Infrastructure, resources and consumer demand – Africa’s three main opportunities

  

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According to various reputable forecasters, the African economy is expected to grow by more than 5% during 2012/13, while its total Gross Domestic Product (GDP) is expected to reach US$2.6 trillion by the year 2020.

In addition, the continent also has the fastest-expanding labour force in the world. Today, there are more than 500 million people of working age (15 to 64) in Africa, and that number is expected to pass 1.1 billion by 2040 – to be larger than China and India.

The rest of the world is taking note of the fact that African countries are trying to improve their business environment as a strategy to attract more foreign direct investment (FDI). One of the key investment drivers is the increasing prevalence of peace, democratic elections and improved governance.

The World Bank ‘Doing Business In’ Survey for 2012 – seen as a benchmark for rating the world’s business environments – tracked Morocco as the top reformer globally during the survey period, with Sao Tome and Principe, Cape Verde, Sierra Leone and Burundi also among the top 10 reformers. Changes in domestic policy in these countries improved the process of dealing with construction permits, protecting investors and paying taxes, among other areas.

The African Development Bank (AfDB), International Monetary Fund (IMF) and other multilateral institutions have done their share by working with investors and recipient governments to improve Africa’s business climate.

Infrastructure

Rapid urbanisation on the continent demands that governments and cities become globally competitive. The biggest need for infrastructure exists in power, transportation (roads, rail, ports, etc), hospitals and schools. The current spend on infrastructure in Africa is about US$45 billion a year. About US$90 to US$100 billion a year is needed, which is a huge funding deficit. This means there are substantial opportunities for the private sector to either invest alone or in partnership with government.

Resources

Africa’s resources are in demand! This is not only restricted to the extractive industries such as mining, and oil and gas. Agriculture is a dominant economic sector in Africa, and concerns around global food security make the continent’s fertile, uncultivated land an enormously important resource.

Consumer demand

Through the phenomenal rate of urbanisation, Africa has a growing population of very young, ambitious, often well-educated, globally minded people who are increasingly moving into middle-income brackets.

Internet users have increased, while the telecommunications sector has seen the number of cellphone users on the continent grow from 11 million in 2000 to almost 400 million today. Undersea data cables are currently being laid at an unprecedented rate, providing exponential bandwidth growth which will drive communications and internet access, particularly through mobile devices.

The banking industry is expanding with growing income levels, increased urbanisation and imperatives of financial inclusion.

To demonstrate that successful projects can be undertaken in African countries, the AfDB has raised its capacity to finance private enterprises and public-private partnerships (PPPs).

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