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Africa's untapped Business Potential.

Posted By Stephen King     Sep 13    
Spotlighting opportunities for business in Africa and strategies to succeed in the world’s next big growth market

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Africa’s potential as a growth market for business remains both underestimated and misunderstood—as does the potential for business to play a transformative role in solving the continent’s biggest challenges.

Consider one question: How many companies in Africa earn annual revenues of $1 billion or more? Most global executives and academics we speak with guess there are fewer than a hundred. Many answer “zero.” The reality? More than 400 such companies exist—and they are, on average, both faster growing and more profitable than their global peers.

Africa’s fast-growing population and markets present important opportunities for business in an environment of slowing global growth. At the same time, greater innovation and investment from business is essential to meet Africa’s unfulfilled demand for goods and services, close the gaps in its infrastructure, create jobs, and decrease poverty. Here, we describe the extent of the African business opportunities in key sectors and suggest steps investors can take to translate that opportunity into profitable, sustainable enterprises.

Five bold business opportunities

Africa’s real GDP grew at an average annual rate of 5.4 percent in 2000–2010, driven in nearly equal measures by labor force growth and productivity growth. After a slowdown prompted by the shocks of the Arab Spring in 2011 and the collapse of oil prices in 2014, Africa’s growth has recovered and its future prospects look buoyant.

Two indicators from the World Bank underline the continent’s promise. First, of the 10 fastest-growing economies in the world in 2018, six were in Africa— with Ghana at the top of the world ranking. Secondly, in the World Bank’s 2019 Doing Business index, five of the 10 most improved countries are in Africa, and one-third of all reforms recorded globally were in sub-Saharan Africa.

The economic acceleration and improving business environment are underpinned by five long-term trends, each of which is unlocking transformative growth in key economic sectors.

Opportunity 1. A population that is fast growing and urbanizing

 Africa’s current population of around 1.2 billion people is projected to reach 1.7 billion by 2030. More than 80 percent of Africa’s population growth over the next few decades will occur in cities, making it the fastest-urbanizing region in the world.

At the same time, incomes are rising across much of the continent, generating new business opportunities in the consumer market. In total, we expect annual spending by African consumers and businesses to reach $6.66 trillion by 2030, up from $4 trillion in 2015. These trends are spurring growing markets in a range of sectors where Africans have unmet needs, including food, beverages, pharmaceuticals, financial services, healthcare, and education.

Opportunity 2. Africa is industrializing

An African industrial revolution is underway as manufacturers ramp up production of everything from processed food to automobiles. We calculate that African industries have the opportunity to double production to nearly $1 trillion within a decade (Figure 5.1).

Three-quarters of that growth is likely to come from manufacturing to substitute imports and meet burgeoning local demand. But there is also an important opportunity to grow manufacturing exports and make Africa the world’s next great manufacturing center as industries shift away from China to lower-cost regions.

The ongoing revolution among industries without smokestacks, such as tourism, agro-industry, and some information and communications technology based services, can serve as a development escalator as these industries share three key characteristics of traditional manufacturing—exportability, higher productivity, and high labor intensity.Africa has an opportunity to triple historical manufacturing output growth rates, and to double output, in 10 years

Opportunity 3. Africa is pushing to close its infrastructure gap

Poor infrastructure is one of the key impediments to investment and growth in Africa. For example, nearly 600 million Africans lack access to the electricity grid. But while Africa’s infrastructure still lags behind that of other developing regions, significant progress has been made: Africa’s annual investment in infrastructure has doubled to around $80 billion a year since the beginning of this century. That represents a big opportunity for investors and entrepreneurs with the imagination to help solve Africa’s infrastructure challenges.

Opportunity 4. Innovations to unleash agricultural and resource wealth

 

Africa has long been known for its resource abundance in both agriculture and mineral resources. To date, though, Africa has struggled to translate these resources into shared wealth and sustained economic development. New innovations and investments promise to change that picture and create exciting growth opportunities for business. For example, in oil and gas, Africa is rich in unexplored, high-potential regions, and the continent has huge unmet demand for energy. We estimate that the domestic gas market in Africa will grow by 9 percent a year to 2025, by which time the continent could use up to 70 percent of its own gas.



Source:bookings.edu

 

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