London: The African consulting market grew by 5 per cent to $1.477m in 2013, according to new research published today. With Nigeria's GDP recently overtaking South Africa for the first time, West Africa saw an enormous growth (up 26 per cent to $123m) in consulting — even if from a small base. Spend on consulting in Nigeria has risen to $106.5m.
The report from leading global consulting market analysts, Source Information Services (Source) says that West Africa's wealth of natural resources, growing middle class, strong manufacturing base, and good levels of foreign investment all had a positive impact on levels of consulting.
The report also found that East Africa enjoyed a very good 2013, with the consulting market growing 18 per cent to $89m — and the market looks more likely to speed up than slow down. Source predicts growth of over 20 per cent for East and West Africa in 2014.
In contrast the report found that South Africa — the undisputed heavyweight champion of the African consulting market — had a difficult year. Slowing GDP growth, a pre-election hiatus in the run-up to May 2014, and instability triggered by a wave of strikes in the mining sector have all taken their toll. Both domestic and foreign investment has suffered as a result, and this led to consulting in Southern Africa only growing by 2.5 per cent to $1,101m.
Hans Kuipers, Principal, South Africa, The Boston Consulting Group, said: "Nigeria is hot at the moment — we see a lot of demand there. Demand for consulting services is centred mostly around FMCG."
B.J. Richards, Senior Editor at Source, urged caution, adding: "The booming Nigerian market does come with its share of complications. Ebola is currently affecting parts of West Africa — Sierra Leone and Liberia, most significantly — which means that consultants are minimising travel around the region, reducing the opportunities available to them. Nigeria is also not an easy place to do business — getting paid can be a challenge, and next year's elections could be a disabling influence. It is certainly a market that's somewhat high risk, though currently it's also high reward."
Hot sectors in Nigeria
Consulting in Nigeria's financial services and technology, media and telecoms sectors both grew by 35 per cent in 2013. The report revealed that new banking regulations have put banks under pressure and led them to turn to consultants — to help navigate the new requirements. The expense of compliance has also put banks under cost pressure, so efficiency programmes and operating model reforms have also driven work.
In technology, media and telecoms, Nigeria has overtaken South Africa in terms of mobile market size. Dealing with competition and the threat of consolidation while also increasing market share and maintaining profitability is driving demand for consulting support.
The Source report also says that a critical piece of the African market that is frequently in flux is the amount of money coming in from the outside. In 2014, foreign investment is on the upswing with levels expected to finally surpass the previous highs achieved before the financial crisis. This money — so important to African development — will be coming from a number of sources, with aid agencies, big multinational corporations, institutional investors, and private equity interests all expected to be highly active this year. This infusion can be expected to have a huge and positive influence on the consulting market.
Bisi Lamikanra, Head of Nigerian MC Practice from KPMG, added: "Foreign direct investment was a driver of growth, mainly via private equity companies investing in high growth sectors and businesses."
B.J. Richards from Source concluded: "For the foreseeable future, things are unquestionably bright for the big multinational consulting firms, and brands that have become well-established here are in a good position to move beyond their initial African hubs to establish a wider presence.
"With so much business to be had, local consultants also want a share, and competition from local firms seems to be on the rise. However, larger firms are benefiting from this increase in local capacity by partnering with these small firms to support delivery to their clients."