In a recent online video presentation, Colin Coleman, head of investment banking for sub-Saharan Africa at Goldman Sachs, identified three forces he believes will reinforce and buttress Africa’s economic growth over the coming years. These are: South African companies moving into the rest of the continent; China; and private equity.
South African companies: The past decade has seen numerous South African firms moving into the rest of the continent, from mobile telecommunications operator MTN to supermarket chains such as Shoprite to restaurant brands like Mugg & Bean.
Coleman said that South African companies form a “very powerful group of sophisticated institutions… that are highly capable”. He said that many South African businesses have made strategic decisions to move into the rest of the continent where they can achieve higher margins and growth rates.
China: “The China factor, complemented by Brazil and India in their own way, is a strategic top-down process where the Chinese government and their corporations have decided that… China and Africa’s future belong together, and they are making strategic, and therefore systemic, attempts to invest in Africa,” said Coleman.
Private equity: Although Africa’s private equity industry is still in its infancy, an increasing number of investors are considering opportunities on the continent. In 2012, about US$1.1 billion of new private equity investments were made in sub-Saharan Africa, and around $1.4 billion was achieved in fund raising.
“Because of the lack of liquid markets outside of South Africa, private equity has participated significantly in putting capital to work in private companies in Africa. This will probably also lead to deeper capital markets as private equity looks for liquidity as they sell those investments in the future.”
Africa – not the Chinese miracle
Coleman noted although Africa is likely to see more development in the future, he doesn’t think the continent will be able to replicate China’s economic success.
“I get asked often, is Africa going to continue to be the abandoned continent on the one hand, or on the other hand is it going to be the new Asian miracle? I think the truth is somewhere in the middle. When we look forward, I don’t think it has the technical skills and expertise to be the Asian miracle, outperforming like a China. But neither is it going to be the abandoned continent.”
“This is a continent that is going to move from a low base into a much higher form of consumer services. Much better banking, technology, telecommunications, infrastructure, and the billion people that occupy Africa are going to see tremendous improvements in their lives,” he added.