Innovation in Africa

Interview with Vijay Mahajan, Author of "Africa Rising" and Co-author of "The 86% Solution"
By Vern Burkhardt
"The rise of Africa is hidden in plain sight." "The entrepreneurial spirit is alive and well in Africa."

In 2007 the World Bank concluded "Many African economies appear to have turned the corner and moved to a path of faster and steadier economic growth."

VB (Vern Burkhardt): You traveled thousands of miles across Africa meeting with entrepreneurs, companies and local people. What led you to make this journey and write Africa Rising?

photo of Vijay MahajanVijay Mahajan: I previously wrote The 86% Solution, published in 2006, focusing on the eighty-six percent of the world's population living in developing countries. I was interested in demonstrating that business growth opportunities are going to be primarily in those countries, given what's already going on with the other 14% in developed countries.

I teach a course at McCombs School of Business at the University of Texas called "Invisible Global Market". The first time I used The 86% Solution in the course some European students shamed me by saying I didn't have much to say about Africa in either the course or the book.

Most of the consulting and travelling I had done was in Asia, South America and Eastern Europe, not Africa. My students' comments prompted me to think about travelling in Africa. I was not sure I was going to find much of interest from a market economy viewpoint, because my perspective at the time was based on what I had read in the media. It was not very positive about business opportunities in Africa, as you can imagine. After pondering the question for a few weeks I decided to calculate the total population and Gross Domestic Product of the 53 African countries.

I had a big "aha" experience when I discovered the population was comparable to that of India and China. Leaving aside the issue of politics and things like culture, the African economy was close to India's at about $1 trillion US. The economy as measured by GDP was actually a bit bigger than India – about two hundred dollars US per capita larger. This high level analysis encouraged me to study its market economy in greater depth in person.

VB: So you traveled across Africa.

Vijay Mahajan: Yes, I guess my destiny was to write this book. I was able to gather a lot of information after about three or four years of traveling across Africa.

I didn't know a single person on the African continent. By accident I came across a fact book published by a South African immigrant to Connecticut which contained two advertisements, one by Coca Cola and the second by a Venture Capital company called Zephyr Kingdom. I decided to try to contact them to find out how active they were in the African marketplace. I knew somebody at the University of Texas whose brother-in-law was working for Coca Cola in Atlanta so I was able to make a connection, and was put in touch with their operations in London. After two or three months I received a reply that the London group would be pleased to help me make connections in Africa. I also went to Washington D.C. to meet the Zephyr Kingdom people. And one contact led to another.

In the beginning it was quite difficult because when I contacted other companies in Africa they were reluctant to even talk to me, but gradually I was able to make contacts as one person referred me to another who referred me to another.

VB: You say you were on a 'consumer safari'. Would you explain?

Vijay Mahajan: I didn't coin that phrase. The people at Unilever gave me the term 'consumer safari' when I was interviewing them in Harare, Zimbabwe. 'Consumer safari' is used at Unilever to describe their executives' visit to consumers. Apparently they have a policy that executives are to spend time with actual and potential consumers from the rich, middle and poorer classes. In Swahili 'safari' means travel or journey.

When I heard the term I thought that's exactly what I'm doing. Like the Unilever executives I'm here on a consumer safari to meet consumers and business executives and managers.

VB: And you met a lot of consumers and business representatives?

Vijay Mahajan: I was not interested in meeting with government officials. I'm a marketing professor and being the son of a businessman I believe in seeing things for myself, and talking to consumers and entrepreneurs.

I didn't have the pleasure of travelling in all 53 countries – I went to the places where I could get the most information. I visited with local representatives of American, European, and Asian multinational companies. I also talked to local entrepreneurs. Some local companies arranged contacts for me in other parts of Africa. I went to a lot of market places to speak to local consumers – some were shopping malls and some were high-density areas where poor people live.

It was a lot of conversation with a lot of people – a 'consumer safari'.

VB: In your travels across Africa you saw an 'entrepreneurial energy'. "The entrepreneurial spirit is alive and well in Africa." Were you encouraged by the speed at which Africa is transforming to a market economy?

Vijay Mahajan: I was totally shocked, albeit it was all new to me. I didn't know what to expect given what I was used to reading in newspapers. I couldn't find a single article or book which was really positive on Africa at that time.

What I saw in Africa was similar to what I used to see in India 15 years ago and China 15 to 20 years ago. I had gone to China in the early 90s, and I also spent time as a Dean at the India School of Business in India.

In Africa I found a lot of excitement, construction, and economic activity, and in many places a positive mood. It quickly became obvious there was a story to be told about Africa, especially from a marketing perspective. Previously published books had not looked at the fact that there are 950 million consumers in Africa.

VB: Would you talk about your statement that Africa's most valuable resource is not its oil or diamonds, it is the talent and creativity of its people.

Vijay Mahajan: I think that statement could apply to people in many developing countries. Nobody has a monopoly on entrepreneurship. Entrepreneurship in Africa is not monopolized by Europeans, Americans, Chinese or Indians. I was impressed with the extent to which people living in Africa are real entrepreneurs.

To put the future potential of the African economy in perspective, the nearly one trillion dollars in GDP of the whole continent is about equal in size to that of the State of Texas in the U.S., which has a population of only 24 million.

VB: They're entrepreneurs because they have to figure out how to get the resources to survive?

cover of the 86 Percent SolutionVijay Mahajan: Not only for survival. It's difficult to market products without an infrastructure. Incomes are not very high. How do they do product design and other innovations with their limited budgets? Even packaging and distribution of existing products can be a challenge given their limited budgets? Many times available funds are related to a daily budget – they may not know what income they are going to receive tomorrow or the day after. Those are also the kinds of things I talked about in The 86% Solution.

VB: What are some of the implications of a continent having more than half of its population, some 400 million people, under the age of 24?

Vijay Mahajan: Another interesting statistic is 41% of the population of Africa is less than 15 years old. It is the youngest population in the whole world. A scholar from Ghana coined the term "cheetah generation", based on the observation that the younger generation does not have memories and negative feelings resulting from the colonial days. This generation is very optimistic, they are focusing on their futures and where Africa can go.

I think of my own circumstances. When I was growing up in India I heard many stories from my parents about the Colonial days up until the British left in 1948. They told us that their colonial days experiences were the reasons they were pushing us to become educated and learn English. But my brother's children, who are growing up in a modern part of India, see the Colonial period as just one chapter they study in school. They have no personal experience or negative memories of the colonial days. They are no different than my children who are living in Texas. They are using e-mail, are on Facebook, are often watching the same TV programs, are reading the same materials, and are sharing ideas with each other across continents.

There is a huge opportunity to focus on education in Africa to help the young generation become the leaders of the future. For example, on the whole continent there are only about eighty business schools. That was also the case in China and India twenty years ago. We probably have that many business schools in the State of Texas!

Many multinational companies don't even have headquarters in Africa. Coca Cola only moved its headquarters for Africa from London to Johannesburg last year and they've been operating on the continent for more ninety years.

VB: Given the social issues that have plagued the people of Africa, why do you think African youth are among the most optimistic in the world?

Vijay Mahajan: When you don't have much compared to others, there is only one way to go and that requires optimism.

The influences of China and India are the best things that have happened to the Africans. Chinese and Indian entrepreneurs have brought products to the continent which meet the price point for many Africans. A positive result from seeing Chinese and Indian entrepreneurs being successful is that young Africans realize they too can be successful.

Some years ago Kenya Airlines was flying only to Europe and, even now, they don't fly to North America at all. The current traffic routes of some African airlines; for example, Kenya Airlines and Ethiopian Airlines, reveals the changing focus of businessmen. When I interviewed the managing directors of these airlines they confirmed they have many non-stop flights going the Far East. They used to stop in Dubai enroute to India, and China. Now they have direct flights to India and China. In addition to regularly scheduled flights they also have several charter flights taking business people to and from China.

VB: India and China are staking out huge positions in Africa?

Vijay Mahajan: Both of them in their own way. I was interested in what they are doing for the consumer market. The increased contact with China and India is the best thing that has happened to many parts of Africa because finally somebody is paying attention to them. They are offering products and services that Africans really need.

VB: And that are affordable.

Vijay Mahajan: And affordable. I was amazed the first time I visited the China mart in Johannesburg. Small traders came from places like Mozambique and Zimbabwe to buy a wide range of goods which they took back to their own countries to sell to the local population. The products ranged from flip-flop thongs to bicycles and even TVs costing $60 to $70 US.

When I visited some of the high density areas composed of what we would call "poor" people in Kenya, Zimbabwe, and even Senegal, a large proportion of the people had a DVD player and television in their homes. They had access to the latest movies, though often pirated and of poorer quality. Many had satellite connections so were able to watch soccer games. In Northern Africa I even saw them watching Arabic shows coming out of Lebanon. They were able to get illegal satellite access by buying code numbers in the informal market.

Another thing you often see for sale in Africa are used products. Many people have mobile phones they bought used for $5 or $10 US. Most of us in Europe and North America don't realize what happens to our old mobile phones when we buy new ones every two or three years. It's a huge market.

You see the same thing with used clothing. Many Africans are brand conscious, and a lot of used brand name clothing is available for purchase. In many places I traveled my drivers were wearing shirts with brand names, which they invariably had bought in used markets.

Used cars are also a huge industry. In the book there is a picture of one of the used cars I encountered in Lagos, Nigeria – it has a Texas license plate. In Houston there is a large auto auction, and apparently somebody managed to buy cars at that auction and ship them to Nigeria. Most of the autos in West Africa are from Europe. Entrepreneurs import them from an auction in Belgium.

VB: You predict that by 2010, more than half the population of Africa will have a cell phone. Is this indicative of a willingness and appetite to adopt breakthrough technologies?

Vijay Mahajan: I think it's like any other developing country. Land line infrastructure requires a huge investment. Mobile phones have a high penetration because it's realized that communication is very important. For example, migrant workers in foreign countries are able to keep in touch with their relatives at home for the first time because of mobile phones.

You cannot work in the hospitality industry in African countries unless you have a mobile phone. If you drive a bus or taxi you need a mobile phone but the company you work for isn't going to give you one.

Many Africans' ways of using mobile phones are very innovative. Unlike here in the U.S., most Africans don't sign contracts with mobile phone providers. After buying an inexpensive used mobile phone they can buy a relatively inexpensive prepaid usage card. The secret is that all incoming calls are free. They keep a little credit on their prepaid cards so that their mobile phone can be used to receive calls. My drivers in almost every country I visited told me, "I'm going to park the car and wait for you, but I cannot call you. When you are ready just call me and I will bring the car around."

People have developed codes for when they call each other. Parents can call their children, using pre-arranged numbers of rings to send messages. For example, three rings means I am ready to pick you up, two rings means meet me at the shopping mall. There is no voicemail, which is one reason why their mobile phone service is cheaper to operate – servers are not required to save the large volume of messages that callers in countries in Europe and North America leave.

Not only have people developed the ability to use mobile phones as a relatively inexpensive medium of communication, in some countries it has become a currency. My driver in Kenya, whose wife was a Massai living in a village some distance away, had three children studying in Nairobi. If the mother wanted to send her daughter a birthday gift she would transfer some of the minutes credit from her mobile phone to her daughter's. In turn, the daughter could go to a commercial establishment and barter some of the mobile phone credit in exchange for a hamburger. The minutes have become a currency.

VB: Would you talk about your observation that the 'Africa Two' market, the future middle class market of 350 to 500 million people, offers the greatest business opportunities?

Vijay Mahajan: That insight occurred to me towards the end of my consumer safari, towards the end of my whole journey. I had been struggling with how to define the 900 plus million people in Africa. When I interviewed advertising executives of companies, many told me they divide the market into A, B, C, D, and segments. After many presentations and discussions it dawned on me that segment C, the 'Africa Two' group, is going to drive the consumer market and the economy in Africa. In the book I don't call them 'middle class' because the usual definitions and descriptions of the 'middle class' don't fit. They are neither rich nor poor, but they are hard-working. They are the schoolteachers, nurses, civil servants, the people working in the hospitality industry, and sometimes they may even be doctors. These are people who want for their children something better than they have had. Interestingly, this group in the U.S. consists of 300 million consumers and 100 million households, so we consider there are 3 consumers per household. When you take the market size of Africa Two, and divide it by 5 – the typical family size on the African continent – the result is 60 to 80 million households. That same number excites people about how the middle classes in India and China are going to drive their economies.

I knew segments A and B were composed of the very rich. In the beginning I was not interested in this 'Africa One' group but later discovered they are the 'elite market' for upscale shopping malls and high-end brands in every major city across Africa. It is composed of 5% to 15% of the population, or 50 to 150 million people.

The 'Africa Three' group, segments D and E, is composed of 500 to 600 million people representing about 50% to 60% of the population. For this large segment of the population the business opportunity is to create a market. One entrepreneur I talked to described it as "moving barefoot consumers to inexpensive flip-flops or gel shoes, from unbranded products to products imprinted with a brand name and later to branded products." In this emerging market price is critical. Prices must be at the lowest possible levels – often at the lowest unit of currency.

VB: One of the basic human instincts seems to be to want to have your children do better than you economically, to have a better education.

Vijay Mahajan: When I look at the face of a mother anywhere in Africa, it is no different than my mother's face in India. She was married when she was 13 – an 8th grader, and my father was only 16 or 17. He had just finished high school. Our parents – especially my mother – had very high aspirations for us and knew the value of education. There are ten of us, and we are the first generation to get a good education enabling us to take advantage of opportunities that exist.

African mothers are no different. Everywhere I went I was impressed by the mothers, by the way they took care of their children, the way they talked to them, and by the aspirations they had for them.

VB: You see similarities between the transformation of Africa and that of India. Would you elaborate?

Vijay Mahajan: The first similarity is the diversity in the population. You go only sixty miles and you encounter a different language, food, and customs. In South Africa I think they have 14 or 15 official languages. Generally, the cultures are widely different but very accommodating. I visited synagogues, churches, and mosques, and saw a great deal of tolerance among the various ethnic groups. I didn't previously know that almost a third of the world's Moslems reside in Africa, and not all of them are in the north. They are in the west, south, and east as well.

It took India almost 45 years to get its act together, and only in the 1990s did they finally start getting some attention in the world economy. Most of the African countries only attained their liberty from colonial rule beginning in the 1960s. As in India, I think there remains a colonial memory. There was a strong colonial memory in India when I was growing up. Either you blamed the British or you praised and wanted to imitate them. They drank scotch whiskey so you had to drink scotch whiskey. You had to fake a British accent. I was struck by similar behaviour in Africa, and that's when I started looking for the impact of the transformation from colonial rule to full participation in the global economy.

VB: Africa is a complex continent of 53 countries, over 900 million people, and over 1,000 languages. What are some of the secrets for businesses that wish to thrive in this environment?

Vijay Mahajan: I think the biggest secret is what representatives of Unilever and Coca Cola told me, "If you want to do business with us you have to walk the market. You cannot sit in Washington, DC or anywhere else outside of Africa, and make decisions based on the available macro data. The data will tend to indicate that there's nothing going on in Africa."

You have to go on a consumer safari so you understand what product innovations you need to make. You need to understand that even if there is no electricity people still consume; people still read. Even if there are no road structures people will travel on their bicycles and sell in the villages. Women may not be as privileged, but as in any developing country they have the same concerns. They need hygiene products. They do get sick.

The best advice I can give your readers is if they want to expand business operations into Africa, they must go to Africa and become familiar with the market.

VB: Multi-national companies can do well when they watch the market, and observe what successful local businesses are doing?

Vijay Mahajan: I didn't see many, but I give several examples in the book. Toyota is doing very well focusing on Africa One, and maybe a little bit on Africa Two. I visited their only dealership in Rwanda six months ago. What I saw was a successful Toyota dealership with service standards no different than those applied to their dealerships in the U.S. They have the same control systems for inventory and warranty service is the same.

Coca Cola is another example. It is the largest single employer in the private sector, employing something like 120,000 people.

Companies currently operating in Africa want to get a message to the rest of the world. The message is there's plenty of business in Africa with 950,000 million consumers, and growing.

VB: Are there positive signs of creativity and innovation by businesses operating in Africa? Such as developing new products, creating new business models, and establishing customer loyalty?

Vijay Mahajan: Oh yes, there are many positive signs. In North Africa I saw traders taking products to places most companies won't go.

An interesting innovation relates to remittances. There are almost 100 million people from Africa living in other countries. In the U.S. the size of the immigrant group from Africa is not much different than those from China or India. The immigrants from Africa are very well connected back home, and they need innovative ways to stay connected to their families and friends. Banking is changing because when African immigrants return home for a visit they want to be able to use an ATM to access their money. The hospitality industry is making major changes because immigrants want to take their children on trips to and around Africa.

You see major innovations by pharmaceutical companies in dealing with the local populace. And, as we previously discussed, there will continue to be innovations in mobile phone and satellite technology in Africa.

Africa is not a dark continent. It's really amazing what's going on there.

VB: As you indicate, Africa has been labeled a 'charity case'. A continent of war, disease and begging bowls. The media has reinforced this image. In what ways are entrepreneurs and large companies challenging this view?

Vijay Mahajan: I don't mean to bash the media, but whenever you see commercials related to collecting money for Africa, they show an impoverished child from Africa so you are left with the impression that on the whole nothing is going on economically in Africa. But Africa gets an injection of something like $40 billion every year in remittances – emigrants sending money home to their families. In terms of charities, the foreign aide that comes to Africa is close to $39 billion. So remittances are a little bit more than the aide the world gives to Africa.

I don't want to give the impression I'm against providing aid to poor countries. Aid may be in the form of money or intellectual help. I myself am a product of U.S. aid funding used to establish the Indian Institute of Technology. It included the help of a consortium of many U.S. universities including Harvard.

VB: The same thing is happening in Africa?

Vijay Mahajan: That's a challenge that I put in the last chapter of the book. Wouldn't it be great if consortia were developed to set up Institutes of Applied Technology in Africa, as has occurred in India. They would educate the best talent from across Africa to the benefit of the private and public sectors, and ultimately stimulate further economic development.

VB: Are foreign aid, international development assistance, and the NGOs contributing to Africa's future well being? Is foreign aid distorting the market economy in African countries?

Vijay Mahajan: I don't think it's distorting the market economy. It needs to be put in the perspective that while aid is needed, there is also a need to promote entrepreneurism. We also need to recognize that an entrepreneurial spirit already exists across much of the continent.

VB: Is there anything else that needs to be done to change the world's view of Africa?

Vijay Mahajan: That's the reason I wrote the book. When you are thinking about a strategy for emerging markets in developing countries, you can't ignore the 17 to 18% that are in Africa.

VB: Has the West's portrayal of Africa negatively impacted investment decisions by foreign businesses?

Vijay Mahajan: That may be partly true. I also blame the African Diaspora because they are not sharing with people in their host countries how exciting Africa is. I think the African Diaspora has to take a major role in spreading the word.

Some companies have begun to realize that the return on investment in Africa can be high. When I first arrived in Africa some business people wondered why an American professor would be coming there to talk to them. Some simply could not believe that that would happen. I even received a comment that perhaps I was there to file a report with CNN!

cover of Africa RisingI almost hate to mention that a reporter based in Kenya, from one of the major newspapers, indicated she would like to write a story about my book, Africa Rising. She was the bureau chief for her newspaper in that area of Africa. She called and said, "I love the book, and would like to write about some of the stories or references it contains, but I can't." When I asked why she replied it was because readers back home in the U.S. would not believe there could be positive stories. She said readers prefer stories about the conflict and famine in Darfur. I replied that she could write many stories on the problems in Darfur but perhaps just one time she could do a story on entrepreneurship in Africa. I gave her names of businesses and business people and said, "If you don't believe me or what I have written in the book go and check it out yourself." She eventually wrote an article about business opportunities but it was only published online.

For some reason the media doesn't want to communicate that some positive things are going on in Africa.

VB: They only want sensational negative stories because that creates emotion?

Vijay Mahajan: There's nothing wrong with appealing to emotions. What is wrong is they don't give a balanced picture. Why not talk about the entrepreneurship and innovation occurring on the continent of Africa?

VB: What are the market opportunities that are on the rise in Africa, and what types of strategies can businesses apply to be successful?

Vijay Mahajan: In the book I talk about market opportunities everywhere, be it in infrastructure, consumer products, transportation, or pharmaceuticals. I saw those opportunities everywhere and in almost every African country. I didn't go to the countries that were having security problems, but where I did go I found many interesting things.

In terms of market opportunities, it depends upon your focus and core competence. You don't have to be as large as Coca Cola which is in all 53 African countries, or as Unilever which is in almost all of the countries. Toyota has major hubs on the continent.

I draw a comparison to other developing countries. In India, businesses don't operate in every state. They initially go where the favorable, major markets are, and where they have a comfort zone. The same applies to China – most foreign businesses don't initially go to the outer provinces.

My suggestion is to study where there are business opportunities in Africa. Check with Chambers of Commerce throughout the continent. Read the annual country reports of the African Development Bank. Many African countries have ambassadors who can be very helpful and provide important information. Of course the companies who are already operating in Africa could be a very good source of information as well. The shortage of market data means businesses may need to collect it themselves by "getting out into the streets" and talking to consumers.

VB: In the developed world businesses need to adapt to the increasing 'power' of customers, and increasingly they are adopting strategies that include self-service, co-design, and 'crowdsourcing' through the Internet. Are some businesses starting to use these types of approaches in Africa?

Vijay Mahajan: Yes. It's very much in evidence in South Africa, and in many other parts of the continent as well.

VB: What is the informal economy that you refer to?

Vijay Mahajan: The informal economy typically happens when there isn't a banking structure available to most citizens, when a high income tax structure exists so people don't want to declare their incomes, and when the country is predominantly a class society. When there is lot of corruption, it also becomes part of the informal economy.

Africa Two and Africa Three people don't have access to loans so they mostly operate in the informal economy.

VB: You say, 42% of the GNP in Africa in 1999/2000 was in the informal economy. That's a large proportion.

Vijay Mahajan: It is a large amount and I think it is an even greater proportion of GNP than those figures indicate. Friedrich Schneider of the Johannes Kepler University of Linz presented this data at a workshop in Canberra, Australia in July of 2002. That was the only source I could find. Even the World Bank doesn't publish data about the informal or, as some call it, the 'shadow' economy in Africa.

VB: You say Africa is one of the world's most important markets. Would you elaborate, and tell us how it compares with other emerging regions, such as Asia, South America, and Eastern Europe?

Vijay Mahajan: I don't think it's any different than other emerging markets. There are 950 million consumers who need a wide range of products and services. It matches the size of India but is not quite as large as China. Somebody commented to me that there are more Mercedes sold in Africa than India though I don't have data to know if it is true or a jest. When I was in Harare the economy was in bad shape, and there was no gas available in the gas stations. But on my way from airport to hotel we passed by a nice Mercedes dealership. I took a picture of it, and it's in the book.

VB: What is social entrepreneurship and how is it building markets and addressing Africa's social challenges?

Vijay Mahajan: It's a very important part of doing business there. I called it 'ubuntu', a Zulu word from South Africa, meaning 'I exist because you exist'. I learned from the local people that this is what personal entrepreneurship means. Bishop Tutu uses the word, as does Bill Clinton.

In an economic sense, businesses realize 'I am because you are'. Employees and customers cannot have their needs met unless the companies survive. There is inter-dependency. Businesses flourish when they address real human needs, and the greatest human needs in Africa are food, shelter, clothing and communication. These are the drivers of progress in Africa and what make it an attractive future market. Many companies are also involved in addressing social issues, such as HIV, aides, and other illnesses.

I saw people in many rural areas collect water in containers and use their hands to scoop it out for drinking. When they put their hands in the water they contaminate it. An example of social entrepreneurship is someone redesigned the container so local people could not put their hands in it. Other examples include supplying food and liquids appropriate for Ramadan.

VB: Does the market of 'illegal knockoffs' contribute or detract from the local African economy?

Vijay Mahajan: Illegal knockoffs exist in almost in every developing country. When I was in Johannesburg I saw a young boy selling DVDs of a Tom Cruise movie – I think it was Mission Impossible Three. It was scheduled to be released that Friday in New York City, yet two days in advance of the release a fellow in Africa was already selling a pirated copy.

Product knockoffs are an issue in virtually every developing country and even in developed countries. But I don't think this phenomenon detracts from the local African economy; it contributes some earnings to some people.

VB: What are some of the interesting ways businesses are designing products and services which take into consideration local beliefs?

Vijay Mahajan: Many of the business models we use in developed countries may not be applicable in Africa. For example, the mobile phone industry in North America requires that we sign a contract for two or three years, and they send us a monthly bill which includes a charge for voicemail. That model doesn't work in Africa.

Other business models could work well in various parts of Africa. It would be great if somebody organized a market for used clothes throughout the continent – just like the Goodwill stores in the U.S. It would be beneficial to have used car marts, which might offer short-term warranties, servicing and a flow of vehicles to the market.

I saw companies addressing local beliefs. In the south I saw the cost of a funeral celebration being partially offset by companies which provided food and soft drinks for guests. This was a welcomed product promotion. I had never seen this practice before. It's actually a very nice thing to do – the companies are doing charitable work in enabling Africans to have a proper celebration of life for their deceased relatives and friends.

It was also interesting to see just before sunset during Ramadan, Coca Cola executives standing at various crossings giving local people boxes containing food and a cold drink to break their fast.

VB: Has the growing African Diaspora impacted Africa in a negative or positive way? You say the return of the Diaspora to the continent is leading to a "brain gain". Will this dramatically impact economic development, progress, and innovation within Africa, or is the trend large enough?

Vijay Mahajan: As with many other developing countries, the brain loss that occurred with migration away from Africa is now, in many cases, being a gain back. This is happening with many senior executives. For example, I interviewed Alex Cummings who was President and Chief Operating Officer of Coca Cola Africa. He is from Liberia, was educated and worked in the U.S., and convinced his company to move their operating group headquarters for Africa from the United Kingdom to Johannesburg, South Africa. This occurred in 2006. Because he was originally from Africa he was willing to move. I asked him whether his wife and children minded the move. He said, "No, there was some discussion but we were fine with moving."

VB: Do you have any comments about the impact of the current financial problems on the market economy in Africa?

Vijay Mahajan: I think it's a mixed blessing. Since they are part of the global economy some industries in Africa are being hurt. It isn't a surprise that Botswana and Zambia, which have a lot of minerals and diamonds, are being impacted.

Africa Three is less likely to be severely affected, because they probably didn't have much equity to lose. Many wouldn't even know how to spell 'recession'! For them life is going to go on. Africa One – the rich people – will have lost part of their equity but they are going to survive.

Africa Two, the emerging middle class, is the group I worry most about. They are living from paycheque to paycheque. There are two possible cushions for people in Africa Two which make their situation different from that of the middle class in developed countries. One is the remittances a considerable number receive from their children living and working in developed countries. I don't think relatives are going to stop sending money home to their families – perhaps $50 or $60 every month.

The second cushion is the informal economy where people keep their savings at home. This practice is probably going to help many overcome and survive the recession.

VB: Maybe it's a lesson for developed countries?

Vijay Mahajan: I'm not saying we should move to an informal economy in the developed world. It wouldn't work. But it may now be time to consider applying some business innovations that have been implemented in developing countries during these recessionary times.

There's no need for super packaging of goods. Perhaps choices could be reduced in areas like the variety of cereal packages many have in their homes. A possible business model change would be the elimination of two or three year contracts for mobile phones. Why not provide an option allowing consumers to buy pre-paid cards instead of sending them monthly bills that include extra charges?

VB: You indicate "many companies do good by doing good." Is this a common theme in Africa?

Vijay Mahajan: I think so. Companies know that whatever is good for consumers and their employees is also good for them. Companies can do good for consumers by providing them with products or services at a price they can afford. That may be the ultimate good because it makes people happy.

VB: Which African countries are likely to emerge as leaders and as strong market economies?

Vijay Mahajan: I believe South Africa is going to take a position just like Singapore did in Asia. Keep in mind that before China's and India's economies advanced many companies didn't know how to do business with these two large population countries. Many went into these markets via Singapore because their senior employees were willing to move there and use it as a 'base of operations'. Some went to Hong Kong but many were scared about what would happen after Communist China took over.

Representatives of companies operating in Africa advised that you cannot develop a strategy for entering much of the African continent unless you begin with a presence in three countries – Egypt, Nigeria, and South Africa. Then you can implement a strategy to expand elsewhere in Africa.

I don't think there are specific countries that will ultimately be winners or losers. Small countries like Mauritius and Seychelles are doing well. Botswana, with a population of 400,000, is doing relatively well. Kenya will do well, having an education system implemented by the British, being part of the railway system in East Africa, and having Mozambique as one of Africa's biggest ports. Rwanda has a fantastic president, Paul Kagame, who is ambitious and knows the history of his country. Ghana is going to do well. Angola is trying very hard. Senegal's music industry is simply incredible. The last country I visited was Algeria because it took a while to obtain a visa. I was interested in Algeria because for so many years after the French left there was chaos. But it seems well on the way to doing well economically. Tunisia is doing great because of all the tourism from European countries, especially France.

I am quite optimistic about almost every African country. I think what's happening is almost a bandwagon effect. When it is said Uganda is doing well, Rwanda doesn't want to lose relatively speaking, and Kenya wants to do even better. When Kenya advances then Tanzania wants to do likewise.

When I went to Rwanda to release my book I became aware that East Africa is likely to emerge as a strong region with a population of 120 million. That's a large market. I suspect neighboring countries will start to become part of this huge growing market.

VB: What are some of your best memories of encounters with people during your travels across Africa?

Vijay Mahajan: There are many. One is of meeting children whose parents had died from HIV/AIDS. In a visit just outside of Johannesburg arranged by Unilever I saw a unique program – the Thokomala project. Rather than creating orphanages Unilever's former Chair Niall Fitzgerals raised 1 million rand while running the London Marathon in 2002 to start the project of providing a normal home environment. Some of these children were found by Unilever, or other companies, while going from home to home conducting market surveys. They found that the head of the household was a child or teenager. Often relatives cannot, or will not, take these children into their homes.

I was walking on a street with wonderful South African white woman. We saw many orphan children with their surrogate mothers. The one that especially sticks in my mind was a seven-year-old child who was painting. He had been given paints to keep him busy and before the surrogate mother knew it this child showed that he had a tremendous painting talent – without the benefit of any training. I will never forget watching him paint. I was almost in tears to see him.

In Lagos, Nigeria a man invited me to evening dinner on a beautiful island where business executives live. As we were leaving the host proposed that his bodyguards escort us back to our hotel. I said, "No, the hotel is only a twenty minute drive." I asked my young Nigerian driver if we would be okay and he indicated so. The moment our driver turned onto the highway a car forced us to stop. The occupants were wearing clothes like the police but I don't know whether or not they were. I was sitting in the back seat speaking on a mobile phone talking to my family in Texas, and the fellow beside me was Caucasian. He was busily putting all the notes of our discussion over dinner on a laptop computer. The men who had stopped us couldn't figure out what was going on with a Nigerian driving the car, an Indian sitting in the back talking on a mobile phone, and a white fellow working on a laptop computer. Finally the leader saluted me and said, "Sir, we work for you." To this day I have not been able to figure out what was going on. One thing is clear; it was dumb to be out after 11:00 pm without bodyguards.

Another memorable moment was at Victoria Falls, where there was a gas station that had been converted to a restaurant because there was no gas available. Right across the road I saw people buying gas at somebody's house. Entrepreneurs go across the border, buy gasoline, and bring it back to their homes where they sell it in the informal market.

One in Dakar, Senegal was probably the most memorable. I actually shed tears when I visited Île de Gorée. Traders used to bring to this island captured Africans to be sold as slaves. The two houses they used to hold the slaves before putting them on ships have been preserved and are open to tours. When my boat first landed on the island a young man, who spoke beautiful English, offered to take me on a tour. I agreed and we started with one of the houses. He couldn't go inside because there was a different guide assigned to show the house. The moment I went in I felt something strange. They used to keep the women upstairs and the men downstairs. The guide told me that upstairs the women would be desperate to have sex with the white men in order to get pregnant, because they would not ship pregnant women. Then he took me to a small alley where the ships used to dock and I could really feel something oppressive there. He told me the whole dock area used to be full of blood because sometimes slaves would jump into the water and be eaten by sharks. Then he took me to the dungeon and said, "Go inside." I looked inside and actually became scared. Apparently this was where people who misbehaved were put.

By the time I finished this tour I was not myself. The moment I got out of the house the young tour guide looked at me and said very jokingly, "Professor, get on with it." I thought this boy was born and raised on this island, yet he is so positive. It occurred to me that his younger generation is looking forward, not backward. When I asked him about it he said, "That's history. Let me show you what kind of art we produce here". He took me to see some artists' works, and showed me his high school. Just before I left the island I asked him if he was educated. He said, "No, I went to school but there's no high school here." He explained he learned to speak English well by interacting with tourists. It turned out he could communicate in about ten different languages, all of them learned from tourists. He was married and said his wife was studying medicine in New York City. An African-American women's group had given her a scholarship. What a contrast! Two hundred years ago an African girl from this island would have been shipped to the U.S. as a slave, and now an African girl from here had gone to New York City on a scholarship to learn to be a medical doctor.

VB: A phenomenal history.

Vijay Mahajan: What a phenomenal change and the positive attitude of the young man! I have told this story to my children. I say, "That boy's face is never going to disappear from my mind." There were many moments like that as I travelled throughout the continent.

VB: Is there a danger some will think there is only one Africa when the truth is that there is tremendous diversity in economic, political and social conditions among the 53 countries?

Vijay Mahajan: That certainly is true. It is true in almost every developing country – Africa is no exception. When people talk about the rise of India, the rise is presently only happening in the south. The northern areas are not advancing at the same pace but that doesn't mean India is not advancing overall. In China there are amazing differences between some of the cities and the rural areas.

Some countries in Africa are very small, others very large. Namibia has a population of only two million compared to giants like Nigeria with 149 million, Egypt with 83 million, and Ethiopia with 75 million people.

Africa has a large number of spoken languages. Khadafi, who is now head of the African Union, would like to push for a 'United States of Africa' with one common currency similar to the European Union. This idea has not been accepted by many African countries but it was known that this was his hope when he was elected as head of the African Union. Who knows what the continent might look like in ten or fifteen years? We might not have predicted ten to twenty years ago what is now occurring in India, China, and other Asian countries.

VB: Are you going to write a follow up to Africa Rising?

Vijay Mahajan: My interest continues to be in developing countries so I'm currently putting my thoughts together to write a book on the Middle East. This idea came when I was in North Africa and saw how calm the Moslem people were.

In the U.S. we get the wrong impression from the media about Arab countries. I'm thinking of researching and writing about Arab countries in a fashion similar to Africa Rising. I plan to include Northern Africa in my analysis.

VB: What other authors would you recommend who have written about creativity, innovation, and the emerging economies of Africa?

Vijay Mahajan: Unfortunately, you won't see much on the economy. There are a few about international management and international marketing, but they tend to focus on the development of institutional structures.

A book on developing economies that was published last year is Billions of Entrepreneurs by Tarun Khanna. Your IdeaConnection readers might consider The Fortune at the Bottom of the Pyramid by C.K. Prahalad. Then there is The 86% Solution which I wrote. Unfortunately there are not very many.

Perhaps IdeaConnection could create a blog on its website where people could share their stories about creativity and innovation in developing countries. There are plenty of great stories. You could encourage people to make videos for the website, and you could create a section on YouTube about creativity and innovation in emerging countries.

That would be tremendous – not only for researchers and students but also for the many companies that may want to go to your website to find out what's going on in Africa. There's no lack of stories, trust me. If IdeaConnection could do that you would make me happy.

VB: You are the John P. Harbin Centennial Chair in Business at the McCombs School of Business, University of Texas in Austin.

Vijay Mahajan: I'm a chaired professor. Once you become a full professor almost always you will get an endowed Chair. A family in Dallas has given the money for the John P. Harbin Chair. The income from that endowment is made available for my research and to hire PhD students as research assistants.

VB: Of the ten books you've written, which did you enjoy the most?

Vijay Mahajan: The books were written at different stages in my life. Research about developing countries has not been my main area of research. My mainstream research has been on the diffusion of innovation. I wrote two or three books on innovation diffusion which are very analytical. Many of the awards I've won are a result of my research on innovation diffusion.

Doing research about developing countries is probably my second mid-life crisis. As I mention in The 86% Solution, I received a phone call in the early 90s from a former colleague who told me he had received a request from '66 and China', a group of developing countries in the United Nations. They wanted the two of us to make a presentation, at their annual meeting in Costa Rica, about how to stop the developing countries from begging. I asked, "What do you mean stop begging?" He replied, "That is exactly what they said." Being the son of an entrepreneur in India, I knew how hard my father and mother worked to put us through school. I knew my cousins and other family members worked hard. That's when I started my journey of learning about developing countries.

An incident happened in India with a group called NISTADS – National Institute of Technology, Science and Economic Development. After I made a presentation to NISTADS the Director said, "Professor Mahajan, we have your models for forecasting innovation diffusion. We even have the software you developed but let me tell you that none of the diffusion models, like the 'S' shape, work here." His comment made me realize that the diffusion innovation models I had developed and used in my consulting work in the U.S. were designed with no supply constraints. I always assumed that when an innovation was introduced there would be an adaptor who would look after all aspects of the implementation process. But in many developing economies suppliers are the biggest restriction. I began to wonder whether all the studies we had done about diffusion of innovation would apply to developing countries.

When I returned to the U.S. from making the presentation to NISTADS I called one of the people I had worked with in developing the models for diffusion of innovation and said, "The models the two of us spent so much time developing ignores the developing countries." One thing led to another and I ended up writing two books on emerging economies. I could relate to the reality of developing countries because I was born in one, only coming to the U.S. when I was 20 or 21.

VB: How do you find the time to accomplish so much?

Vijay Mahajan: I enjoy what I do and so it is a lot of fun for me. I look forward every day to doing interesting things. I have fantastic PhD students to work with, and learn so much from them. I am very lucky.

VB: Africa is rising.

Vijay Mahajan: Yes, Africa is rising.

VB: You've been very generous with your time Professor Mahajan. Is there anything else that we should talk about related to Africa Rising?

Vijay Mahajan: No, I don't think so. Thank you for doing such hard work. Please thank your friends who suggested you read my book.

Conclusion:
Vijay Mahajan ends Africa Rising by saying, "The Africa market is on the move. If you are not invested or involved there, it may not be too late to participate in Africa's rise. As an old African proverb says, 'The best time to plant a tree is 20 years ago. The second best time is now.'"

Dr. Vijay Mahajan's Bio:
Vijay Mahajan, former Dean of the Indian School of Business from June 2002 to June 2004, hold the John P. Harbin Centennial Chair in Business in the McCombs School of Business, The University of Texas at Austin. He also served as the Associate Dean of Research, Graduate School of Business, at the University of Texas at Austin from 1991 to 1994. He has consulted for both government and industry, and offered executive development programs in the United States, Asia, Europe, and South America.

Vijay Mahajan has researched and written extensively on product diffusion, marketing strategy, and marketing research methodologies. His work has been published in academic journals such as the Journal of Marketing Research, Journal of Marketing, Marketing Science, Management Science, and Harvard Business Review. Vijay Mahajan wrote Africa Rising: How 900 Million African Consumers Offer More Than You Think (2008) and co-authored with Kamini Banga The 86 Percent Solution: How to Succeed in the Biggest Market Opportunity of the 21st Century (2005).

Dr. Mahajan has a BTech from the Indian Institute of Technology at Kanpur, and a M S in Chemical Engineering and PhD in Management from the University of Texas at Austin, Texas, U.S.

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Comments:

This is a great article. I have been fishing around for information and resources on innovation and how to use that to evaluate business processes to result in optimal performance.
- IQ

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