The third in the series of MasterCard Worldwide’s Insights report on Africa sees the author of the report, Dr. Martyn Davies, chief executive of Frontier Advisory Group, examining the dynamics that are transforming Africa and taking a closer look at the new actors taking to the African stage in a report entitled: New Commercial Actors in Africa, and the Region’s Changing Business Dynamics.

Over the last decade, Brazil, Russia, India and China, known as the BRIC nations, have made their entrances onto the African stage, each bringing their own unique strengths and agendas to the fore.

“During this time, they have become the biggest trading partners and investors in Africa, with a total increase in trade with the continent between the four markets climbing from $24.2bn in 2000 to $194.72bn in 2010. In contrast, trade between African markets and the European Union has declined by 11% in the last 10 years, while trade with the United States of America has declined by 2% for that period,” Davies explains.

Rapid industrialisation and fast economic growth in these emerging markets are fuelling demand for resources, and they are impressed with the resource potential that Africa offers. The development of these resources is, however, still hampered by poor and sometimes nonexistent infrastructure, and a lack of investment.

Below is a brief summary of how each of the BRIC nations has a vested interest in Africa, and how they have become the new commercial actors on the continent.

Brazil

Brazil has historic links to Lusophone (Portuguese-speaking) countries in Africa such as Angola and Mozambique as a result of their shared colonial past, although there has been significant investment in countries such as the Democratic Republic of Congo, Gabon, Guinea and Zambia. Brazil’s drive to invest on the continent has been supported by the Brazilian Development Bank, with investments by mining companies, for example, running into the billions of dollars for each deal. It has also offered its expertise in construction in exchange for many of the resources it needs to continue its own growth trajectory.

Russia

Russia’s investments in Africa are almost all resource-focused, often leveraging on old Cold War political relationships. Russia’s investment footprint is expected to remain relatively small in comparison with other BRIC countries active on the continent.

India

India’s interest in the continent is a particularly noteworthy one, as its multinationals and their entrepreneurial spirit, challenge and replace ‘business as usual’ with new business models that leapfrog conventional business constructs.

The emerging multinationals who are most interested in Africa are already household names in their own markets, and bring their competitive advantages in IT, healthcare, pharmaceuticals, biotechnology and the automotive sector to play in Africa’s developing markets. They all have the benefit of their strength in the Indian market to leverage their global comparative advantage.

China

Chinese banks have led the nation’s foray onto the African continent in their aggressive expansion of their loan portfolios in Africa. Chinese bank-provided finance has come to be perceived as a Chinese foreign-policy tool, and is providing impetus for traditional donors and development finance institutions to change their older, tired models of aid and risk aversion to the continent.

Over the past decade, the GDP growth rates of China and sub-Saharan Africa have tracked each other very closely, in an intimate relationship that sees the region’s growth underpinned by China’s demand for resources.

South Africa

South Africa was formally included into the bloc, becoming the ‘S’ in BRICS in 2010. Post 1994, the country has built up a pervasive footprint in Anglophone Africa, most particularly in mobile telecoms, retail banking, mining, engineering services, hospitality and retail.

Conclusion

Given Africa’s robust growth performance of approximately 5% per annum over the last decade, and the optimistic and promising outlook for the future, it would be shortsighted for international companies to neglect the profitable opportunities presented by African economies.

The new actors on the continent – Brazil, Russia, India, China and South Africa – are leveraging political relations and cultural comparative advantages for commercial success in Africa.

African economies that can strategically position themselves and provide enabling economic environments will be best positioned to capture the economic benefits that these relationships can offer.