McLean Partnership

McLean Impact: Local Business; Africa’s Success Story?

June 9, 2020

The McLean Partnership has recently launched McLean Impact, an initiative outlining our continued commitment to policy makers, leadership teams and organisations that endeavour to generate positive societal and economic transformation. The success of Africa-founded companies is critical in driving improving economies, employment, and standards of living across the continent.

The presence of global corporations in Africa has been largely ubiquitous since Coca-Cola sold its first bottle in Cape Town in 1928. Multinational corporations have certainly had a positive impact on African nations; increasing local employment, improving logistics networks, and encouraging FDI (Foreign Direct Investment).

However, whilst the employment benefits are significant, multinational corporations pay negligible tax in local African economies, diverting capital that could otherwise be spent on large infrastructure improvements. African governments are therefore eager for local businesses to flourish, in order to keep capital local, creating a greater societal and economic impact.

With the gradual improving macro-structural issues and the governmental reformation of economic systems, there has been a genesis of remarkable Africa-founded business. The key to these success stories is usually strong partnerships between local entrepreneurs and financial institutions (often private equity funds).

There are innumerable illustrations of the symbiotic relationship between local businesses and private capital. Fintech continent leader Flutterwave (backed by Greycroft), is transforming the African fintech sector, creating a wealth of jobs and an ease of transactions. Furthermore, M-Kopa (backed by Generation Investment Management), a Kenyan energy company, has recently sold off-grid solar power kits to 600,000 rural households. Perhaps the most notable success story has been Jumia, the e-commerce giant, that after private equity investment has subsequently listed on the NYSE.

Evidently, there are exciting businesses making waves across the continent, but it is hard to quantify their economic or societal impact. However, a recent McKinsey survey outlined encouraging signs in terms of job creation and tax revenue, precipitated by the success of African businesses. The research shows that medium sized companies (50-200 employees), typical of the size of companies likely to attract private capital investment, on the continent create jobs at twice the pace of both large corporations and small businesses. Furthermore 90% of African companies are expected to grow their revenues over the next 5 years (Source: McKinsey 2019).

The Coronavirus pandemic will certainly test local businesses and the deal volume of private capital investment. However, there are reasons to be cheerful. Private equity investment into the continent has withstood political uncertainty, downturns in growth, and weakened currencies. There is hope within the industry that African-founded businesses will continue to flourish over the next decade.

McLean is proud to work alongside several Africa-founded businesses and private equity firms, helping to provide human capital solutions. Sector agnostic, we have provided executive and non-executive solutions across the continent in FMCG, e-commerce, manufacturing and healthcare, from a diverse pool of international and local talent.

For more information on the impact-led organisations we partner with, or how we can aid in a recruitment or advisory capacity, please visit; https://mcleanimpact.com/

Henry Agnew works in the Private Equity Practice at The McLean Partnership. For more information or a confidential discussion on how we can help, please contact Henry on 020 3597 6426 or henryagnew@mcleanpartnership.com