Africa, Optimism and What it Means for Companies

This article originally appeared on GreenBiz.com Sept 6, 2012, as part of our Proof Points blog series

10 September 2012 – With economic difficulties looming ever larger around the world, pessimism has now taken hold among consumers in a growing number of countries, infecting even those that have so far been doing well -- like emerging economies in Asia and Latin America.

But for many, Africa now constitutes a bright spot. Rapidly-growing countries such as Nigeria and Ghana contribute to the cautiously optimistic public opinion around the world when it comes to the continent's economic future.

Learning more about this sentiment can serve companies well when it comes to managing their reputation.

In GlobeScan’s latest polling for BBC World Service in 22 countries around the world, an average of nearly three in five (58 percent) are confident that Africa will experience significant economic growth over the next ten to 20 years.

Faith in Africa and broader global optimism seem to be linked. Barely one in three (34 percent) surveyed in the GlobeScan poll say they think the world is headed in the right direction -- a figure that has slipped over recent years. But optimism and a sense of global citizenship is higher (39 percent) among those who are confident that Africa will see imminent growth.

Africa's Optimists: Who Are They?

What is this optimism based on when it comes to the issue of African development? It is useful for companies operating in the continent to understand a little more about who these optimists are, as it suggests that there are lessons to be learned from a perspective of managing its reputation.

It is also encouraging that the poll indicates that those who expect to see the continent grow economically are younger than the rest of the population (nearly half are between 18 and 34) and better-connected. They’re also more informed and aware of business and political issues, discuss them more frequently, are more likely to use online social media, and are also more likely to support environmental and social causes advocated by NGOs. The fact that this is a more informed and engaged group is reason for hoping that their optimism is well-founded.

But what of their economic convictions? The data suggests that the positive outlook of those who are optimistic about Africa is underpinned by a belief in the ability of open markets to make a difference, with optimists about Africa slightly better disposed towards free market economics than most. In all countries surveyed, they’re much more likely than their peers to consider that foreign investment in African countries is a good thing for the economy of the continent (79 percent, a full 16 points above the proportion for the total sample). This group’s upbeat perspective, then, appears to be strongly linked with a belief in the power of foreign investment.

In this respect, optimists on Africa are somewhat out of kilter with the global trend. GlobeScan’s tracking data show that public support for the free market system worldwide has eroded steadily since 2002. Our most recent data from 2012 also indicate that national attitudes towards capitalism have become increasingly skeptical in the wake of the European sovereign debt crisis that has led the global economy to the brink of a double-dip recession.

It would be ironic if free markets came to be seen as the route out of poverty for Africa just as the rest of the world started to ask fundamental questions about them. Still, macroeconomic data confirms the critical importance of foreign investment for the economic development of Africa.

Foreign direct investment (FDI) in Africa has surged during the last decade, and has only slowed in recent years because of the global crisis. According to the New Partnership for African Development, in 2008, the total of FDI poured into Africa (around $90 billion) was ten times the amount invested in 2000 (around $9 billion).

What does all this mean for foreign businesses investing in Africa? It suggests that mid-to-large scale entrepreneurship involving long-term investment in the African economy is likely to be viewed positively, provided that tangible benefits for the local populations materialize quickly. In this context, concerns voiced by some NGOs about the loss of control over national resources (after foreign companies purchase long-term rights to natural resources and land) are a note of caution. Foreign investment, then, will need to be seen as part of a wider contract with society that involves the creation of real shared value.

Nestlé’s approach is one example of a company attempting to create shared value with local communities. Among the numerous programmes developed by the Swiss company as part of its Creating Shared Value platform, the “My own business” initiative launched in 2011 in Central and West Africa as a vehicle to increase awareness of its Nescafe product, also encourages entrepreneurship and empowering the lives of young people and their families. This is an initiative that aspires to be benefit both the local population and the bottom line.

Unilever has launched initiatives for rural development to improve the livelihoods of African communities through supply chains. One of them stemmed from a public-private partnership with the Kenyan Tea Development Agency, from which Unilever sources tea for its Lipton brand.

The partnership aimed to train smallholder farmers in sustainable tea cultivation. Field schools were set up where farmers could discuss bottlenecks they faced during the cultivation process, and received practical guidance to identify best practices for sustainbility. They were also provided with bookkeeping, and health and safety courses. After completion of the three-year project, participating farmers saw their profitability improve and their tea yields increased by an average of 5-15 percent.

This kind of initiative is likely to pay off from a reputational point of view. GlobeScan’s barometer of most socially responsible companies has Nestlé and Unilever regularly among the most frequently mentioned names—and particularly in Africa.

Chart: Profile of Africa optimists

The Biggest Challenge: Communicating "Shared Value"

But with the issue of resource nationalism rising, the biggest challenge for companies working in foreign environments remains to communicate effectively about what they call a “shared value footprint.” As consumers seem to remember bad practices by corporations over good practices, companies face the risk of being criticized for a lack of contribution without focusing on shared value.

The extractive industry’s struggles with its reputation in Africa are a case in point. Oil and mining companies with local operations are regularly accused of unethical and dishonest business practices, or lack of transparency. Even if their success in creating wealth means these industries are positively viewed within the African nations we poll, we also find that the global audience regards their environmental and social impacts so negatively that they often overshadow the actual positive contribution of their activityto the local and national economies.

In this context, the profile of the new optimists about Africa means that while opportunities exist, companies need to tread carefully as they manage their reputation. Being relatively young, wired to online media, and not being afraid to speak their minds, they have the ability to be advocates for corporations — or equally potent and influential critics.

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