Staying the course
It is interesting to observe the manner in which discourse on Africa has shifted recently. After several years of growing optimism, based partly on sustained GDP growth rates, sentiment regarding Africa’s prospects seems to have turned more negative. Doubts about the sustainability of Africa’s growth momentum are perhaps inevitable, given the vast perception gap that has been a consistent theme of our Africa Attractiveness surveys, as well as a tendency by many to easily see and believe the worst when it comes to Africa.
Indeed, the past year has been a tough one for those of us doing business in Africa. For a decade, Sub-Saharan Africa (SSA) average GDP growth rate was close to 6%. In 2015, growth slowed substantially to 3.4%, and this year it is set to be even lower. Some of our key economies — including Angola, Nigeria and South Africa — are under significant pressure and are likely to remain so over the next year.
And yet, for those of us committed to a long-term growth strategy in Africa, it is important that we do not get distracted too easily and by the wrong things.
Chief Executive Officer, Sub-Saharan Africa
It is important to note, first, that, although economic growth across the region is likely to remain slower over the next few years, the main reasons for a relative slowdown are not unique to Africa. The negative factors impacting many African economies are the same as those weighing down the global economy: a general slowdown in emerging market economies, and in particular the rebalancing of China’s economy; ongoing stagnation in most developed economies; lower commodity prices; and higher borrowing and capital costs.
While putting Africa’s challenges in a global context, it is also important to note that although there has been a substantial slowdown in growth, SSA will remain one of the fastest growing regions in the world for the foreseeable future. In other words, slower growth does not equate to no growth, and, from our perspective, does certainly not signal a cyclical decline in African economies.
If anything, the current economic environment reinforces the diversity of Africa’s many markets. While some economies struggle, the International Monetary Fund’s most recent forecast indicates that 17 SSA economies will still be growing at more than 5% this year — including Kenya, Tanzania, Mozambique and Cote d’Ivoire.
Yes, the environment for investing and doing business in Africa is uncertain and volatile, but this is nothing new. The critical point here is that anyone serious about doing business in Africa needs to take a long-term view on particular markets and should be staying the course. Of course, our resolve will be tested by what seem like ever greater levels of uncertainty — the most recent being the still as yet unclear impact of Brexit on African economies — and it may be necessary to make adjustments based on changing market conditions. However, shorter-term tactics should not be confused with long-term strategies.
In this report, we have therefore reintroduced our strategic 7-Ps framework — a tool designed to support investors to focus on the right questions at the right level of analysis to keep them on track to stay the course in Africa. In the end, and despite current uncertainties, it remains our view that the longer-term outlook for economic growth and investment in Africa remains positive. The next few years will be tough — partly, even largely, as a result of a fragile and possibly fragmenting global economy. But many African economies remain resilient, and when conditions improve globally, much of Africa will be well positioned to accelerate the growth momentum once again.