When business developers look for international expansion opportunities, they look for unexplored markets and prioritize insights that will guarantees a return on their investments. In this article I would give you seven reason why your organization needs to invest in Africa to survive and thrive in the next couple of decades.
“Your best opportunity might be the hardest.”
“Anything worth doing takes time.”
“No pain. No gain.”
“No risk. No reward”
I can throw all the quotes about hard work and its rewards at you in an effort to tell you why you should invest in Africa.
But I’m not going to do that.
I’m just going to tell you that Africa is the present and the future.
And if your organization wants to set a foundation for surviving and thriving in the global economy over the next three decades, then you should be doing business in Africa now.
Why?
Because it’s the most youthful economy in the world.
And where there are young people, there is creativity and economic empowerment on the horizon.
But you may ask: “if it’s so great, why is it that Africa today accounts for around 17% of the world’s population, but only about 3% of global GDP. ”
To understand where we are now and how to move forward, we have to take a peek into the past.
A brief history
I think it’s safe to say that globalization has not worked great for Africa.
From the initial scramble for Africa between the late 19th century and early 20th century, self-governance and autonomy of Africa was seceded to European powers that drew up lines to form countries – “African colonies”.
This period saw a significant shift in power and governance. 10% of Africa that was under formal European control in 1870 increased to almost 90% by 1914.
These countries served as a base board to serve the colonial powers and not the people within Africa.
Over years of exploitative trade in people and resources during this period of “new imperialism” and even post-independence, the African continent has come to be known as a place where you go get things for cheap to build the rest of the world.
Lack of economic diversity
With the reliance on commodities and raw materials, economies remained at the bottom of the global value chain, not diversified or resilient enough to absorb the shock of shifts in global demands.
Without building out an extensive industrial base, the labor force did not benefit from the proximity to natural resources to create value-added products that would have moved African businesses and countries up the value chain in the global economy.
Hence not benefiting from the global gains of the industrialization age.
With improper management and weak institutions, the rewards from the exploitation of natural resources only favor the few that can get close to the seats of power, causing significant inequality and disempowered citizens that don’t have the agency to effect the change they want to see for themselves and future generations.
This degradation has been happening over a significant amount of time.
But not all hope is lost.
If there’s one thing about the African continent, it’s that its people are one of the most resilient in the world.
In the last 30 years, the GDP growth in 30 of the 54 countries have been above 400%, with countries like Ghana, Tanzania, and Equatorial Guinea seeing growth of 1,064%, 1,365%, and 8,839% respectively.
Just before the covid-19 pandemic hit, 8 of the fastest growing economies in the world were in Africa.
Then the pandemic shut the world down. Despite the disparities in vaccine distribution and lower health infrastructure, Africa responded a lot better than most people expected.
The pandemic exposed the fragility of lean and efficient supply chains that comes with the over-dependence on limited suppliers.
As the century turns, corporations are now rethinking current practices, ethos, and supply chains.
As things evolve, organizations have to think differently for both the short term and for long-term survival.
Africa’s youthful population is going to be important in any global organization’s long term survival and that’s why you should be investing in the latent opportunities now.
And here are the 7 main reasons why your organization needs to invest in Africa:
Large, Diverse & Youthful
The continent has a growing middle class, as well as a population that’s due to hit 2 billion by 2050 – with approximately half of the people under the age of 20.
With youthful countries that are rapidly urbanizing, organizations have the opportunity to tap into the human resources and customer base across Africa to extend their global presence.
Fun Fact: in 2020, there were 9 cities in Africa with more than 5 million inhabitants. That number is going to double to 18 cities by 2030.
Africa’s economic growth will outpace others
Africa is set to reach a GDP of $29 trillion by 2050, making it a continent with one of the most powerful economies in the world.
Six out of ten of the globe’s fastest growing economies are in Africa. Contrary to popular belief, countries like Ghana, Tunisia, South Africa, and Mauritius, have outperformed nations like Brazil, India, Russia, and China, and showed no signs of slowing down before the pandemic.
That growth trajectory is expected to return as we begin to normalize around the world. It’s the early movers that will get the most of the benefits when they invest in Africa now.
Invest in Africa’s wide range of “new industries“
A reliance on commodity trade has always plagued Africa’s growth potential.
Diversification has become a priority for many African nations – moving away from the dependency of natural resources.
This gives new market entrants plenty of opportunities to excel in respective industries that have a lot of catching up to do.
Africa’s infrastructure boom
Several African nations require better infrastructure to bridge gaps between markets and consumers.
Fortunately, with 49 African nations signing the Africa Continental Free Trade Agreement (thereby creating one of the largest free trade areas ever), domestic and foreign investors have an opportunity to make those connections through infrastructure development.
The infrastructure that needs to be built include but not limited to – building roads, dams, schools, pipelines, railways, power grids, internet base stations, and supplying machinery to factories.
Fun fact: The African Development Bank estimates that the continent’s infrastructure financing needs will be as much as $170 billion a year by 2025, with an estimated gap of around $100 billion a year.
Africa is experiencing a digital revolution
Along with logistical integration brought about by the AFCFTA agreement, internet and data access is steadily increasing in Africa.
Africans steadily continue to adopt the use of mobile phones. This means that there are several big opportunities for communication, hardware, technology and retail brands looking to connect with a growing and large digital-savvy customer base.
Fun fact: The $4 billion total raised in 2021 was almost three times what was raised in 2020 and 2019, when venture funding for African startups was pegged at $1.7 billion and $1.3 billion respectively.
Easier to do business in Africa
African nations are steadily moving up on the list of countries where it’s easiest to conduct business.
Prior to the Covid-19 pandemic, you need only look to countries like Nigeria, which jumped up 24 spots on the list in 2018, to note the significant improvements being made.
Out of the 264 reforms implemented in 190 countries in 2018, Africa accounted for approximately one-third of them.
You can make returns while making a difference
“You can be part of the great equalization”
While Africa is a place of exponential growth and opportunity, it is also home to the largest number of people living in poverty.
By choosing to do business on the continent, you will also be investing in job creations and economic mobility for a large number of individuals in the world.
It is not just one of the reasons above that makes Africa an interesting bet for your organization’s future.
It is the combination of the youthful population, narrowing the infrastructure gap, increased connectivity – physically and virtually, a focus on diversification, and a shift in the way global brands operate that makes Africa a sure place for your organization to invest in.
You just need to work with the right partners to identify and capture the right opportunities.
As it stands, for Africa to contribute and get its fair share of the global economic pie by 2030, the collective African economy has to grow by 9.8% every year for the next 10 years.
It’s the attainment of that 9.8% yearly growth that drives us at KPA.
That’s what keeps us motivated to connect the right global leaders and organizations with burgeoning opportunities to invest in Africa.
