India’s technological landscape has undergone a remarkable transformation over the past decade, emerging as a formidable force in the global tech arena. The nation’s journey from being an outsourcing hub to a pioneer in technological innovation and development is a testament to its strategic growth and the prowess of its talent pool.

The growth is driven by a surge in AI development and open-source contributions, positioning India as a leader in these domains. The “Octoverse” report by GitHub highlights this growth, noting a 28% increase in the Indian developer base in 2024 alone, making it the fastest-growing developer community globally. India’s contributions to public generative AI projects have placed it second only to the United States, with a staggering 79% growth over the past year.

The Role of Open Source and AI

Open-source projects have become a cornerstone of India’s tech growth, with initiatives like ERPNext and the Open Healthcare Network (OHC) leveraging AI tools like GitHub Copilot to accelerate development and address societal challenges. This symbiosis of open-source and AI is propelling India to the forefront of tech solutions that are not only innovative but also socially impactful.

India’s National Education Policy has played a pivotal role in this growth by integrating coding and AI skills into the curriculum, fostering a new generation of tech-savvy professionals. The country now ranks second globally for GitHub Education users, indicating a bright future for the upcoming workforce.

The economic impact of India’s tech ascension is significant, with the industry’s revenue set to surpass US$254 billion in FY2024, a 3.8% year-on-year growth marking an addition of more than US$9 billion compared with the previous year. This growth is fueled by the rise of Global Capability Centres (GCCs) and a strong focus on Engineering Research and Development (ER&D), which alone added US$2.88 billion to the export revenue.

Looking ahead, India is poised to surpass the US as the largest developer community by 2028, with sustained growth in developer talent and a strong emphasis on AI and open source. As businesses continue to embrace digital transformation, India’s tech industry is expected to grow at a compound annual growth rate (CAGR) of 10.9% between 2024 and 2029.

The Deloitte Tech Trends 2024 report also underscores India’s evolving tech landscape, emphasizing the country’s resilience and adaptability despite global economic uncertainties. It points to India’s increasing ability to meet international tech demands, with over 1,600 GCCs and a market on track to exceed US$100 billion by 2030.

GitHub anticipates that India will surpass the United States as the largest developer community by 2028. With a deep talent pool, a burgeoning start-up ecosystem, and a government that supports digitalization, AI, and electronics manufacturing, India’s tech industry is poised for a robust growth trajectory. This boom is more than just a testament to India’s technical prowess; it’s a narrative of empowerment and global competitiveness. From multinational corporations to startups, the Indian tech community is changing the game, driving GDP growth, and innovating for a better tomorrow.

India’s tech industry’s inexorable rise is a narrative of resilience, strategic planning, and the harnessing of a vast pool of skilled professionals. It is a story of a nation that has embraced the digital revolution and is setting the stage for a future where technology is not just a tool but a catalyst for inclusive and sustainable growth.

These companies struggled and they are largely retailers which left southern Africa for a voyage in Nigeria. They have since returned or about returning home. Some belong to “organized retail” which represents modern retail stores, such as supermarkets, department stores, and convenience stores, that are structured and have economies of scale.

 In Harvard Business Review, in a piece titled “The Challenges Facing E-Commerce Start-ups in Africa”, I sounded an alarm on the competitive positioning of “open market”, and why that would make running profitable B2C ecommerce businesses in sub-Saharan Africa extremely challenging. I maintain my position, nine years since that piece was published, as the open market still holds the ace to win for a long time. But it is not just ecommerce. Yes, with those markets everywhere in Nigeria, organized retail will continue to struggle. Some reasons below: Here are other reasons why these companies fail:

Product-Market Fit: To a large extent, formal retail in Nigeria remains highly underdeveloped due to infrastructures. While it makes sense to go to a farmer’s market in Cape Town and buy a cow, process it and dump it in your deep freezer for months, large-scale shopping when there is no electricity makes no sense in Nigeria.

Economy:  South Africa has more resources per citizen. Its budget is about $100 billion more than Nigeria’s national budget even though Nigeria is 3x its population. In other words, on average, South Africans are richer; the middle class in Nigeria is very small and the purchasing power for organized retail may be limited.

The product-market fit is not there to run this type of business in Nigeria. Unlike South Africa, Nigeria’s most significant opportunity for B2C operations lies with consumers who earn around $4 – $8 per day, but that spectrum is not a very sweet domain for organized retail. You need at least $15 per day to make it fascinating for the likes of Shoprite and Pnp. So, there is a clear product-market fit dislocation and that has made organized retail challenging in Nigeria (see plot below)

Competition: From daily to weekly open markets, to shop on the street, to traffic sellers, Nigeria is a market. In short, the Igbos were even direct when they said that “uwa bu ahia’ [the world is a marketplace]. To win as an organized retailer, you have to beat those alternatives. But beating them when they do not pay VAT and tax becomes challenging. If margins remain low, issues crop up.  

Good People, running a B2C ecommerce and organized retail in Nigeria must not discount the inherent position of those open markets which are everywhere. Those markets are winning right now even as the middle class shrinks.

Pick n Pay came to Nigeria, and in 2021, I wrote below in a piece titled “What Is Pick n Pay Playbook in Nigeria?”. From their press release, it was not the Nigeria that I know that they were describing. Today, PnP is gone: “In a strategic move that underscores the dynamic nature of international retail, South African grocery chain Pick n Pay has announced its departure from the Nigerian market.”

From 2021: ‘Shoprite came to Nigeria in Dec 2005 when Naira was about N127 to a dollar; the South African Rand was about 7 rand to a dollar then. Last year when it began the exit process from Nigeria,  one dollar exchanged for N380… Nonetheless, the biggest problem was not the currency deterioration in Nigeria but the fact that the middle class was shrinking, affecting the capacity of Shoprite to capture value with the presence of supermarkets, open markets and even street-sellers as competitors.

‘When that exit was announced, I wrote, “Shoprite may not be doing terribly bad in Naira but struggles in Rand when it reports in South Africa. It is exiting Nigeria even though it makes tons of naira.”

‘But in the midst of this paralysis, another South African retailer is here: Pick ‘n Pay. My question is this: what is the playbook for success in Nigeria considering that Shoprite, Mr Price and Woolworths could not overcome the paltry effective 30 million addressable market in Nigeria? Yes, I model that Nigeria has only 30 million who earn “decent” income and those 30 million support the remaining 180 million citizens.’

Today’s comment: The product-market fit is not there to run this type of business in Nigeria. Unlike South Africa, Nigeria’s most significant opportunity for B2C operations lies with consumers who earn around $4 – $8 per day, but that spectrum is not a very sweet domain for organized retail. You need at least $15 per day to make it fascinating for the likes of Shoprite and Pnp. So, there is a clear product-market fit dislocation and that has made organized retail challenging in Nigeria.

The Pick n Pay’s Exit from Nigeria

In a strategic move that underscores the dynamic nature of international retail, South African grocery chain Pick n Pay has announced its departure from the Nigerian market. This decision comes after the company sold a 51% stake in its joint venture, marking a significant shift in its operational focus.

Pick n Pay’s foray into Nigeria was met with optimism less than five years ago, as the retailer sought to tap into Africa’s most populous nation. However, the journey has been fraught with challenges. The company’s exit adds to a growing list of multinational corporations that have found the Nigerian business environment daunting.

The reasons for this retreat are manifold. Economic volatility, fluctuating market demands, and infrastructural hurdles have all played a part in shaping the company’s decision. Pick n Pay reported a larger half-year loss, driven by trading losses in its core supermarket operations and rising borrowing costs.

Despite these setbacks, Pick n Pay’s clothing and online businesses have shown “solid momentum,” suggesting that while the Nigerian venture has not met expectations, other areas of the business are thriving. The company’s CEO, Sean Summers, has expressed a “quiet confidence” in the ability to reduce trading losses in the Pick n Pay business by up to 50% for the full year.

The departure of Pick n Pay is a reflection of the broader challenges that foreign companies face in Nigeria. From regulatory complexities to currency fluctuations, the barriers to sustained profitability are significant. Other companies, such as Shoprite and Jumia, have also scaled back their operations or exited the market altogether, citing similar concerns.

Pick n Pay’s departure adds to a growing list of multinational companies that have found the Nigerian market challenging. These factors have led to a reevaluation of business strategies, with some companies choosing to shut down or relocate their operations. The implications of such exits are profound. They not only affect the companies’ bottom lines but also have potential repercussions for the Nigerian labor market and the broader economy. The exit of these firms can lead to job losses and reduce the diversity of products and services available to Nigerian consumers.

However, this trend also presents opportunities for local businesses to step in and fill the void left by departing multinationals. It could lead to a strengthening of local industries and the emergence of new market leaders. This trend raises questions about the future of foreign investment in Nigeria and the strategies companies must employ to navigate such a complex landscape. It also highlights the need for a supportive business environment that can attract and retain international retailers.

As Pick n Pay restructures its international strategy, the Nigerian market remains a testament to the resilience required to operate in emerging economies. The lessons learned from such exits could pave the way for more sustainable business models and partnerships that can withstand the pressures of Nigeria’s unique market conditions.

For now, the retail landscape continues to evolve, and companies like Pick n Pay must adapt to the ever-changing tapestry of global commerce. The exit may be a setback, but it also opens up opportunities for local enterprises to fill the void and for foreign players to reassess and potentially re-enter the market with renewed vigor and a deeper understanding of the local context.