Dynamics: power to the people
Africa: real and sustainable growth
Sustainable and real is Michael Lalor’s verdict on Africa’s growth. He explains why the continent continues to move forward.
With diverse African economies continuing to outperform other regions in the world, now is the time to invest for long-term growth.
Our recent Africa attractiveness survey confirmed Africa as a continent on the move. Growth continues, development is ongoing and prospects remain robust.
However, project numbers for foreign direct investment (FDI) were down, reversing last year’s trend. This underlines that more work is needed to persuade international investors that Africa’s rise is both real and sustainable.
Skepticism over African growth, together with the continent’s long-standing image as conflict ridden and poverty stricken, continues to endure.
However, a huge number of African countries have experienced consistent growth for more than a decade. According to the IMF’s most recent forecasts, 11 of the world’s 20 fastest-growing economies through 2017 will be African.
We believe that a critical mass of African economies is poised to drive the structural transformation required over the coming decades.
A sustainable growth trajectory
There are a number of economic, social and political factors that are all moving in the right direction.
- Economic reforms – Initiated in the 1990s, these have laid a foundation for the sustained growth that we have subsequently seen.
- Increasing diversification of sources of growth - Natural resources have contributed less than a third of Africa’s expansion since 2000. The rest has come from other sectors, including agriculture, manufacturing, construction and services.
- Growth in trade – Africa’s trade with the rest of the world has grown over fourfold since 2000.
- Improving infrastructure - In 2012, there were over 800 active infrastructure projects across different sectors in Africa, with a combined value in excess of US$700b.
- Political development - Democracy has increasingly taken root across the continent.
- Improved quality of human life - The trends point to significant progress in raising income levels and in health, education and general welfare in many parts of Africa.
- Ease of doing business - The World Bank’s research shows that 45 out of the 46 sub-Saharan economies they track have improved their regulatory environments for doing business since 2005.
Bridging the perception gap
The most significant take away from this year’s Africa attractiveness survey is the stark perception gap between those with an existing business presence in Africa and those that have not yet invested.
The focus of both business and government in Africa, therefore, needs to shift from “why” to “how”; from converting skeptics to encouraging and supporting believers.
Addressing key constraints to doing business on the continent should be priority, such as improving transport and logistics infrastructure and enforcing anti-bribery and corruption initiatives.
Over the horizon
African governments should engage in more collaborative and productive partnerships with these companies already doing business across the continent.
With a critical mass pulling in the same direction, and with committed leadership from government, business and civil society, Africa will continue its rise in the decades to come.