The advisory services industry in Africa is still in its infancy, at levels far below global averages. Yet, our companies are in no less need of assistance to grow and expand; indeed, the need is much greater in Africa, given the scourge of joblessness among our young people.
The advisory services industry in Africa is still in its infancy, at levels far below global averages. Yet, our companies are in no less need of assistance to grow and expand; indeed, the need is much greater in Africa, given the scourge of joblessness among our young people.
Covid-19 has become the most severe economic crisis of our lifetime. No matter what sector you look at, there is almost no type of job or employment that has not been affected by the pandemic. The massive shift to online shopping, the suspension of almost all forms of tourism, the rise of new working-at-home environments – one could go on, and on.
What is more, the crisis has exposed how economies’ biggest strengths can become their greatest weaknesses. That Africa is home to the youngest pool of talent(talent network) in the world is often described as both a great strength and an enormous opportunity, especially by consumer goods companies eyeballing the forecast rise in spending by this demographic.
Similarly, companies at the forefront of spreading digital innovation across the continent were driven by the huge potential in serving this new consumer at highly competitive rates. Covid-19 has changed such calculations. Young people are disproportionately affected by the jobs purge wrought by the pandemic. In South Africa, the Covid-19 recession is already starting to push the youth unemployment rate beyond the 60% mark.
At the same time, Covid-19 has also brought the continent’s biggest weakness into sharper light: the lack of innovation and resilience of our private sector. Global supply chain disruptions and weak digital technology infrastructure across the continent have had a negative impact on operational efficiencies for many African companies, forcing many to shut down operations or reduce capacity.
It is important to acknowledge that these challenges have existed in our economies long before the spread of Covid-19. The pandemic has just exacerbated the problem. Africa has a rapidly expanding young workforce of more than 600 million, but the majority of African companies have stagnant growth and expansion. This is a dangerous cocktail, with or without a global pandemic. The question is, do we rise from the current crisis stronger, or let it slide us into a long-lasting economic downturn?
No African company has ever made it into the Fortune Global 500 ranking. Why? Because our businesses do not scale. The majority of large companies do business the “traditional” way: they employ old technologies in a large untapped market, which allows them to be less cost-efficient, less margin-focused and less hungry for growth than global players in the same industry. Unfortunately, this makes our businesses more prone to collapse in a time of crisis.
This is where the role of the consulting industry needs a closer look. Most global consulting firms rose to significant scale in the second half of the 20th century, in the aftermath of the devastation caused by the Second World War, when economies had to be revived and businesses were under pressure to transform the way they did things. The “need for change” increased their willingness to spend money on advice.
Being half-German (and half-Ghanaian) and growing up in Europe, I observed the rise of McKinsey & Company in the late 1980s and early 1990s. In Germany, the oil price shock and recession of the early 1980s brought many businesses to the brink of collapse. McKinsey became famous across the country for the massive multi-year restructuring efforts it carried out for the largest public and private organisations. It was the starting point for the global expansion of many German companies.
Today, Germany is the second-largest country office of McKinsey after the US in terms of the number of consultants. A similar story holds for South Korea, where McKinsey opened offices in the late 1980s, but only became a large player during the Asian Financial Crisis of the late 1990s. This was the break-out moment for the global rise of Korean conglomerates such as Samsung, which managed to survive the crisis.
But, can the freelancing model work in Africa? I am sure it can. Having founded a firm in Ghana based on these principles, I am hardly unbiased. But I think the fundamentals at play are incontestable.
Coming back to Africa, there is a big difference between our private sector and Germany’s or South Korea’s, even when they were in crisis. Africa’s private sector has never had the chance to flourish to a level where the cost of a top consulting firm became affordable enough to make such an investment into growth. There are very few organisations in the African private sector, except for foreign multinationals and governments backed by international donor funding, that have the resources available to pay the bill of a top firm.
As a consequence, the advisory services industry in Africa is still in its infancy, at levels far below global averages. Yet, our companies are in no less need of assistance to grow and expand; indeed, the need is much greater in Africa, given the scourge of joblessness among our young people.
The African consulting market is just 0.1% of its GDP in comparison to an average 0.8% in other key geographies. Therefore, it could be said, taking the average of other markets as a guide, the consulting industry on our continent is eight times smaller than it ought to be. Expanding by eight times, in absolute terms, represents about $14-billion in untapped annual revenue opportunity.
Size of consulting industry as % of GDP, 2018
In recent years, the consulting industry in South Africa has suffered reputational damage. There are many reasons for this. The unseemly scramble for very few opportunities in the African market certainly did not help bring about the best traits of the industry. All of us involved in it have been forced to take a hard look at ourselves in the mirror.
None of this negates the value that advisory services can bring to companies nor the huge importance of this sector in supporting the transformation of Africa’s economies.
Consulting, in essence, is the deployment of top talent into an organisation for a temporary period in order to advance its performance and scale. The question is not whether we need such services to grow our businesses. We do. The question, rather, is whether there is an opportunity to create a different model of access to top talent that hits a better value-for-money ratio than the traditional model of consulting. The story of Toptal.com is instructive.
Toptal was founded in Silicon Valley more than 10 years ago. It brings freelance consulting services, from software engineering to project management, to clients in the US and Europe. In 2016, it exceeded $100-million in revenues. Toptal promises to only hire the top 3% of freelancers and has rigorous quality management mechanisms in place to ensure that clients have a good experience.
The company does not have any offices – remote work is the foundation of the company’s lean operations. Whoever builds the African version of Toptal could lay claim to a big chunk of the $14-billion market opportunity for such services and help move the continent forward.
But, can the freelancing model work in Africa? I am sure it can. Having founded a firm in Ghana based on these principles, I am hardly unbiased. But I think the fundamentals at play are incontestable.
Freelancing significantly decreases the cost of consulting compared to a traditional top-tier firm. The high costs associated with the latter are mostly down to utilisation pressures. As a people company, the payroll cost of a consulting firm can be exorbitantly high; and the average utilisation of a consultant can plummet below 50% when times are tough.
This means that pricing to clients needs to incorporate the excess cost of low utilisation periods of such firms, which leads to an overall high bill. The model of freelancing eradicates this problem, where the freelancer shares into the utilisation risk with the company.
It is not the cost advantage alone that makes freelancing a striking opportunity in the African context. Freelancing opens up an under-utilised pool of top talent that is otherwise inaccessible. This pool includes experts in the African diaspora and young professionals who require more freedom. Here are two real-world examples to illustrate the point.
To equip African companies for growth – across the continent and beyond – we need to democratise access to top human capital. Given the challenging policy environments in many African markets, it is especially difficult for businesses to scale and unlock their global potential.
The first, from Nigeria, is an expert in real-estate management and education sector financing. After building up expertise in these areas over more than 20 years, he chose to relocate to a top university in Europe to fulfil his dreams of teaching and doing academic research. But he still wanted to retain a foothold in Africa.
Offering him the opportunity to remain plugged into the economic ecosystem of Africa by working as a freelancer remotely to support clients has been a win-win: he retains a strong professional connection to the continent and Africa doesn’t lose the vital human capital on which private sector growth is dependent.
The second example is a young, Ivy-league educated African professional who has committed her energies to different “high impact” initiatives and runs an NGO part-time, which assists people in need. The traditional, full-time job does not chime with her character or her life objectives. Freelancing enables her to commit only to the consulting projects that align with her values and aims, which in her case is mostly around empowering African organisations.
A question I hear often: how is a talent network model different from a consulting firm? My answer is that this model is a hybrid, sitting halfway between a traditional consulting firm and a talent matching platform, such as Upwork.com or Freelancer.com. Matching platforms are largely open online marketplaces that allow anyone to post jobs and, unless there is an oversupply in talent, also allow anyone to sign up to offer capacity.
As a result, these platforms can grow to an enormous scale, eg, Upwork crossed the mark of 10 million freelancers many years ago. The key differentiator for a talent network model is that it operates a managed marketplace approach: Managed because it vets talent, selects projects and assures first-class project delivery; Marketplace because it connects contractors with opportunities, albeit vetted, via an online platform.
To equip African companies for growth – across the continent and beyond – we need to democratise access to top human capital. Given the challenging policy environments in many African markets, it is especially difficult for businesses to scale and unlock their global potential. This has been true for decades; Covid-19 has only amplified the need for growth.
Yet, make no mistake, there are countless hidden champions on our continent. Better access to top talent is one important way to ensure they don’t remain hidden forever. DM
Yasmin Kumi grew up in Berlin. She has worked in the consulting industry for more than a decade. In 2016, she moved to Ghana and at 27 years of age founded the Africa Foresight Group, where she is the current CEO. Kumi holds two graduate degrees from Oxford and is a member of the Harambe Entrepreneur Alliance, the leading network for African entrepreneurs.
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