African Press International (API)

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Africa at large: Signs that lion will roar in 21st century

Posted by African Press International on August 25, 2008

Johannesburg (South Africa) – To the uninitiated, Africa is still a huge, dark land mass where angels fear to tread and missionaries disappear. But can we really continue to ignore what constitutes almost 25% of the worlds land mass and is home to 10% of its people?

Despite the many political, social, technological and economic challenges faced by Africa, the past five years have been a beacon of hope. Africa today offers unique and unprecedented business opportunities to global businesses in largely virgin terrain.

In many areas, including healthcare, infrastructure, education, poverty and violence, Africa has far to go. However, the continent is poised for a dramatic change in its economic prospects. Maybe the dawn has arrived, as we see African countries finally develop from debt-laden, aid-financed, market-unresponsive commodity exporters to market-driven, prosperous, dynamic and diversified economies.

According to the International Monetary Fund (IMF), African growth has been outpacing world growth since the beginning of the commodity bull market in late 2001. Since that year, annual economic growth in Africa has averaged 5%, while overall world growth rose only 4,2% a trend that is expected to continue. The IMF forecasts that this relative outperformance will continue, with average African economic growth at 5,6% up to 2012, while the rest of the worlds growth is expected to advance only 4,8% on average.

Africa offers a world of opportunity. Interestingly, in a Merrill Lynch-Capgemini World Wealth Report for last year, Africa posted the fastest gains in the number of high net-worth individuals, with an increase of 12,5% in 2006. Looking forward, the report estimates that the number of high net-worth individuals in Africa will rise 6,1% through to 2011 and surpass the $1,2-trillion level.

Rising per capita incomes will precipitate the development of a consumer class, creating huge demands for banking, mortgage, insurance and asset management services in the years to come. African economies are showing strong fiscal positions and proving to be an attractive destination for global capital flows. This bodes well for infrastructure development with its allied effect on the greater economy through job creation , taxes and financial services.

Tangible evidence of this is the exponential growth of the telecommunications industry. The internet revolution seems also to be within striking distance. This is likely to be a cornerstone for future African businesses, distribution models and penetration, and thereby act as key ingredients for enhanced productivity and entrepreneurial success.

There is already growing evidence of this IT revolution in countries such as Egypt, Tunisia, and Morocco. Experience in southeast Asia and India has shown that a young and hungry population combined with the power of IT and technology can be a compelling proposition, which can bring enterprise, productivity and diversification.

One of the key sources of wealth in Africa is oil, as the continent possesses 8% of the worlds proven oil reserves. Libya, Algeria and Egypt together possess 51% of Africas proven oil reserves, making northern Africa very wealthy. However, only four of the 10 highest per capita gross domestic product countries on the continent are oil exporters.

Large parts of Africa stand to benefit from much better utilisation of the significant untapped oil resources and the multiplier effect on those oil-exporting economies. Reserves in the west African countries alone have been estimated at about 110-billion barrels, which, if proven, would be on a par with Iraq and more than Kuwait.

Africa is also one of the largest continents in the world, with an estimated 24,3-million square kilometres, almost one-quarter of the worlds land, yet with only 12% of the worlds arable land. As the world continues to struggle with constraints on food production and a lack of arable land, Africa with its abundant land could become a major food exporter. Signs of this opportunity being harvested for many African nations to produce and export food are already evident.

Natural resources such as gold, silver, platinum and various other commodities have filled government coffers. Diamonds, for example, are a major source of revenue with African nations producing about $8,4bn a year in revenues from diamond mining alone. In addition, Africa offers unique natural wonders and, as the perception of and access to Africa improves, the travel and tourism industry will make rapid strides in its net contribution to the local economies. An emerging consumer class will also spend some of its disposable income on travel within and outside the continent, thus boosting aviation-based industries and airlines.

If it was the Asian tiger in the 1980s and 1990s, it is definitely the African lion that is ready to roar in this new century. Despite the challenges, there are many factors that indicate that Africa is awakening. When it does, make sure youre ready.

* Sanjeev Gupta is CEO of Sanlam Investment Management Emerging Markets.


API/Source.Business Day (South Africa), by Sanjeev Gupta

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