STAX sees huge opportunities for Sri Lankan companies in Africa

August, 2, 2017

As a company engaged in facilitating market entry for corporates as well as global investors, global strategy consulting firm STAX Inc is seeing renewed interest in African countries as of late. Stax recently assisted a Sri Lankan FMCG market leader to tap into the burgeoning consumer market in East Africa by helping it to find suitable in-country partners.

As a whole, Africa has become more peaceful and stable over the last decade. The World Health Organisation reports that deaths through conflict in Africa declined by 95% between 2000 and 2012. This improved peace and stability is starting to reap economic benefits for the African nations.

In the 1990s growth in Sub-Saharan Africa averaged roughly 2.0% a year, a slow rate by the standards of other developing economies. Between 2000 and 2007, Sub-Saharan Africa nearly tripled its growth rate to 6.0% a year. Over the last decade African economies have added nearly $1T, and the combined GDP of African countries today stand around $2.2T.

The combined population of Africa is 1.2B today, and accounts for more than 15% of world’s population. Africa’s working age population as a share of the total population is set to continue to rise from its current 56%, all the way through to the next century.

The link between a country’s level of urbanisation and economic growth is well established. Two decades ago less than 30% of Africa’s population lived in urban areas. This has increased to 40% today, and by 2025 the majority of Africans will live in cities, with the urban population accounting for 52% of the total population.

“As Sri Lanka’s post-war economic resurgence transitions into long-term stability, local companies are increasingly looking at larger regional markets for future growth. Neighbouring South Asian nations (Bangladesh, Pakistan etc.), emerging Mekong valley economies (Cambodia, Myanmar etc.) and African nations are popular destinations among Sri Lankan companies”, said Rasitha Wickramasinghe, Business Development Lead of STAX Inc.

“Mini-hydro power companies such as VS Hydro and Hemas Power, a subsidiary of Hemas Holdings plc, were among the early entrants of Sri Lankan companies into Africa as opportunities in the local market started to saturate. They were followed by construction, ICT, logistics and automotive companies”, he added.

In the ICT sector, hSenid, the largest Human Capital Management (HCM) solution in Sri Lanka, entered the African market more than 10 years ago when it successfully bid for a RFP in Tanzania with a local partner. According to Founder Chairman Dinesh Saparmadu, “Africa is a high growth market for us with clients in banking, insurance, telecom and NGO sectors. Today we have more than 60 corporate clients across 17 African countries for our HCM and mobile solutions”. In order to cater for growing demand, hSenid opened an office in Nairobi, Kenya and from there rest of the African continent is serviced via direct and partner channels.

St. Theresa Industries (STI), a company that specialises in the manufacturing of power distribution and transmission materials, is another company that has expanded into Africa over the last four years. In 2013, STI set up a factory with a local partner in Kenya to take advantage of the huge market potential due to limited rural electrification and distribution network.

Director of STI Madusanka Fernando said, “We were able to take advantage of the 2030 vision of the Kenyan government which promotes local manufacturing by providing exclusive rights to government contracts. To date, we have been successful in securing over USD 15 million worth of contracts from the public and private sector and are already looking to increase our footprint to Tanzania and Rwanda by the end of this year”.

During 2017, apparel manufacturers Hela clothing and Hirdaramani group also established their manufacturing presence in Africa.

“As African economies continue to grow, more opportunities will open up in in areas such as tourism, hospitality education and green energy. Service industries such as retail, banking and healthcare can also expand into to Africa to take advantage of the growth in the services sector”, Wickramasinghe concluded.

STAX Inc, Sri Lanka’s largest strategy consultancy, has its headquarters in Boston,  and branch offices across Chicago, New York, Colombo and Singapore. In Sri Lanka, STAX advises four of the Top 10 conglomerates, blue chip industry leaders and large family businesses on areas such as strategy planning, market assessment, data analytics and investor facilitation.

Photo caption: High growth African economies based on average GDP growth rate between 2010 -2016 (STAX analysis)