Africa: New Business Opportunities and Potential for Growth

Earlier this week, McKinsey & Company released a report tracking the many developments and improvements taking place in Africa’s growing economies. Different economic indices expressed in the report highlight the various changes taking place on the continent, placing special emphasis on the undeniable signs of progress displayed by the growing national economies, and expanding consumer class. The report sends a refreshing message to foreign investors and the international community, many of whom shape their views of “Africa” through the popular images of war, ethnic clashes, and political disarray that dominate the media.
To illustrate the extent to which many sectors are rapidly changing, the report compares Africa with many of the world’s emerging market nations, such as China and India, Brazil and Russia:

• Africa’s population of 1 billion has spent $860 billion in 2008, spending more than India’s population of 1.2 billion

• Combined GDP in Africa for 2008 is $1.6 trillion, roughly equal to Brazil or Russia

Other figures illustrate progress in recent years:

• Africa’s collective inflation rate fell from 22 percent in the 1990’s to 8 percent after 2000

• FDI has skyrocketed from $9 billion in 2000, to $62 billion in 2008

• From 2000 to 2008, African economies grew twice as fast as they did in the 1980 and 1990’s

Finally, the report also makes predictions for Africa’s future economic growth:

• By 2040, Africa will have 1.1 billion people of working age, more in China or India

• By 2030, the 18 cities are expected to have a combined spending power of $1.3 trillion

The demand for raw materials that has dominated Africa’s trade relations in the past, remain a key factor to long term growth. “The continent boasts an abundance of riches, 10 percent of the word’s oil, 40 percent of its gold, and 80 to 90 percent of the chromium and platinum metals groups.” Lack of diversity in African exports has often been an obstacle to economies. However, a study of 15 countries shows that natural resources only account for 24 percent of Africa’s GDP growth from 2000-2008, signs that other growing sectors have become increasingly present.

When reviewing the impressive figures, one must keep in mind the specific situations and markets present in Africa’s 50 diverse countries. Treating the continent’s mixed economies as one entity may increase the odds of producing skewed results, as South Africa’s G20 booming economy clearly has more of a pull than, Cameroon for example. Nonetheless, the overall improvements are undeniable, and the report accounts for both the good, and the bad in Africa’s diverse economic landscape. The developments remain both an economic and ideological triumph for the continent.