Africa is rich in natural resources, arable land, and has a growing population (by 2025 the UN predicts that there will be more Africans than Chinese people). The investment opportunities in the continent are massive and players across the globe are rushing to be at the forefront. The New Scramble for Africa poses immense opportunity for all, and Africa needs to make smart decisions in order to capitalize on this opportunity.
Africa today accounts for around 17% of the world’s population, but only about 3% of global GDP. There is untapped potential here, with tremendous opportunities for growth. Six out of 15 of the world’s fastest growing economies are African Last year, economic growth slowed in all geographic areas except Africa, the United Nations reported, By 2045, Africa will have more people than India and China combined This implies major increases in consumer consumption and business spending. By 2030, household consumption is expected to reach US$ 2.5 trillion. The market opportunities are clear.
Africa is continuing to receive a high level of interest from all across the globe (China, the US, the UK and the EU, as well as other smaller players). A PWC survey showed that 82% of respondents see growth as the primary driver of investor interest in African markets. Some challenges investors will face include a lack of data, and an absence of formal markets in some countries, which makes it very difficult to perform valuations across Africa.
On a macro level, China has made immense strides in promoting growth on the continent, focusing on infrastructure development. China’s Belt and Road Initiative (BRI), is a multi-billion-dollar infrastructure investment platform, and has positive economic implications for Africa (39 African countries are listed on the BRI’s official website. Studies show that current Chinese investment in Africa produced a more equal distribution of economic activity across the continent. Furthermore, with rising production costs in Asia, manufacturers are looking at countries such as Ethiopia, Kenya and Rwanda. China is expected to lose from 85-100 million low-cost, labour-intensive manufacturing jobs by 2030, and Africa can position themselves to capture many of them.
Post-Brexit, Britain has an 11-month transition period where the country will try to sign as many new trade deals as possible; African countries are a prime target.The UK states that they are helping Africa grow, by tackling climate change, supporting women entrepreneurs, and offering tech and digital expertise. The United Kingdom announced commercial deals worth £6.5 billion ($8.6 billion) during the summit, including one signed by engineering company Rolls-Royce. The UK has the potential to increase growth in Africa, through foreign direct investment, assistance in tackling climate change, supporting women entrepreneurs, and offering tech and digital expertise. Improved trade deals may help reduce tariffs and other barriers that have previously stymied trade between Britain and Africa. If Britain wants to maximize their investment opportunities, they need to diversify their interests (majority of investments is focused on mining and financial services, and 30% of investment in the continent goes to a single country, South Africa).
In order to accelerate Africa’s growth, there is a need to strengthen institutions, support political stability, promote democratisation, reduce debt, improve healthcare and education, attract foreign direct investment, and open financial markets. The African Continental Free Trade Area agreement will certainly help promote this growth. The New Scramble for Africa is incredibly exciting and everyone wants to tap into this pool of opportunity. In order to make optimal investment decision in Africa, market assessment and market understanding via research and knowledge solutions will be crucial. If Africa succeeds, the continent can empower its people, decrease poverty and inequalities, and serve as a prosperous economic partner in the global economy.