Fortune Magazine: Is Africa’s rise for real this time?

  • March 10, 2015
  • BLOG
by Vivienne Walt – 

Its economics are surging, and foreign investment is exploding. The challenges—including Ebola—are immense. But the continent may finally be ready to deliver on its promise.

In the depths of the financial crisis in 2009, Irwin Barkan, a shopping-mall developer, was idling at home in rural Vermont with not a single project on his books when he fired up his computer and found an email from Morley Gordon. Gordon, his best friend’s son, whom he had known since Gordon was an infant, was traveling around Africa as a consultant for U.S. businesses. “Uncle Irwin,” Gordon wrote, “you should look at doing commercial real estate in Africa.” Barkan’s Boston-based company, I.J. Barkan Inc., had been developing shopping centers since 1984. But the deep recession had pummeled his industry and left the business Barkan ran with his wife, Lindsay, “dead in the water,” he says. Still, Africa seemed a stretch. “I’d never been to Africa,” says Barkan, 63, over beers at an outdoor jazz club one steaming tropical night in Accra, the capital city of Ghana in West Africa. “I thought about Africa like a lot of American businessmen: like the jungle.” Africa remained unfathomable to Barkan until 2011, when—still languishing in forced retirement—he happened to read one morning that his longtime tenant Wal-Mart, whose first New England stores had opened in Barkan’s developments in the 1980s, was paying $2.4 billion for a controlling stake in Africa’s biggest retail giant, Massmart Holdings, and that the No. 1 company in the Fortune 500 was now aiming for a slice of the continent’s exploding consumer market. It was Barkan’s eureka moment. “That was it,” he says. “I said, ‘We gotta go to Africa.’ ”….

Africa may no longer be “the jungle,” as Barkan puts it, but to many in the business world it still seems as untapped a market as is possible in the 21st century…. By mid-century there will be more Nigerians than Americans on the planet. And the United Nations estimates that by 2035 half of all Africans will live in cities. That means millions of people who once subsisted as bare-bones farmers will be earning and spending cash and driving demand for countless consumer items, almost all of which are currently imported. The trend is already evident. Nigeria’s 170 million people are now among the world’s biggest consumers of imported tomato paste and rice, and they drink more champagne than anyone outside France…..  Travel around the continent, and the breathless tone people use to describe Africa’s business potential becomes quickly familiar, if at times almost cloying. Many have a rags-to-riches tale (or at least a rags-to-riches business plan) and are certain that Africa is a hugely promising environment. And yet, for all the talk of boundless possibility, there is plenty to instill sober second thoughts…. With widespread unemployment across the continent, 48% of Africans scrape by on $1.25 or less a day, a situation that African leaders say desperately needs to change—and swiftly—for their countries to remain stable. “We have seen that in the Arab Spring,” says the president of Ghana, John Dramani Mahama, sitting in his grand office overlooking Accra. “African leaders need to respond quickly to avoid getting caught in some sort of social explosion as a result of a youth bulge that does not have meaningful employment.” ….