Africa’s economy predicted to grow by $1.1 trillion – around 50% – to $3.7 trillion by 2019
- Over half a billion Africans predicted to be middle class by 2030
- Over next five years 15 African countries likely to outpace Chinese growth
- Eight of Africa’s 12 fastest growing economies were not dependent on oil or mining in 2013
Now is the time for businesses to invest in Africa and those that wait too long risk missing out, according to a new report from Deloitte, the business advisory firm. Africa: A 21st Century View notes that Africa has many opportunities and is relatively untapped by both UK businesses and investors, particularly in the emerging consumer sector.
With high growth economies like China, India and Brazil showing signs of slowing, the report says businesses are increasingly looking to the fast growing markets of Africa to offset this reduction. Indeed, over the next five years 15 African countries, including Nigeria, Ethiopia, Uganda, Tanzania and Zambia, are likely to outpace Chinese growth.
Until now Africa’s economic story has been focused on natural resources and commodity exports. In 2013, eight of the continent’s 12 fastest growing economies were not dependent on oil or mining. In future, it will more likely be driven by consumers as rising incomes and urbanisation support growth in domestic demand. This transformation coincides with the growth of the African middle class: a more optimistic, connected and brand conscious population.
Ben Perkins, head of consumer business research at Deloitte, said: “Right now Africa is where South East Asia was 30 years ago – on the cusp of a consumer boom. The ONS tells us only around 3% of UK foreign investment has gone to Africa in recent years, so with its economy due to grow by around 50% to $3.7 trillion by 2019, the potential for UK businesses is huge.
“By 2030, over half a billion Africans are projected to be middle class. The population is also dominantly young, with 680 million, or 60% of the total African population, aged below 25. These younger Africans will play a critical role in the continent’s economic development not only because they will want increased connectivity and access to a wider choice of food, consumer goods and entertainment, but also as they bring a more innovative and entrepreneurial mindset.”
Africa’s population is becoming increasingly clustered in large urban centres, and urbanisation will be a key driver of economic activity. Many urban areas will cross national boundaries, linking major populations and creating sizable markets and trade opportunities.
Deloitte’s research shows that across the four fastest growing markets in Africa*, nearly a quarter of young consumers said buying well-known brands makes them feel good, while one in four say they can afford to buy the latest gadgets, which points to an awareness and appetite for branded goods and high end products. It is also predicted Africa will have 334 million smartphone subscriptions by 2017, presenting a huge opportunity for consumer businesses operating there.
Rodger George, Advisory Leader at Deloitte East Africa, said: “Despite the many infrastructural challenges that Africa faces, Africans have shown they are willing to innovate. For example, Africans have leapfrogged poor or no fixed line infrastructure and moved straight to mobile, which has seen the fastest growth in the world over the last five years. Kenya is already one of the world leaders in mobile money and the continent as a whole has a mobile subscription penetration of 72%, which is set to grow to 97% by 20171.”
Despite significant growth prospects, Africa remains complex and carries risk. There are 54 countries with different markets and challenges, and issues like poor governance, a lack of infrastructure, fragile security and unreliable logistics can make strategic planning difficult. West Africa has also been the subject of heightened concerns about the spread of Ebola. However, Africa is making progress, with widespread democracy and fewer conflicts suggesting the dominant trend is positive.
Perkins concluded: “Our research shows Africa is not suffering from a lack of demand, but a lack of supply. The UK is currently underweight in Africa and now is the time to seize the opportunity. But, there are no quick wins; to reap the benefits businesses must be prepared to engage with the various challenges on a long-term basis, while carefully weighing the risks and rewards.
“However, where there are challenges, there are also opportunities to innovate. Given the potential for growth the continent offers, the business opportunities in Africa could outweigh the risks as Africa heads towards fulfilling its economic potential.”