Market Intelligence

The “Africa Rising” narrative that dominated the start of this decade, with accelerating growth in almost all economies of the region, has over the past few years been replaced by caution and disengagement by investors in many parts of the continent. This followed a downturn in global commodity prices and concern over the scale with which a number of African countries were tapping international capital markets.

The continent’s fundamentals remain strong. Real GDP continues to grow across the African continent. Africa’s population is growing and is young. Africa’s percentage growth rate of urbanisation is currently faster than on any other continent. Average household consumption in Africa is expected to grow by just under 4% a year until 2025.

The development of Africa’s manufacturing industries and infrastructure is critical to Africa’s growth prospects. The African Development Bank reported that an investment of approximately $90 billion is needed every year for at least the next 10 years to meet the continent’s growing infrastructure demands.

The gap in perceptions that exist foreign investors, companies and operators that have already established a footprint on the continent and those that are yet to is often stark. For some external spectators with no direct connection to the continent it can appear an unlikely destination for their next investment. For others who have already committed and can see and feel the opportunities on the ground, the potential is very real.

While it is often not productive to generalise about the continent as a whole, it is true that the economies of many Africa countries can often test an investor’s patience. Investment periods associated with private equity and other similar business models that fit other markets often do not translate to Africa well.

When investing it is critical to remember that the continent consists of many different economies, with different drivers and different prospects. Designing strategies that work for specific regions, markets, cities and even towns or communities is necessary to navigate the complexities and abundance of cultures present across Africa.