At World Retail Congress Africa, U.S. brands try to figure out a 'frontier market'

A Zimbabwean on his way to work in Harare pushes a Coca-Cola cart. Coke is one of many Western brands trying to figure out the African market at the World Retail Congress Africa this week.

Representatives of the world’s biggest brands are in Johannesburg this week at World Retail Congress Africa, trying to figure out how to sell to a fast-growing, but also very challenging market. Among them are many American-based brands like Coca-Cola and Google.

All the calculations that go into where American companies expand basically boil down to one thing: risk versus reward. The continent offers both in ample supply.

“The returns in Africa are potentially huge,” says New York University economist Yaw Nyarko, originally from Ghana. “But it’s also risky. That’s why they call it an emerging market, right? It’s a frontier market.”

Some frontiersmen get rich. Others get eaten by the local wildlife. Succeeding in Africa requires hacking through legal and bureaucratic tangles and dealing with poor infrastructure.

But African countries have made big strides recently, all while conflicts ended and population boomed.

“By 2050, it is likely to have 25 percent of the world’s population,” predicts University of Pennsylvania international business professor Mauro Guillen. “By the end of the century it is likely to have 35 percent of the world’s population.”

Numbers like that are why global brands want to gain a foothold now.

Mark Garrison: All the calculations that go into where American companies expand boil down to one thing: risk versus reward. NYU economist Yaw Nyarko is from Ghana.

Yaw Nyarko: The returns in Africa are potentially huge. But it’s also risky. That’s why they call it an emerging market, right? It’s a frontier market.

Some frontiersmen get rich. Others get eaten by the local wildlife. Investing in Africa means hacking through legal and bureaucratic tangles.

Nyarko: It’s not as straightforward as the United States. You’d have to go through governments. The regulatory framework is important. Those are some of the challenges there.

Others include poor infrastructure. But African countries have made big strides recently, all while conflicts ended and population boomed. Mauro Guillen is an international business professor at the Wharton School. He marvels at how many potential consumers will be in Africa by mid-century.

Mauro Guillen: It is likely to have 25% of the world’s population. By the end of the century it is likely to have 35% of the world’s population.

And that’s why global brands want to gain a foothold now. I'm Mark Garrison, for Marketplace.

About the author

Mark Garrison is a reporter for Marketplace and substitute host for the Marketplace Morning Report, based in New York.

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