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2012 Africa attractiveness survey - Why we are positive about Africa’s future - EY - South Africa

Ernst & Young's 2012 Africa attractiveness survey Why we are positive about
Africa's future

Has Africa become more attractive in the past three years: investors' perception by location.

Will Africa become more attractive in the next three years: investors' perception by location.

Top sectors that will offer the greatest potential in the next two years.

When do you think Africa will offer high and robust growth potential?

Perceptioon gap relative to main countries' attractiveness

Investors' plans in Africa

Barrieres to investing in Africa

Viewpoint: It is still possible to gain investment targets with relatively low capital input, Olaf Meier African Development Corporation (ADC)

Olaf Meier
African Development Corporation (ADC)

I think investment prospects in Africa are favorable right now. Africa is the last uncharted territory on the investor's map and opportunities abound. The political climate is improving steadily and the countries are growing strongly.

Standard Chartered Bank, which has its origins in Africa, Asia and India and possesses the corresponding expertise, predicts that over the next 20 years, Africa's economy will grow by an average of 7% annually - more rapidly than China's.

And most importantly: while the whole world is already looking toward Asia and is investing there, most investors don't even have Africa on their radar. Africa, so to speak, is the better Asia and still has good gains to shower on investors.

We are excited and confident about Africa. We are optimists, but we are realistic optimists — our perspective is deliberately a half full glass rather than a half empty one.

This is partly a response to the Afro-pessimism that has been dominant for too long, but mainly because we believe that it takes a positive mindset to succeed in Africa. If you set out expecting difficulty and risk, you will find it.

However, ours is not a point of view informed by anecdotes and wishful thinking — the facts speak for themselves:

1.   Levels of FDI, a critical driver of growth and development, are increasing

The number of FDI projects into Africa has grown at a compound rate of almost 20% since 2007 and increased 153% in absolute terms since 2003.

2.   Although a perception gap remains, there is a compelling growth story to tell
    The story of Africa since the end of the Cold War is one of sustained and sustainable economic growth. The continent's overall economic output will have grown more than fourfold between 2000 and 2015, with the majority of the fastest growing economies in the world over that period being African.

3.   Africans are taking ownership of their own future
    In the period between 2003 and 2011, there has been 23% compound growth in intra-African investment into new FDI projects (437% growth in absolute terms), with the compound growth rate accelerating at 42% since 2007.

4.   The regional integration agenda is being prioritized

While we would like to see even greater urgency and acceleration, there is no doubt that the regional integration is being pushed hard by the AU and that several of the RECs are making good progress. The tripartite FTA represents a potential paradigm shift for Africa, and has the potential to create a market with the potential to rival the BRIC economies.

5.   Substantial investment is already being made in infrastructure

While the infrastructure deficit remains a very real challenge, investment into key projects across the continent has accelerated significantly in the past few years.  In 2010, there was as estimated US$85b in funding for infrastructure, close to the US$90b required to bridge the infrastructure gap.

This year the South African government alone announced an infrastructure program in excess of US$400b.

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