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Attractiveness Program 2016

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.

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EY Ajen Sita

Ajen Sita
Chief Executive Officer,
Sub-Saharan Africa


Facts & figures

EY - Africa Attractivness Program 2016, Staying the course


Investor confidence in Africa remains strong, despite slowdown in growth

GDP growth for SSA slowed to about 3.4% in 2015 compared to with average of 6% over the past decade. Africa experienced stronger headwinds in the past year than in recent times, including soft commodity prices, the slowdown in China’s economic growth rate and macroeconomic volatility. Despite these headwinds, SSA remains one of the fastest-growing regions in the world. This is also reflected in the FDI levels in 2015. During the year, FDI project numbers increased by 7% compared to 2014.

Though down year-on-year, both capital investment and jobs created were ahead of the average for 2010 to 2014. Significantly, the year-on-year increase in FDI project numbers in Africa in 2015 occurred in a context in which the total number of FDI projects globally dropped by 5%. In fact, Africa was one of only two regions in the world in which there was growth in FDI project levels over the past year.

East Africa gathers momentum, with Kenya the star performer

2015 proved to be a milestone year for Africa, marked by a more balanced playing field at the subregion level.

With an 11.6% drop in FDI projects versus 2014, Southern Africa’s lead narrowed in favor of East Africa, now accounting for 26.2% of projects. Factors such as recent oil and gas discoveries, growing consumer markets, accelerating regional integration and infrastructure development have put East Africa firmly on investors’ radars.

Of these destination countries, Kenya was the biggest gainer, with year-on-year FDI project numbers growing by over 50%, and moving into second spot overall, after South Africa.

EY - East Africa gathers momentum, with Kenya the star performer


Historical investors gain strength, new investors emerge

Africa attracts FDI from a diverse and growing group of investors. In 2015, the US retained its position as the largest investor in the continent, despite a 4.0% fall in FDI projects. Historical investors including the UK, France, the UAE and India expressed renewed interest in Africa. Interestingly, in 2015, Kenya replaced South Africa as the largest intraregional investor, more than doubling its number of outward FDI project into other parts of Africa. Other notable investors were Italy and Luxembourg, which became among the largest 15 investors in 2015.


Investments shift from extractive to consumer-facing and next-generation industries

Over the past decade, we have seen a shift across sectors from extractive to consumer-facing industries.

Mining and metals, and coal, oil and natural gas, which were previously the key sectors attracting major FDI flows, have given way to consumer products and retail (CPR), financial services (FS) and technology, media and telecommunications (TMT), accounting for 44.7% of FDI projects in 2015. In our 2014 edition of the Africa Attractiveness Survey, we also highlighted the emergence of real estate, hospitality and construction (RHC) as an increasingly attractive area of investment. 2015 saw further evidence of sector diversification, with business services, automotive, cleantech and life sciences all rising in significance and becoming the likely “next wave” for investors.


EY - Investments shift


Focusing on effective execution in Africa

As the emphasis of many organizations in Africa with a growth strategy shifts from rapid expansion to consolidation and optimization, effective strategy execution is key to tackle the increased uncertainty and complexity.

In this regard, we have reintroduced our 7-Ps model, which distills the lessons learned from growth leaders in Africa into a set of seven capabilities. By rating themselves on these seven capabilities, businesses can assess the robustness of their strategies for growth in Africa.

EY - Focusing on effective execution in Africa