Why the best time to invest in Africa is now!

Ayodele Odusola Correspondent
Africa is the most profitable region in the world. A report by the UN Conference on Trade and Development states that between 2006 and 2011, Africa had the highest rate of return on inflows of Foreign Direct Investment: 11,4 percent.

This is compared to 9,1 percent in Asia, 8,9 percent in Latin America and the Caribbean.

The global figure is 7,1 percent.

Examples of companies benefiting from bountiful profits in Africa abound: Sonatrach’s turnover from oil and gas alone was $33,2 billion; MTN Group’s turnover was about $10 billion; and Dangote Group’s turnover was $4,1 billion – all in 2017.

A variety of factors drive up Africa’s profit prospects, making it imperative for European, North American, Asian, and Latin American businesses to invest, helping to foster the continent’s economic progress.

Africa’s economic growth prospects are among the world’s brightest. Six of the world’s 12 fastest-growing countries are in Africa (Ethiopia, Democratic Republic of the Congo, Côte d’Ivoire, Mozambique, Tanzania, and Rwanda). Further, between 2018 and 2023, Africa’s growth prospects will be among the highest in the world, according to the IMF. Good news: sectors where foreign companies could have a comparative advantage, such as banking, telecommunications and infrastructure, are among the drivers of current economic growth in Africa – creating clear investment opportunities for foreign businesses.

Africa’s growing, youthful population, amidst an aging population in most other regions, constitutes a formidable market.

The continent’s population is predicted to quadruple from 1,19 billion in 2015 to 4,39 billion by 2100. In 2015 alone, 200 million Africans entered the consumer goods market. Maximising this burgeoning market size calls for actively engaging Africa’s structural economic transformation.

Africa’s youthful population contributes to an abundance of labour, which is one of the region’s highest potentials for labour-intensive industrialisation, and lowers production costs, leading to benefits that far outweigh the cost of doing business on the continent.

The hourly wage in Africa is less than 50 cents (for example, it’s $0,27 in Mozambique, $0,34 in Nigeria and $1,62 in Morocco) compared to $10,49 in UK, $7,25 in the USA and $6,57 in Japan. Engaging more foreign companies may help raise wage rates in Africa, improve labour market efficiency and generate additional resources for those left behind on the age ladder.

Africa’s large deposits of natural resources promise a bright future for developing value chains.

Agriculture and the extractive sectors are linchpins of national, regional and global value chains.

Africa hosts 60 percent of the world’s uncultivated arable land.

In 2015, the continent produced 13 percent of global oil, up from 9 percent in 1998.

The growth trend of oil and natural gas production between 1980 and 2012 was amazing: from 53,4 billion barrels to 130,3 billion barrels for oil; for natural gas, from six trillion cubic metres in 1980 to 14,5 trillion cubic metres in 2012.

As of 2012, Africa also controlled 53,9 percent of the world’s diamond resources. In 2017, the Democratic Republic of the Congo alone accounted for 58 percent of the world’s cobalt (used in electronics production) while South Africa accounted for 69,6 percent of the world’s platinum production in 2016 (used for catalytic converters and in other goods).

Actively investing in adding value to these commodities, among other extractive activities, will shape global economic activities over the next five decades.

Finally, emerging domestic developments lend credence to actively engaging Africa’s economic transformation agenda.

Dr Ayodele Odusola is the Chief Economist, UNDP Regional Bureau for Africa. This  article, courtesy of Africa Renewal, is reproduced from New African magazine.


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