Geoffrey White, CEO, Agility
The world in 2016 is very challenging; energy prices have collapsed, China’s economy has slowed; political instability is amok in the Middle East; ISIS wages open war; Russia has resumed its colonial ambitions and Europe is struggling to survive the difference in economic cultural attitudes between the North and South, compounded by the influx of migrants. Japan has negative interest rates.
In contrast to this worrying global scenario, Africa seems less threatening and potentially more interesting as an investment option than it has done for decades.
The macroeconomics across the continent are impressive. Unlike maturing developed markets, Africa has a young burgeoning population that will reach 2 billion by 2050 that is rapidly urbanizing creating a demand for everything. This nascent consumer market has an incredibly high propensity to spend and is attractive to the world’s manufacturers who have transitioned from trying to understand the ‘African opportunity’ to working out ‘how to execute’ in this new market motivated by the difficult times in traditional markets and seeking new growth frontiers.
Outside of its indigenous growth, Africa has two globally significant areas of potential. Firstly, it now has proven reserves of as much as 15% of the world’s energy resources. Secondly, Africa has 60% of the world’s uncultivated arable land. With a global population expanding from 6 billion to 9 billion this will play an essential role in feeding not only Africa, but the world.
However, not everything is rosy. The infrastructure required to support the urbanization of Africa’s population and the movement of goods to and from markets is woefully undersupplied. This has significant implications. It increases the cost of goods thus stifling potential growth and it reduces the ability for African companies to compete in world markets. A manufacturer who operates part of the month on backup generators will not be able to compete for global business. China will lose 80 million manufacturing jobs in the coming decade as its labor becomes too expensive. Those jobs will not relocate to Africa without manufacturers having consistent power, efficient logistics and infrastructure.
2016 is the year of the ‘4th industrial revolution’ and ‘the internet of things’. Africa’s young demographic has proven its ability as an adopter of new technology. With 80 million cellphones Africa leads the world in mobile banking and payment platforms – The latest digital revolution may be to Africa’s advantage.
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