“At the IFC, we see the impact of Africa rising in our investments. From less than 10% of IFC’s global investment portfolio only five years ago, today sub-Saharan Africa is the second largest region of investment for us and we project that in three years we will be investing more in sub-Saharan Africa than any other region in the world.”
This was said by Bernard Sheahan, the International Finance Corporation (IFC) director of infrastructure and natural resources for Africa and Latin America, at the African Mining Indaba event, held in Cape Town, last week. The IFC is a member of the World Bank Group and is the largest global development institution focused solely on the private sector in developing economies.
“Economic growth today [in sub-Saharan Africa] is well above world average,” he explained. “The run of economic growth over the last several years is clearly unprecedented and it’s been resilient in the face of difficulties in the overall global environment. Underpinning that growth has been increased political stability and while we have seen several setbacks in recent months we have also seen a number of positive transitions – whether they be Guinea, Ivory Coast or Senegal – underpinning the general positive direction in terms of overall political stability. And with political stability has come improved economic governance. Again, not perfect in many places but clear improvements in terms of the policy choices made in a great number of the countries in the region and broad-based progress.”
Sheahan said that this has been seen particularly in terms of investment climate reforms. An example of this is that 17 of the 50 top performing countries, in terms of improvement in their ease of doing business since 2005, are in sub-Saharan Africa, according to the World Bank’s Doing Business 2013 report. In addition, Egypt and Morocco were the North African countries to make this list.
“And we also believe that economic growth today will be economic growth tomorrow,” continued Sheahan. “Over the next five years, Africa is projected to grow, on average, at 5.5% a year, well over the projections for the world average, well over the projections for all other regions, other than emerging Asia, and more than double the projected growth of the advanced economies. And that future growth will also be underpinned by social transformation here in Africa with the population growing and increased urbanisation.”
Africa’s population is the fastest growing in the world. Sheahan cited a McKinsey report on jobs and the labour force in Africa which said that in a few decades Africa’s labour force will be larger than that of China and India.
“And with urbanisation, today 41% of Africans live in cities… and by 2033 we project that Africa, like the rest of the world, will be a majority urban continent,” said Sheahan. “Urbanisation and development go together and with a large urban consumer base, firms and consumers benefit from scale economies.”
Sheahan highlighted Africa’s mining industry as a key part of the continent’s current and future economic growth, stating that mineral revenues account, on average, 5% of GDP in the mineral rich countries. “It’s critical for government expenditures in many countries, and also for us at the IFC. Africa already accounts for more than one half of all our global mining investments. With close to one third of total global resources, Africa is ripe for much more mining investment.”
According to the World Bank’s projections, investments in the exploration of mineral resources in Africa are expected to double every decade. Sheahan, however, pointed out that this exploration is increasingly present in conflict-affected states of Africa. With violent labour disputes in several countries, including recently in South Africa and Madagascar, and uncertainties over licences, taxation, and talks of resource nationalism, the continent’s risks remain high for investors in the mining sector. “So the opportunity comes first but political risk is very much there and, in our view, is likely to be rising,” added Sheahan.