Unleashing investment opportunities in Africa

Africa’s household consumption has continued to grow at a robust pace. Sixty percent of consumption growth has come from an expanding population, and the rest from incomes rising enough to fuel spending on discretionary goods and services as well as basic necessities — all powered by rapid urbanisation.

By Kudzai Goremusandu

According to McKinsey Global Institute 2016 report despite the various challenges, Africa’s domestic consumption and corporate spending are both growing strongly, offering companies a $5,6 trillion opportunity by 2025.

Africa’s manufacturing sector today underperforms those of other emerging economies. However, output could expand to nearly $1 trillion in 2025 if Africa’s manufacturers were to produce more to meet domestic demand from consumers and businesses, and work with governments to address factors hindering their ability to produce and export goods.

To realise this potential will require Africa’s companies to step up their performance. Africa is home to 700 companies with revenue of more than $500 million per year, including 400 with revenue above $1 billion. However, the region has a relatively small number of large companies. It needs more.

Africa achieved impressive economic growth over the past 15 years with the average gross real domestic product (GDP) rising from just above 2% during the 1980-90s to above 5% in 2001-14.

In the past two years, growth has been more moderate; this trend is expected to continue in 2016, but strengthen in 2017.

Africa’s growth is adversely affected by headwinds from weaknesses in the global economy and price falls of key commodities, but is supported by domestic demand, improved supply conditions, prudent macroeconomic management and favourable external financial flows.

The Africa economic report 2016, forecast assumes a gradual strengthening of the world economy and the slow recovery of commodity prices.

However, given the fragile state of economic recovery and the high volatility of commodity prices this forecast is uncertain. Growth remained highest in East Africa, followed by West Africa and Central Africa, and is lowest in Southern Africa and North Africa.

Rapid urbanisation in Africa creates an opportunity for business. Africa is the world’s fastest urbanising region. Over the next decade, an additional 187 million Africans will live in cities — equivalent to 10 cities the size of Cairo, Africa’s largest metropolitan area.

Between 2015 and 2045, an average…

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