential of the resource-rich region and its rapidly growing population. The United Nations has predicted foreign direct investment could more than double by 2014 to as much as $100bn (£64bn).

While the miners as well as the oil and gas drillers have long been alive to Africa's possibilities, a burgeoning middle class means the opportunity for consumer goods companies is causing much excitement. With consumer spending set to rocket to $2.2 trillion in less than 20 years, according to the African Development Bank, there has been no shortage of multinationals making their move into sub-Saharan Africa.

Asda's owner Wal-Mart has recently spent $2.4bn on a majority stake in the South African retailer Massmart while earlier in the year Diageo, which already sells more Guinness in Nigeria than in Ireland, splashed out almost £150m on Ethiopian brewer Meta Abo.

Meanwhile, Unilever, whose biggest brands in the region include Sunlight soaps and Stork spreads, plans to nearly double its revenues from Africa within five years. The continent (excluding north Africa) was recently made one of the company's eight operating regions across the world, headed by Frank Braeken, who says he has seen "a tremendous surge in investor interest".

Mr Braeken points out the shift in attitudes, saying that what "is starting to interest investors more than, or at least as much as, mineral wealth, is consumer wealth. The focus of the new investment increasingly becomes the African consumer."

In Zambia specifically, it is not just the growth of its economy – GDP has risen more than 6 per cent over the past few years – that has made it attractive, with Martyn Schouten, the managing director of the Zambian bank Zanaco, highlighting the country's political stability.

Last September Michael Sata, the leader of the Patriotic Front party, was elected as president in what went on to become the latest peaceful transition of power. The contrast with others in Africa, especially Zimbabwe with whom it shares a border, is stark and certainly something Zambia is proud of. Not long after the elections vice-president Guy Scott told fellow politicians that the country was "the envy of Africa".

Mr Schouten points out that it is "not often that you work in a [African] country in which all five presidents to date are either alive or have passed peacefully". His presence in Zambia is one example of how foreign companies are getting involved. He is actually an employee of Dutch bank Rabobank, which bought a 49 per cent share of Zanaco from the Zambian government. "Why are [Rabobank] here?", he says. "Because Zambia is one of the future bread baskets for Africa, maybe even for the world."

Nonetheless, travelling out of Lusaka and into the Zambian countryside, the mining industry remains the most obvious evidence of investment, and the country remains dependent on copper prices given its position as Africa's largest producer of the metal.

China is the biggest investor in the country's mining industry, but its involvement remains highly controversial. A Human Rights Watch report published last November claimed Chinese-run copper mines were more dangerous than other foreign-owned sites, while last year charges were dropped against two Chinese miners' supervisors accused of shooting a number of protesting employees, the latest in a number of similar happenings.

Meanwhile, the attitude of Zambians towards China's involvement in their country can be demonstrated by a rather crude joke about a Zambian women who reacts to the death of the child she had with her Chinese husband by saying "Well of course, it was Chinese goods".

Mr Sata attempted to capitalise on these anti-Chinese feelings during his election campaign, taking aim against the mining companies' business practices, although he never went as far as vowing to boot them out. Still, there are some who argue he has quietened down considerably on the issue since gaining power.

Another particularly conspicuous sign of new money in Zambia is the clutch of freshly built shopping malls. South Africa, the continent's largest economy, has a strong grip in retail, in part, Mr Braeken points out, because many Zambians are able to receive South African television channels. As well as being behind the new malls, chains from the country such as Nando's and Woolworths (not connected to its ill-fated British namesake) have a visible presence in Lusaka.

Tourism is also a contributor to Zambia's economy. Although it is rather more low key than rival safari destinations in Africa there is certainly a desire to raise the number of visitors. Unsurprisingly, the Victoria Falls is the largest draw, with the waterfall's importance shown by the lengths to which politicians have been prepared to go in order to preserve its popularity.

When, at the turn of the year, Australian backpacker Erin Langworthy's rope snapped midway through a bungee jump over the Victoria Falls (she survived), Zambian tourism minister Given Lubinda responded to footage of the accident going viral by doing the jump himself in an effort to prove its safety.

Promising for the tourism industry, as well as the economy generally, is the fact that the number of international airlines flying to Lusaka is on the up. After Gulf carrier Emirates introduced Lusaka as a destination this year, Dutch airline KLM restarted flights from Amsterdam in May after 15 years away. It was a big enough event for the inaugural flight to be greeted by journalists and a troupe of dancers on the side of the runway as politicians praised it as a vote of confidence for the country.

KLM, which is promising to "open the way to Zambia for the rest of the world", is another company turning towards Africa for growth. Lusaka is its 14th destination on the continent while the company has also been for a long time involved in a partnership with Kenya Airlines, in whom it holds a 26 per cent stake.

Still, the presence of Western companies and figures such as GDP growth are not enough by themselves. Despite the recent strength of Zambia's economy, on paper at least, the proportion of the population living in poverty is still at 60 per cent, with this figure significantly higher in areas.

The challenge, therefore, will be to ensure that as the rest of the world pours into Africa, it will be the many and not just the privileged few that benefit.

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