Africa's Homegrown Companies
Come into Their Own

The start of the World Cup in South Africa this month promises to shine a new light on Africa's increasing economic dynamism, which is often overshadowed by the flashier growth of markets like China and India. It is not just the continent's consumer base that is expanding; homegrown African companies are also spreading their wings and challenging foreign multinationals in areas such as retailing, financial services and mobile communications. These firms are taking advantage of reduced barriers to intra-African trade and their knowledge of African consumer tastes to grow beyond their home countries and gain the scale they need to compete with companies from outside the region. The rapid growth of forty of the best African firms has even led The Boston Consulting Group to christen them the "African Challengers".

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The growth of local "champions" signals a new maturity in African markets. In these countries, as well as other emerging markets, the emergence of competitive local companies usually follows a period in which foreign investors have taken advantage of political stability, low-cost labor and favorable incentives to produce goods and services for both local and export markets. Skills and knowledge transferred by these firms to local workers, as well as increased economic activity, then fuel the growth of native firms. An increasing number of African countries, in particular South Africa, Botswana and Kenya, now have the conditions in place to produce enterprises that can compete with multinational corporations (MNCs).

The growth of these companies poses a challenge to Western firms, but it also presents an opportunity to learn from the strategies and innovations of businesses that have their finger on the pulse of local customer segments. When entering new geographies, MNCs would do well to "go native" by understanding local, competitive dynamics. Thorough competitive intelligence and analysis of emerging-market competitors can be a critical part of MNC success on a global scale, especially when these new, local entrants threaten to upset the status quo.

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