While preparing for the World Economic Forum on Africa, which took place in May in Cape Town, I read about Africa being “the next China”. I wondered about that comparison before, but can today say from a business perspective that it is inaccurate.
China is a single country with one legal and tax system, one currency and with one highly empowered government. Africa is a continent consisting of 54 different countries, many with multiple national languages, and the quality of governance within these countries varies, to say the least. Therefore, foreign investors must focus on having broad insight and knowledge on the regional markets before making strategic decisions on where to target their focus.
Recent research analysing growth potential of real estate markets in Africa identified 20 key cities, 13 of which are located in only five countries. The research revealed an important finding: diverse as they are, these cities and regions are simultaneously undergoing major industrial, social and political changes, and demonstrate urbanisation.
Ten years from now, 65 cities in Africa will have more than 1m inhabitants. Just from a commercial real estate point of view, the need for office space, shopping malls and logistics centres feels quite overwhelming; we have a long way to go.
Currently, the linkages are still at a very low level. In many instances, Africans need visas to travel to neighbouring countries, work permits are sometimes impossible to get and roads literally end at the borders. Even today, it is often simpler to fly through Dubai or Istanbul into a neighbouring African country rather than direct. While at dinner my first night in Cape Town, I sat next to a banker from Nigeria. He told me that not too long ago, to travel from Nigeria to South Africa, he had to go through London. Today, he can travel directly in five hours.
The result of continental disconnection can be summed up in one statistic: intra-Africa trade represents just 12% of all African exports compared to 65% within Europe and 40% within Asia. Doesn’t that make you think about the great thing called “European Union”?
Free trade in a common market creates wealth, free movement of labour and efficiency, and modern infrastructure links it all together. For Africa, there is a wonderful window of opportunity. The amount of oil and gas which has been detected in many African states would be able to provide the necessary funding to pay for all of that.
It is not rocket science. Africa needs government leaders who live up to their responsibilities; leaders who care for their people. It needs social media and press to create the necessary transparency. It needs good education to qualify the young generation for the challenges of the future.
In his vision for Africa in 2063, Swedish Finance Minister Anders Borg hoped that his great-grandchildren would one day ask: “Is it really true that in former times Africa was poorer than Europe?”
Christian Ulbrich is CEO, Europe, Middle East and Africa, Jones Lang LaSalle. This article first appeared on the World Economic Forum blog.