NAIROBI / DAR ES SALAAM On the African continent, two things are growing fast: the economy and the population. We asked the car giant Volkswagen, the technology company Nokia and the elevator manufacturer Kone what opportunities the situation offers them.
In addition to business prospects, the companies’ answers tell about the growth of motoring, construction and increasing data traffic.
But let’s first give the floor to Business Finland’s regional director for Africa Esa Rantanen.
In the video below, he explains why Africa offers business opportunities.
African director of the German car giant Volkswagen Group Martina Bee is on the same lines as Rantanen. According to Biene, the potential that Africa offers to the global automotive industry is huge.
– There are now 1.4 billion people in Africa, the same number as in India. By 2050, there will be 2.5 billion of them, and they will have to move somehow, Biene tells Yle.
According to him, 1.1 million new cars are now sold on the continent per year, but in ten years the sales could be 3–5 million cars. It would roughly correspond to the combined markets of Germany, France and Spain.
In total, more than a million cars are sold on the African continent per year. In most African countries, the majority of cars sold are used.
The forecast for new car sales growth is based on population growth, economic growth and the fact that there are still relatively few cars in African countries.
According to Biene, annual sales of 3–5 million cars would require regulatory development in the direction desired by the automotive industry. It would mean regulation that would speed up the demand for new cars and gradually ban the import of cars of a certain age.
The economy is growing in the south
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Sub-Saharan Africa’s economy will grow by 4.1 percent this year, anticipate International Monetary Fund IMF in October. The IMF predicts a growth of 5.2 percent for the developing and emerging countries of Asia, 1.2 percent for the Eurozone and 2.0 percent for the United States.
You can see the growth forecasts for individual countries on the map below.
Nokia builds networks
Nokia, which builds mobile networks and optical networks on the African continent, believes that business in the region will grow.
Last year, Africa and the Middle East brought more than ten percent of the company’s turnover. Nokia does not separate the sales of the regions from each other.
– Africa is quite significant. Of course, not the biggest market economically, but a growth market, he says Mikko Lavanti.
Lavanti is the Africa and Middle East regional director of Nokia’s mobile networks business.
Nokia’s faith in growth is fueled by a growing and young population.
Mikko Lavanti talks about Africa’s opportunities in the video below.
The optical connections mentioned by Lavanti, i.e. fiber networks, transfer large amounts of data. They are needed in Africa for artificial intelligence and data centers.
The graphic below shows how much data traffic is estimated to grow in Africa and how much of the traffic is 5G.
Lavanti estimates that the governments of African countries have begun to understand how important functioning networks are.
– There have been positive messages that economies are growing and currencies have strengthened. We believe that investments will go up, says Lavanti.
Africa is not an easy market. Nokia’s main competitors on the continent are the Chinese. They push the price level down, comments an analyst who follows Nokia Atte Riikola From Inderes. He also lists political instability and inflation as challenges.
What about the corruption that plagues many African countries? According to Lavanti, Nokia has zero tolerance for corruption, and it serves as a selling point for the company.
Urbanization increases the demand for elevators
In Nairobi, the capital of Kenya, you come across construction sites here and there.
– Buildings are going up here and there, and it really signals that this is a growing market, says the East Africa regional director of elevator company Kone Diana Masila From Kenya.
This pair of photos from Nairobi shows how rampant urbanization has been in the last ten years.
According to Masila, construction creates demand for elevators that are safe and durable.
Masila gives an interview in one of Nairobi’s tallest buildings, the JW Marriot Hotel, which was completed a few years ago. There are eight buildings in Kenya that are at least 120 meters high. Five of them have been completed in the last ten years.
He talks about the hotel’s elevators in the video below.
According to him, the demand for elevators in Africa is increased by population growth and urbanization.
In 2050, the African continent will have nearly 160 urban areas with more than one million inhabitants, it is estimated in the reportwhich was being done by the African Development Bank. At the time, the report estimated that there were 17 cities with more than ten million people. Now there are a few, the largest of which are Lagos and Kinshasa.
Analyst following the machine Jussi Mikkonen OP estimates that Africa is a “considerable growth market” for Kone in the longer term. Kone does not disclose its turnover in Africa. Mikkonen estimates that it is individual percentages of the total turnover.
According to Mikkonen, the value of the African elevator market is estimated to be about five percent of the size of the European market. He says that estimates of the market’s growth rate vary, but are in the range of just under ten percent.
What about the difficulties? Koneen Masila does not comment on what kind of difficulties, for example, corruption and instability bring in East Africa. Kone’s corporate communication says that the company does not comment on challenges in individual market areas. The communication adds that the company’s bylaws prohibit participation in corrupt business arrangements.
Trade between Finland and Kenya doubled
Population and economy are growing in Kenya, East Africa and Africa. Why don’t Europeans invest more in the region?
– If we’re talking about Finns, there isn’t really a business here that Finns would invest in, says Business Finland’s Rantanen.
According to him, Finns have invested in South Africa because, for example, there is a lot of paper industry there. Among Europeans, Rantanen estimates that Britain and the Netherlands have invested the most in Kenya.
– England is probably in services, banks and insurance companies and businesses like this, Holland is traditionally in farming, Rantanen opens.
However, trade between Kenya and Finland has doubled in five years, Rantanen says. During the last five years, almost 900 Finnish companies have done some kind of business in the direction of Kenya.
Rantanen also has work experience in China.
– I have been here for 15 years now. After all, this is a much easier market than China in a cultural sense, he says.
The Volkswagen assembly line is up and running again
In August, Volkswagen reopened its car assembly line in Kenya, which had been closed for several years. VW also has car assembly in Ghana and Rwanda.
The company put assembly in Kenya on hold because it was not profitable due to regulatory issues. Now Volkswagen has come to an agreement with the Kenyan government.
According to Biene, Volkswagen’s strategy in Africa relies a lot on the Africa-wide free trade agreement that started in 2021. It is intended to increase intra-continental trade.
It doesn’t apply to the automotive industry yet, but it will soon, Biene believes. According to Biene, it would be a wonderful opportunity for Volkswagen.
Difficulties for Volkswagen in the African market are political instability, trade barriers and low-quality fuel, which means that Volkswagen cannot use all of its engines in its cars.
The customers’ ability to pay must also be taken into account. Biene talks about this in the video below.