Top 5 food markets in sub-Saharan Africa

By Kurt Davis

The food sector is the focus of investors who are seeking to capture the opportunity of a rising middle class in Africa. 

They were lost in Luanda, Angola's bustling capital, until they found the McDonalds. Being American in a familiar place in a foreign country is home until you see the price for the burger meal: $14. 

This being Africa means there must be a local twist, says the American tourist John, and sometimes the twist is the price.

Investing in the sub-Saharan African market is the right move at the right time. Call it the “last frontier” or the “last big opportunity.” Either way, the numbers speak to great prospects.

The International Monetary Fund’s (IMF) latest Regional Economic Outlook for sub-Saharan Africa projects GDP growth to reach 5.5% in 2014 from around 5% in 2013. The accelerating growth is expected to be buoyed by large investments in infrastructure and mining, maturing investments in transport and telecommunications, and a rebound in agricultural output.

The sustained boom creates more consumers. Global management consulting firm Mckinsey & Company projects that more than half of African households will have discretionary income by 2020, rising to 130 million households from 85 million today. Restaurants want a piece of the pie.

Kentucky Fried Chicken (KFC) and McDonalds are the big first movers. Other American brands, including Burger King and Pizza Hut, are salivating at the growing opportunity. But franchises are not the only players as local brands, including South Africa's Debonairs Pizza and Nando’s, continue to expand across the region.

Here are the top 5 countries for restaurant expansion in sub-Saharan Africa:

Nigeria

It has a Johnny Rockets! But the entrance of lesser known brands Johnny Rockets and Dominos underline two big things about Nigeria: (1) its approximate 170 million-plus population (biggest in sub-Saharan Africa) and (2) its GDP, which stands north of US$520-billion - the largest in sub-Saharan Africa.

Nigeria’s population is likely to overtake the United States by 2045, according to the United Nations, and its GDP is likely to surpass US$1.6-trillion by 2030 with a yearly growth rate of 7.1%, propelling it into the top 20 for economies by GDP. In a similar time frame, global management consulting firm Accenture in a recent report projects consumer spending to grow to $167-billion by 2020.

Tapping into this market is obviously imperative to gaining market share in sub-Saharan Africa. But creativity is necessary – for example, throw in jollof rice or seafood okra to excite the local palate. Nigerian tastes span local delights to British adoptions and American transformations.

Kenya

Kenya is a favored destination for investment in Africa. It is sub-Saharan Africa’s sixth largest economy and population. And its birthrate remains in the top quartile globally. The IMF projects the Kenyan economy to grow 5% in both 2014 and 2015, compared to 4.7% in 2013. All this being said, the underlining numbers in Kenya indicate more spending consumers in one of Africa’s biggest food-loving countries.

Accenture projects consumer spending to grow to US$38-billion by 2020. back in 2012, an Africa-focused private equity firm invested in Nairobi Java House, a local Kenyan coffee house and restaurant, signifying a new focus of investment firms. A large expansion by Kentucky Fried Chicken (KFC) only further underlines the opportunity. And Subway has entered and likely confronting Subzone, a healthy eating alternative in Nairobi that has a similar look and appeal of Subway.

The Kenyan palate, to a distance observer, initially seems fulfilled by the simple presence of meat – ideally chicken. But locals will suggest that you have only tapped the surface if you leave with that belief. Asian influence, British and American influence (from Kenyans studying abroad), and a well-travelled middle class undoubtedly implies greater diversification.

South Africa

The former “largest economy” in sub-Saharan Africa is still trying to get its growth back on track. The IMF projects the economy to grow 2% in 2014, only barely surpassing the 1.9% growth in 2013. Weaker economic numbers worry investors and politicians alike. Yet consumer spending remains strong with untapped potential.

Consumer spending, projected at US$315-billion in 2020 by Accenture, will be approximately double that of Nigeria. The South African palate is nuanced accompanied by larger pockets. Local brands, including Spur and Ocean Basket, compete strongly against Western brands inside (and outside) South Africa. It is also easy to find a McDonalds and a KFC in country.

Skeptics routinely suggest that the food service business is approaching saturation in South Africa. Yet all the numbers indicate growing competition, but nowhere near any level where investors cannot snag great returns.

Uganda and Tanzania

This grouping will not excite Tanzanians and Ugandans – the countries are definitely different in many ways. But they do have a lot in common too. As the 5th and 7th most populated countries in sub-Saharan Africa, Tanzania and Uganda already possess large consumer bases. This base will only expand with birthrates in the top 20 globally – Uganda at the 3rd highest and Tanzania is the 18th highest.

Tanzania and Uganda embody the East Africa boom. Underpinned by recent natural resource discoveries, both countries possess fast-growing economies. The IMF projects the Tanzanian economy to grow 7% in 2014, compared to 6% in 2013 while the Ugandan economy grows at 6.25% in 2014, compared to 5.75% in 2013. As commercialisation of these resources take hold and pipeline projects mature, these growth figures may very much be higher in a few years.

If not for the supply chain challenges, many investors think these two countries would rise to the top as investment destinations for the food service industry. Yet a lack of commercial quality inputs, ranging from potatoes typically for French fries to meats (i.e. chicken and beef) stymie operators and create deficiencies throughout the value chain. Focused efforts on agriculture from central governments and local investors will continue to improve the industry’s prospects.

Honorable mention: Angola and Ethiopia

This article is re-published with permission from Frontier's content partner, Ventures Africa.

Ventures Africa chronicles business and investment news, and the success stories of African entrepreneurs and business leaders.

Ten tech startups to watch in Ghana

By Mfonobong Nsehe

The Meltwater Entrepreneurial School of Technology (MEST), an entrepreneurial school founded in 2007 by Norwegian software entrepreneur, Jorn Lyseggenhe, is helping to train young and intelligent Ghanaians (and from this year, Nigerians) to become software entrepreneurs. Since founding the school, 139 students have graduated and 13 companies have been founded by these people. Collectively, these companies now employ over 70 people.

MEST is a tech entrepreneurial school and incubator with an interesting model.

“The idea was to get young graduates from Ghana who were passionate about technology and entrepreneurship. We wanted people who were interested in building a company. Our selection criteria was that each of them had to have a first degree from a University or higher institution of learning. Then we put them through rigorous aptitude tests and other screening exercises to get the very best out of the entire lot,” said Lyseggen, who was born in Korea but adopted by a family in Norway and has already sold two companies and taken a  third public.

MEST receives close to one thousand applications from hopefuls across the country every year. Lyseggen and his team meticulously review every application and then select no more than 20 exceptional applicants from the pool. On acceptance into the school, the successful applicants, usually referred to as ‘Entrepreneurs in Training’ (EITs) have to go through an intensive, rigorous two-year entrepreneurial training program that blends an MBA-type education with hands-on training in software development in a fast-paced, startup environment. The EITs learn everything from the fundamentals of business management, entrepreneurship and finance to communications and programming. These students are taught by teaching fellows that include business professors, MBA consultants and software geeks, who each bring several years of seasoned experience in the software and tech business in the United States, Europe and Asia. Together these teaching fellows prepare the MEST students for the global markets.

Students at MEST are all compelled to develop software applications that will provide solutions to pressing international problems - applications that must be launched in the global marketplace as real companies. This is the subterranean objective of the intense two-year training. The first year is mainly theory, but in their second year, students must form teams of three or four people and boot-strap their own software start-ups. For their final examinations, the students must present an investor pitch to a committee that includes Jorn Lyseggen, renowned venture capitalists and entrepreneurs. Based on the strength of the commercial viability of the start-up, it’s global appeal and other metrics, the students stand to receive seed funding from $30,000-$200,000 from MEST’s incubator, which is conveniently located in the same environment. When the ideas are funded, the newly-formed companies move into the incubator to start business. 

It’s a model that has worked well so far. Between 2008 and 2013, the Meltwater Foundation, chaired by Lyseggen, has invested over $1.5-million in these budding businesses. But it’s not just about the money. MEST graduates who receive investment gain instant access to a global network of advisors and mentors - many of whom are friends to MEST.

Prior to the 2013 graduation ceremony, some of the students pitched their business ideas to a panel for possible funding and a place in the MEST incubator. I had the opportunity to be a part of the investor pitches, and many of the students were eager to share the ideas of their young outfits with me. There were a few decent ideas that I have outlined below and think are worth watching closely.

Dropifi

Dropifi became the first African start-up to be accepted into 500 Startups, the renowned Silicon Valley-based seed accelerator and investment fund. Dropifi offers an intelligent contact form - a smart widget that helps businesses and companies better analyze, visualize and respond to incoming messages. With Dropifi, companies can view the social media profiles and demographic of message senders and analyze the emotions behind the messages.

Orgaroo

Currently in beta, Orgaroo is a web and mobile application that allows event planners and people who coordinate conferences, official meetings, trips and other related activities to seamlessly organize itineraries, manage activities, and keep attendees on track with real-time updates. According to its co-founder Selasi Tsikata, Orgaroo lets organizers import attendees’ email addresses from an address book in less than a second, plan the activities, events and travel information for each attendee, then add them to each person’s calendar.

Afriyage

Afriyage is a mobile app that offers first-time or regular travelers to Africa personalized travel suggestions based on a traveler’s preferences and interests. MEST graduate and Afriyage co-founder, Agana-Nsiire Agana, describes the app as “your intelligent personal travel assistant in Africa”.

ClaimSync

Claimsync is an end-to-end claims processing software that enables hospitals, clinics and other healthcare facilities all over the world to automate patients’ medical records and to process records electronically. Claimsync’s solution allows these healthcare providers to easily prepare medical claims and send electronically to health insurance companies. Claimsync also offers a platform whereby insurance payers can receive medical claims through their online dashboard and easily vet them for payment. With Claimsync, one can also search for patient records by name or membership number.

RetailTower
RetailTower’s e-commerce marketing software allows online merchants to easily list their online stores across all major comparison shopping engines thereby increasing exposure, driving traffic and improving sales. RetailTower submits data feeds of independent online stores to more than 15 shopping engines like Google, Amazon, TheFind, Shopzilla and Pricegrabber. Online merchants can track referral traffic from various shopping engines through RetailTower’s analytics platform. At the moment, RetailTower has over 11,000 merchants and integrates with the leading e-commerce platforms, including Amazon. The firm is even a preferred solutions provider for Amazon Ads.

Trokxi

Trokxi is a mobile and web-based application that provides you with estimated fares for public transportation and destinations around the world thereby allowing you adequately budget for your trip, as well as save money and time. The app also maps the major cities and their transport systems. It is now available only to Ghanaians, so it only maps cities in Ghana, but the founders plan to launch it on a global scale sooner or later.

FreelancePro.Me

Richard Brandt, the Ghanaian co-founder of FreelancePro.Me, describes the site as ‘the LinkedIn for freelancers’. FreelancePro.Me is a website that allows freelance writers, programmers and designers to create a professional reputation profile by aggregating their testimonials on multiple freelance sites like odesk, freelancer, elance and LinkedIn on one singular platform. With all their testimonials from multiple job sites aggregated on one channel, freelancers find it easier to promote themselves to prospective clients and secure more jobs.

mPawa

Founded by Maxwell Donkor, mPawa is a mobile application developed for Africa’s blue collar recruitment sector. mPawa provides companies and individuals with access to a pool of blue collar workers. The app connects employers to blue collar workers such as construction staff, plumbers, mechanics, electricians and the sort. mPawa supports the posting of jobs and then notifies blue collar workers on the availability of new jobs based on  geographic location, job preference, wages and other metrics, thereby getting blue collar workers into a centralized location and allowing employers to easily reach them.

Saya Mobile

Saya has developed a free group messaging application that works on feature phones with internet access. Saya also works on Java, iOS, Android and the Blackberry platforms. The app connects users with their phone contacts and Facebook friends.

Leti Games

Leti Games is a mobile game development company. The arcade and strategy games Leti develop are usually set in traditional African settings complete with African heroes and elements such as elephants, hyenas and other animals, giving the savvy gamer an experience like no other. Leti has thousands of users and their games are available on Apple’s App store for a small fee.

Mfonobong Nsehe chronicles the stories of successful African enterprises and entrepreneurs for Forbes.com