Africa on the rebound with growing markets and opportunities for private investors
World Bank photo
London, April 19, 2018 (AltAfrika)-The end of the commodity super cycle in 2014 hit Sub Saharan economies hard, sending economic growth to a two-decade low by 2016 as prices of crude oil, commodities, and other African exports fell dramatically.
In addition, global financial factors reduced the interest of international investors in the region. But after a few years of sluggish growth, most ofthe region’s economies are returning to previous levels of expansion.
Capital flows into the region, in the form of bank lending and equity and bond offerings, have strengthened considerably, reflecting improved global sentiment toward emerging markets in general and inAfrica in particular.
Remittances, an important source of capital and foreign exchange for all developing countries and no less so for Africa, are also improving.
Progress is uneven across the continent, as resource intensive economies—especially oil exporters such as Angola and Nigeria—continue to lag, while agricultural exporters enjoy stable growth. And several large economies—Ethiopia, Côte d’Ivoire, Senegal, Tanzania, and Ghana in particular—have posted growth rates of over 6 percent over the last few years.
Overall, the economic outlook for the region is positive, with economic growth expected to rise to 3.2 percent this year and 3.6 percent in 2020, according to World Bank Group data.
OPPORTUNITY FOR THE PRIVATE SECTOR
Despite the recent economic drag, Africa is a rapidly expanding market that represents significant economic opportunity for private enterprises and investors around the world.
The region’s economic potential is about more than recovering commodity prices. Other forces are at work, including favourable demographic trends, economic reforms, infrastructure investment, buoyant services sectors, and strong agricultural production.
Africa’s demographics are unique and brimming with potential. In an aging world, the region has a young and growing population. Rapid urbanization is expected to double the population of cities within 25 years, raising hopes for the productivity, innovation, and economic diversification that such trends have brought to other regions.
By 2030, Africa’s middle- and high-income groups are expected to grow by 100 million, boosting them to over 160 million people across the region. These rapidly expanding groups of consumers will spend smaller portions of their income on basic necessities such as food and beverages and more on transportation, information and communication technologies, housing,
education, clothing and footwear, pharmaceuticals, and other products and services.
Technology is a particularly bright area for Africa. Innovative technology adaptations are creating opportunities for economies to “leapfrog,” or skip conventional development steps to more rapidly catch up with advanced economies. Africa continues to lead the world in innovative financial services based on mobile telephony, a trend that is rapidly bringing
banking and other financial services to the un-banked and under-banked.
The overall climate for business continues to improve, as African reforms tracked in the World Bank Group’s Doing Business annual survey continue to rise. The growth of local capital markets, though still nascent in most countries, continues apace across the region.
All in all, private enterprises and investors that are prepared to take advantage of these trends and serve Africa’s burgeoning consumer classes stand poised to tap new markets and reap significant gains.
In spite of the very rosy pictures above, significant obstacles stand between African economies and full-tilt growth and progress.
A general lack of financing continues to constrain growth and development in the region, as less than a quarter of adults have access to formal financial services. The region’s infrastructure gap—a lack of electricity, roads and other transportation, andsanitation, for example—is not closing as quickly as regional governments had hoped.
Growing cities, despite their potential, continue to struggle in terms of costliness, housing availability, efficient delivery of
services, and other issues.
These can be overcome or mitigated through joint efforts by regional governments, the World Bank Group and other multilateral development banks, and private enterprises.
The report is the highlight of a special report on “SHAPING THE FUTURE OF AFRICA: Markets and Opportunities for
Private Investors” by the International Finance Corporation, World Bank Group in partnership with African CEO Forum