Viewpoint: Africa's strengths and challenges
“We face neither East nor West: we face forward.” Kwame Nkrumah, first President of Ghana
Summary: The forward looking story for Africa is positive, but where to write yourself into the narrative?
- New FDI projects into Africa are forecast to reach US$150b by 2015, creating 350,000 jobs per annum.
- GDP growth is expected to average 5% through 2015, based on a return to growth in its main investors.
- Africa has great strengths, including an abundance of natural resources and a large workforce, plus significant growth potential.
- Challenges include skills scarcity, small market size for individual countries and weak infrastructure.
- Governments, foreign investors and domestic companies can all take action to make the most of Africa’s potential.
The future looks bright
Research commissioned from Oxford Economics for this report forecasts strong growth of new FDI into Africa from 2012 onward, reaching US$150b by 2015.This will lead to job creation in Africa.
The continued growth of FDI will be based in part on the economic recovery of Africa’s main developed market investors, and the continued strong growth of emerging markets such as China and India. The top 10 countries (United States, France, UK, India, UAE, Spain, Canada, Germany, South Africa, China), which invested in Africa over the past decade, are expected to see GDP growth return to 4.2% on average.
The GDP growth of Africa, in turn, will continue to remain robust, averaging a healthy 5% up to 201528, and predicated partly on an assumption of continued strong demand for, and high prices of, commodities.
Africa’s strengths and challenges
Understanding Africa’s strengths and challenges and bring strategic within the framework of these can help African countries position themselves more competitively and also help focus investment for optimal returns.
Incentives for investments into Africa can be grouped into four categories:
- Resource seeking: pursuing cheaper or better inputs for production processes
- Market seeking: tapping into the growing influence of the African consumer and other new market-making opportunities
- Efficiency seeking: achieving operational excellence through outsourcing, shared services centers, etc.
- Strategic motives: seeking first-mover advantage in a new market or securing parts of the supply chain
Competition for FDI will continue to be fierce. Foreign investors seeking the highest rate of return will vie with other investors for first position. Domestic companies will compete with each other to supply foreign investors.
And African governments will compete with each other and othermarkets around the world to win a bigger slice of the investment pie.
In the survey we make further recommendations for each of those stakeholder groups in relation to the African opportunity. See our full report to find out more.