Economists project that by 2060, Africa’s middle class population, which is currently about 300 million people, will triple to about 1 billion people. This will without a doubt present a lucrative market for products and services that all companies, including multinationals, are eager to access.
In his book, The Fortune at the Bottom of the Pyramid, C.K Prahalad highlights opportunities that exist within the 4 – 5 billion people living on less than $1 or $2 a day who are unserved or underserved by the large private sectors and multinationals. This is an emerging market that has been largely ignored by the private sector until recently. This market requires innovative technologies, products, services and business models relevant to their specific needs; something we shouldn’t ignore as entrepreneurs.
Lionesses, why not consider unconventional approaches to markets as innovators of the economy? There is a desperate need for entrepreneurs to respond to the needs and struggles of underserved markets. Besides, as small businesses, we know exactly what communities need since we are part of these communities.
In 1998, the Tolaram Group, headquartered in Singapore began selling indomie noodles in Nigeria; even though the group had a diverse portfolio of offerings that included paper products, infrastructure, textiles, energy and digital services. At the time, Nigeria was going through difficult times politically and 78% of the population lived on less than 2$ a day. Does this sound like a lucrative opportunity? Probably not; especially for many of us using conventional approaches to business – nonetheless, Toleram saw a huge opportunity feeding a nation with an affordable and convenient product – noodles. The company now sells 4.5 billion packs of noodles in Nigeria annually. It employs 7 500 people and has created a value chain with 1000 exclusive distributors and 600 000 retailers generating almost $ 1 billion in revenues yearly.
This is an example of the market at the bottom of the pyramid where low income individuals are viewed as full participants, consumers, and entrepreneurs in local economies rather than passive recipients of charity. Most bottom of the pyramid businesses tend to be low margin, high volume and high return on capital businesses – so, scale is critical. Awareness, Access, Affordability and Availability are key to market development at the bottom of the pyramid.
As African entrepreneurs, we don’t have to be stuck in the mistaken assumption that business opportunities only exist in the middle class market. The bottom of the pyramid market has potential to create many new entrepreneurs and micro enterprises at grass roots levels.