Forget about brands and the rich! Shouldn’t we be focused on Africa’s poor?
The point of entrepreneurship, in any region, is to serve others by finding financially sustainable solutions to problems, with the most relevant being those that affect lives today. Therefore, given the wealth of socioeconomic challenges in Africa, is it imperative that all entrepreneurial actors work in and around these areas alone? Or is there any room for future thinking?
One of our recent MBA interns (who originates from Africa) asked us a simple question, which many others have asked us in some form before. “I love the focus on design and brands with the things [Mustard] are building, but do you think this practice is excluding Africa’s poor?” Recently an investor prospect in Nigeria also mentioned: “the way you work, what you aim to build, and who you aim to build with (influential founders), seems a little elitist.” The juxtaposition of the words ‘brands’ and ‘Africa’ in our mission statement (‘better products, better brands, and better perceptions for Africa’) and our focus on internationalisation, has rendered this line of questioning something we are not, not used to hearing (forgive the double negative). But the trains of thought that render inappropriate any initiative that is not tackling Africa’s current developmental issues, tend, I think, to be short- sighted and built on at least two erroneous assumptions.
Millions of tourists visit London’s Regent Street each year to shop.
Assumption 1: the rich minority in a developing country will spend mostly on domestic goods. A key macroeconomic indicator of a developing country is its relatively small middle class. If we look at Nigeria, Africa’s most populous country and largest economy (based on GDP), 70% of its people were reportedly living on less than a dollar a day in 2015, during which time it had the fastest growing market for private jets in the world after china. A few wealthy individuals living among many more who are struggling is the reality, as is the inevitable exit of this wealthy set’s money to more developed markets in the form of capital investments and the consumption of well branded, desirable foreign goods. Spend in the UK by Nigerian tourists from a similar period provides a good illustration. The average spend per visit of Nigerian tourists to the UK in 2016 was £1,951, which was almost double and 3.5 times that of the average US and Chinese tourist respectively (UK ONS data). Stats like these indicate the flight of wealthy Nigerian’s cash towards other shores, which would likely be mitigated as and when globally renowned brands of competing quality begin to come out of Nigeria.
As a side note here, I think there are many who would consciously ask the opening question, and consciously disagree with this assumption. However, by implying that most or all entities steer their efforts towards Africa’s low income majority, they beg the question: if not us, then who will develop goods for Africa’s existing rich?
The Harvard study’s results apply to all people regardless of income level or region.
Assumption 2: most purchase decisions (especially by the relatively poor) are based on need and not want. According to Harvard professor Gerald Zaltman 95% of purchasing decisions are subconscious and emotionally based. I would paraphrase the study by saying that 95% of our purchases are based on want and not need, and further emphasise that the study posits its findings are true for all humans, not just Westerners or those at higher income levels.
Further fleshing out the findings, firstly, I think it speaks to our inclination to make additional discretionary, non-staple purchases based on want, and does not limit this tendency to those with relatively higher disposable incomes. Regardless of our income bracket, we can always find a way to justify the decisions we make that are based on emotions, if the emotions we feel are strong enough (for an extreme example think of any illicit industry based on vices). Secondly, and more broadly, I think this study points to our disposition to buy from the brands we want/like, even when we’re purchasing products that can be genuinely deemed as staples.
Although I think the study’s conclusions are self-evident, there are people who still fight back and hold to the validity of assumption 2. To these individuals I like to state that this assumption was also defended by Multilateral organisations at the turn of the century. Back then this led to the logical (and very understandable) conclusion that Africans did not need mobile phones. Virtually everyone knew that Africans did not need phones, but fortunately there were some who thought Africans would want them, and took the initiative to import and sell them to rich and poor alike. The rest of course is history, but very important history! If mobile phones were not imported they could not have been purchased so widely by both urban and rural consumers, meaning the digital telecommunication boom in the mid-to-late ‘00s and ’10s would not have happened, and the African tech startup and VC environment we see today would not exist.
“If mobile phones were not imported they could not have been purchased so widely by both urban and rural consumers, meaning the digital telecommunication boom in the mid-to-late ‘00s and ’10s would not have happened, and the African tech startup and VC environment we see today would not exist.”
Conclusion It should go without saying that I think most Africa-focused investment entities, venture builders and entrepreneurs should aim to solve the developmental and infrastructural challenges they see around them. The whole point of entrepreneurship, in any region, is to serve others by finding financially sustainable solutions to problems; and the most pressing problems are those that affect our lives today. However, we also believe that the ability to build brands will be key to the global competitiveness of African states in the future.
A region that does not have global brands, or the experience/ability to build them, cannot participate at the highest point on the value chain in global industries. The direct and indirect consequences of this are presently evident and include: perpetual deficits and subjugation in the arena of international trade, currency instability, and high unemployment (consumer-facing industries hire more people). Therefore, while the eyes of most are on the developmental challenges Africa faces today, we at Mustard have chosen to anticipate and work towards the issues of tomorrow; regardless of how elitist or exclusive we may appear to some today.
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