Five phenomena you should know about Africa

June 6, 2022 - Africa has always been a continent full of diversity and opportunity for those who had an appetite for it, built the bandwidth and invested capital in social, cultural and economic infrastructure.

For the past 30 years, I’ve had a front row seat participating in the growth of my own company and those I’ve worked for, as well as advising entrepreneurs, and local and international companies on their growth across Africa and its 55 countries. To me, Africa is AfriCAN – the “can do” continent.

Let’s consider five phenomena that are not (yet) on many people’s radars that highlight why now is the time to invest in Africa.

African Multinational Companies

Expanding not just across the continent but across the globe, Africa is the birthplace for companies such as about Dangote Industries, Tanzanian-based MeTL group, telecoms companies like Econet Global and MTN, as well as banks, retailers, insurance companies and many others who continue to find plenty of opportunities across Africa.

The secret to their successes? First and foremost, they are on the ground, in the communities, partnering with local companies. They also invest in infrastructure to grow not just their own operations, but that serve the larger communities as a whole: power generation, in-house training academies, roads and bridges. Furthermore, they localize their products and services to the African market.

Industrialization, the Kind without Smokestacks

When Africa falls short of matching Asia’s growth pattern, fingers wag and people declare Africa lagging behind and failing. However, times have changed. So too should our perceptions and indicators of industrialization and economic growth.

A potentially more appropriate indicator is looking at “industries without smokestacks” such as horticulture and high-value agribusiness, tourism, business services, and other tradable services, such as transport and logistics.

Between 1998 and 2015, services exports grew more than six times faster than merchandise exports across Africa. Overseas Development Institute in the UK found that the services sector in Africa contributed more than 50% to labor productivity growth in 15 of the 25 countries they researched. In South Africa, research suggests that jobs in the industries without smokestacks will account for nearly 80% of all new jobs through 2028.

Cities and Corridors

Africa’s country borders do not mirror market boundaries. Rather, it is the cities and urban corridors that offer a concentrated and rapidly increasing growth for businesses as Africa’s leading cities account for 80% of a country’s consumers with the disposable income to buy the cars, TVs, appliances, and services.

According to the UN, by 2030 Africa will be home to 10 mega cities (+10 million people), 17 cities with more than 5 million inhabitants and nearly 90 cities with at least a million inhabitants. That is a lot of consumers and a lot of opportunity to meet their desire for services, retail goods, healthcare, education, and hospitality. With such concentrated numbers of people, companies can benefit from lower fixed costs and easier product distribution.

Leapfrogging

Africa’s rapid acceptance of mobile telephony was helped by their lack of legacy infrastructure. They leapfrogged over the telephone poles and copper wires and went straight to digital. Africans are also able to move from kerosene to solar-based electricity, leapfrogging grid-based electricity.

It’s wonderful that people can study, stream a video, do their banking and make an appointment for their baby’s next check up via digital technology, however too many still live without running water or electricity. Leapfrogging cannot replace lack of infrastructure or good governance. Which brings us to our final reason why now is the time to invest in Africa.

Infrastructure

The World Bank estimates that Sub-Saharan Africa’s GDP would grow by 1.7% a year if it were to close the infrastructure gap.  Successful companies in Africa know that by helping to close the infrastructure gap everyone benefits. This is more than a contract to build a road or hospital. It is imitating Dangote Cement that builds power generation for their cement factories that are also accessible to the local population. Or partnering like MTN and Airtel who share cell towers in Uganda not only because it lowers their costs; it also improves services and access to the internet for everyone, which in turn improves the economy and, of course, increases MTN and Airtel’s revenue.

Africa is open for business—your business. However, there are no shortcuts. Your best bet is to get on the ground and discover for yourself the plethora of reasons why now is the time to invest in Africa and why “there are no better witnesses than your own eyes” (Amharic proverb).

Photo: Flying into Dar es Salaam, Tanzania by Dr. Deanne De Vries

This article was originally written for SuperReturn Emerging Markets 2022 taking place June 20-22 in Amsterdam, the Netherlands and posted on https://informaconnect.com/why-now-is-the-time-to-invest-in-africa/