Investment climate in Africa
Background information
Africa is the second largest continent in the world after Asia with an area of about 30.3 million square kilometers or 11.7 square miles covering 20.4% of the surface area of the earth. Africa is surrounded by water in all directions. It is bordered in the north by the Mediterranean Sea, the Suez Canal and the Red Sea in the northeast, the Indian Ocean in the southeast, and the Atlantic Ocean in the west. Africa has about 9 per cent, or 4 050 km3/yr of the earth fresh water resources. The average water availability per person in Africa is 5 720 m3/capita/year compared to a global average of 7 600 m3/capita/year.
Vision for development of Africa
The Agenda 2063 is a strategic framework by Africa Union for the socioeconomic transformation of the continent over the next 50 years. It builds on, and seeks to accelerate the implementation of past and existing continental initiatives for growth and sustainable development. The guiding vision for Agenda 2063 states “An integrated, prosperous and peaceful Africa, driven by its own citizens and representing a dynamic force in international arena”. The Africa’s agenda of economic transformation opens new business opportunities for investors. The transformative objectives at the heart of the African Union’s vision that include accelerating value creation, promoting diversification, improving public services calls for partnership between private and public for the development of Africa. Africa climatic zones include Savannah, rain forests, dry lands or semi-arid, deserts and snow capped mountains despite standing across the Equator.
Population of Africa
The population of Africa has grown from 944 million people in 2007 to 1.203 billion in 2016 half of whom are under the age of 20. Africa population has increased by 2.42% per year for the past 30 years. And while the rest of the world is aging, Africa is young. According to Deloitte, some 200 million Africans, about 20% of the population, are between the ages of 15 and 24, a figure expected to rise to 321 million by 2030. The youth population is also urbanizing at an increasingly rate. By 2050, the African population is forecast to reach 2.4 billion and is expected to grow to 4.2 billion in the next 100 years.
The global workforce may be shrinking, but in a few years Africa’s workforce will number some 1.1 billion, surpassing that of China and India. Africa’s young demographics point to economic strength, in that a working-age population is associated with favorable rates of GDP growth. The young population also consumes the latest products, services and technology. The percentage age distribution is as follows;
| Age structure 2016 | |||
| <15 years | 15-64 years | +65 years | |
| Northern Africa | 32 | 63 | 5 |
| Western Africa | 44 | 53 | 3 |
| Eastern Africa | 43 | 54 | 3 |
| Central Africa | 45 | 52 | 3 |
| Southern Africa | 31 | 64 | 5 |
Source: Population Reference Bureau reports
Overall, about 40% of Africa’s population is under 15 years but the youth dependency rate is expected to fall and the working-age share of the population to rise, indicative of an increase in the work force and improved income per capita. The current young segment of the population creates business opportunities for investment in education, health and industries that create job opportunities.
Africa unexploited resources
The continent is extraordinarily rich in minerals, energy resources and uncultivated arable land. Although less than half of its land has been surveyed, Africa is thought to hold more than half of the world’s gold, more than 40% of its platinum and vast deposits of copper, diamonds and iron ore. Large new oil and natural gas fields are being discovered on a regular basis in numerous locations, including offshore West Africa, offshore south-east Africa and along East Africa’s Rift Valley. According to the United Nations, Africa also holds more than 60% of the world’s uncultivated arable land, yet only 10% is currently planted. Africa has about 9% of the world’s fresh water resources and 11% of the world’s population.
African Tourism
Africa is blessed with a rich diversity of wildlife and landscapes is the world’s second largest continent. Africa is home to many of the world’s best loved and most fascinating animals including the big 4, as well as to some of its most endangered. The continent creates huge investment opportunities in the area of tourism.
Governance in Africa
The Ibrahim Index of African Governance (IIAG) 2016 found that over the last 10 years Africa has experienced a very slight overall improvement in governance. Notable improvements were in the areas of human rights, human development and sustainable economic opportunity. The most recent data available on governance in Africa shows growing demands for better economic opportunities and more accountability with respect to public policies. Priorities for businesses include better access to electricity, financing and competition policies. Priority demands expressed by citizens across Africa relate to jobs, while expectations for better public governance are growing.
Economic performance
According to Africa Economic Outlook 2017, The African Economic Outlook (AEO) 2017 shows that the continent’s performance was uneven in 2016 in regard to economic, social and governance indicators, but prospects are favourable for 2017 and 2018. The region’s real GDP growth slowed down to 2.2% in 2016 down from 3.4% in 2015, mainly due to the continued fall in commodity prices and weak global economic growth.
East Africa was the fastest growing region at 5.3% real GDP growth, followed by North Africa at 3%. Growth in other regions was as low as 0.4% in West Africa and 1.1% in Southern Africa. The biggest economies in Africa of South Africa and Nigeria grew by 0.3% and 0.7% respectively.
Africa’s Economic Growth, 2013-18
Africa’s growth outlook remains positive for 2017-18, boosted by expected increases in commodity prices and domestic demand.
Why invest in Africa?
- The youthful African population provides a huge market for investors in all sectors;
- Africa provides a competitive environment in all key sectors of the economy;
- Africa has a lot of unexploited natural resources;
- African leaders through African Union are working towards removing all trade barriers;
- The mobile technology has opened Africa and has made it easier to do business.