Africa's Quantum Leap: Will you be there when it happens?

Friday, 22 August 2014

Andrew-s-nevin_pwc website Ebola, Boko Haram. Failed state in Somalia. Al Shabaab. Extinction of the white rhino. No Power. Corruption. Life expectancy of 56.          

There would certainly appear to be a lot of reasons to stay away from Sub-Saharan Africa (SSA) at this time. For some executives, postponing one’s African entry and expansion plans might make life a bit easier and many corporate boards would be sympathetic to this suggestion.

But here’s the thing: despite all the challenges, the hardships and the risks of doing business in Africa, the economy is actually booming. It is booming because of the energy and ambitions of nearly 1 billion SSA people and because many of the most pressing barriers to development are slowly but surely coming down. Democracy is on the march. Power is on the agenda and has been privatised in places like in Nigeria. Economic growth in SSA is forecasted to reach 5.2% in 2014, up from 4.7% in 2013.  Nigeria, Africa’s largest economy, has a current estimated GDP per capita of $2,827 (which is expected to rise to $3,781 in 2018, an increase of 7.5%). This will not only improve the quality of lives, but also generate a consumer class that is more demanding.

From a sector perspective, Resource Development continues to play a major role, but Telecommunications, Consumer Goods and Real Estate are also expanding. Major African companies like Airtel Africa, South Africa’s Shoprite and Nigeria’s Dangote Group are expanding rapidly, driving intra-African investment. Mobile Technology is pioneering leapfrog business models in Financial Services, Agriculture, and Healthcare while E-payment services are going viral due to their affordability. All these elements make SSA an attractive destination for investors.

Furthermore, in order to facilitate this, African Governments have figured out they need to co-operate on a regional basis. Take the U.S.-Africa Leaders Summit earlier this month for example: $7 billion in new financing was announced to promote exports and investment in Africa under the Doing Business in Africa (DBIA) Campaign. Other commitments amounting to over $33 billion in key sectors such as Clean Energy, Aviation, Banking, Construction and Power are aimed at stimulating economic growth in Africa. Andrew QuoteA United Nations report released earlier this year showed that FDI flows to Africa increased almost 7%, reaching close to $56 billion last year, and this trend is set to rise.

As a comparison, I first visited China in 1983 when there was not a single private car. By 2008, China had become both the largest market and the largest producer of cars. In just 25 years. Few major companies that did not enter China in 1990s are successful there today.

One could say that parts of Africa are where China was in 1983, but moving even faster. Africa’s business people are making it in extraordinarily challenging conditions – the business equivalent of distance training at altitude. They can create the entire business ecosystem – power, security, infrastructure, human capital – because they cannot take it for granted.  And the relentless expansion of Africa business empires, like Dangote, are a testament to these capabilities.

So one can put Africa in the too hard for now category, but if one does, there may be no second chance. To take one example, the war for African banking supremacy is already on. Nigeria, Moroccan and South Africa banks are securing their positions to be one of the top 3-4 banking groups in Africa in 2030, at 20, 50, and 100 times their scale today. Only two international banks are really in the mix, and the chance to be in the game is rapidly disappearing.

As Woody Allen put it, ‘80% of life is showing up’. You can choose to not show up in Africa, but by ceding the battle, do not be surprised if an African company comes after your domestic market in 15 or 20 years.

Comments

Africa is the place to be, it is still in its emerging market phase, with lots of human resources and a large consumer market.. in other words it is a win win bet...

To also add to the grooming Africa development prospect, the Grow Africa Initiative which looks to develop the Agricultural sector with diffused benefits to the global world is something of noteworthy mention.
It will serve as a continual drive of Foreign Direct Investment into the region over the coming years, as countries and companies commit funds and resources towards the achievement of a significant decline in poverty level and increase in world food supply. This makes gro-allied industries another sub-sector investments can look out for.

Great article Andrew, the future's definitely bright for Africa.

In addition, the Nigerian government's decision to enforce IFRS as the universal financial reporting language for all companies only adds to this resolve that it's time to wake up and notice us!

This is an optimistic projection about Africa, I just hope this great Continent will be able to fulfill these potentials. Kudos Andrew.

These days it has become the norm for other countries and foreign companies to analyse the inherent potentials in Africa. Granted Africa is growing and will continue to grow, but what interests me is how the people of Africa will drive these growth. Everytime these figures and patronising gists pop up, it always seems Africa is a pie cake waiting to be cut, sliced up, and shared around!

These are the critical questions on my mind:
1. How can our governments sculpture policies that will ensure that the people of Africa are not re-exploited the second time by foreign countries and foreign companies?
2. How can our governments ensure an inclusive growth by ensuring that Africans own majority shares in this new branches of foreign corporations cropping out of our continent.
3. How can our governments ensure that Africans are gainfully employed by these corporations?
4. How can our governments ensure that our educational and technical capabilities are beefed up to match the task ahead?
5. What vision does Africa have for itself? Do we want to continue exporting raw materials and importing finish products and technologies? Or do we want to join China as the world's manufacturing centre?

I just hope these questions can be answered and worked on.

Just the right message to the world at the right time when Africa is going through its transition phase. It couldn't have been better said! Well done Andrew!

Thank you all for the excellent comments .. was in Dar Es Saalam last week. Tanzania seems to have a very hopeful future, though I pray that they will not try to become too dependent on the gas economy - by the time the gas flows, the price may be much lower than today and when solar comes in a big way, the economic value will be zero. It is distressing to seeing the troubles hitting Ghana at the moment, with the IMF presence. Here is Lagos, life is proceeding, albeit with schools closed because of Ebola. I am very worried about the future for Liberia and Sierre Leone - these 2 post-conflict countries do not deserve the suffering Ebola is bringing.

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