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AFRICA ECONOMY IN BRIEF

As the world’s second-largest continent with 30 million km2 of land, Africa is fast emerging as a significant business destination as well. With a population of 1.333 billion people and a GDP of US$2.58 trillion (US$1,970 per capita GDP) in 2020, Africa has become the world’s 6th fastest-growing continent with average GDP growth in 2020 of 3.7%.

The World Bank’s 2019 online Africa Overview noted that four of the fastest-growing economies in Africa are in the top 10 fastest growing in the world. The fastest-growing African nations include (GDP growth in brackets): Cote d’Ivoire (7.0%); Ethiopia (8.2%); Ghana (7.3%); Rwanda (7.8%); Tanzania (6.3%). Beyond the top 10 fastest growing economies in the world, Senegal (6.3%) features within the top 20 fastest-growing nations.

ABUNDANT NATURAL RESOURCES

Endowed with tremendous natural resources, Africa has a large youthful population and an open business climate in addition to its vast mineral resources. Gold is the continent’s leading mining resource. However, Africa also ranks 1st or 2nd in global reserves in zinc, steel, graphite, platinum-group metals, vermiculite, and zirconium. Africa also has more than a quarter of the world’s remaining arable land.

As 40% of the continent’s export earnings come from natural resource exports, Africa has benefitted from a period of unprecedented global demand, particularly from the Asian countries of India and China. 30% of the world’s mineral resources come from the African continent.

% Share of World Mineral Reserves

RAPID POPULATION, URBAN AND CONSUMER GROWTH

Over the next 30 years, the African region’s population is expected to more than double to 2.4 billion inhabitants. Thus, in 2050, when the world’s population will have grown from 7.1 billion to 9.7 billion, Africa’s population will be nearly as large as that of India (which with a population of 1.6 billion will be the largest country in the world) and China(with a projected population of 1.3 billion).

The continent’s economic growth has also been fueled by internal consumer growth from its fast urbanizing and expanding middle class. By 2030, when the Continental Free Trade Area is fully implemented, as many as 1.7 billion Africans will be integrated into the consumer goods market. As a result, in addition to natural resources, banking, telecommunications, and infrastructure expenditures have emerged as key drivers of the African aggregate economy. The growth rate of these sectors is rising significantly faster in Africa than in the world as a whole.

The trend is toward urbanization and the growing continental population. Currently, Africa has 44 cities that have a population of more than a million inhabitants.

Indeed, U.N. projections forecast that by 2030, there will be 759.4 million African urban dwellers – more than today’s total number of city dwellers in the entire Western hemisphere. By 2050, there will be more than 1.2 billion African city dwellers, or more people living in African cities than the combined urban and rural populations of the Western hemisphere.

Lastly, as a result of improved healthcare availability, declining mortality rates, and continued high birth rates, Africa’s population is growing. Furthermore, while civil unrest and terrorist attacks in the Sahel and Horn of Africa regions still often capture global media headlines, over the past decade, Africa has also enjoyed a period of unprecedented relative peace and stability. With increasingly stable and democratic political environments, Africa is also growing free and functioning economic markets. Furthermore, notwithstanding the scourge of the Ebola virus, overall healthcare in Africa and indicators relating to perennial challenges on the continent associated with HIV/AIDs, malaria, and tuberculosis, as well as infant mortality, have all been improving.

Africa 1+ Million Population Resources

IMPROVEMENT IN THE EASE OF DOING BUSINESS AND A YOUNG LABOUR FORCE

The ease with which one can conduct business on the continent has had a significant impact on the number of companies launched in recent years. It is not by coincidence that the three countries with the most newly registered businesses on the continent. Nigeria, South Africa and Kenya are also three of the leading regional economic centers in West Africa (first with 70,000 business launched annually); Southern Africa (second with 70,000 business launched annually); and East Africa (third with 22,000 business launched annually).

In addition to the growing entrepreneurship and new business formation in Africa, demographically, the continent has one of the most youthful populations and a growing labor pool that has encouraged both new business start-ups and expanded investment. Young people in Africa aged 15 to 25 represent more than 60 percent of the continent’s total population and 45% of its overall labor force. By 2040, it is estimated that the continent’s labor force will be 1 billion strong by 2040.
It is also important to note that Africa’s economic growth has accelerated because of improving overall governance. Over the past decade, an increasing number of policy and regulatory reforms have made it easier to do business.

World Bank/ IFC Doing Business 2019 Top 15 in Sub-Saharan Africa

Doing Business Rankings – North Africa

THE BEST OPPORTUNITIES ARE ONES YOU INVEST IN

GROWING FOREIGN DIRECT INVESTMENT

The developments in Africa over the past decade have led to unprecedented foreign direct investment and encouraged unique intra-regional investment as well. In this regard, the United States, UK, France, China, and South Africa have emerged as the leading foreign investors in Africa among the top 15 investors overall. It is noteworthy that South Africa (number five leading investors overall), Kenya (number 11 overall), and Nigeria (number 14 overall) have also become prominent investors on the continent.

Leading Sources of FDI in Africa 2014 – 2018

Figure 1 above shows the leading countries in terms of intra-regional investment. South Africa and Morocco were in the top countries that invested in Africa by project numbers in 2016. It is hoped that the signing of the African Continental Free Trade Agreement (AfCFTA) will increase intra-regional trade from the current 18% to 60%

Leading Intra-Regional Investors in Africa
(Share of FDI projects from Africa as source region)

DIVERSIFIED INVESTMENT DESTINATIONS BY SECTOR, REGION AND NATION

Not with standing the continents mineral wealth, FDI has been flowing into other important sectors such as agriculture, infrastructure, financial services, ICT and consumer products.

Investment Opportunities in Africa-Beyond Resources
Beyond natural resources: Opportunities in consumer-facing Sectors. Which three sectors offer the highest growth potential for Africa in the next two years?

The leading regional recipients of investment and the Top 15 African states where investment was made include the following:

Leading FDI Recipients in Africa 2014-2018

Top 15 States / Provinces for FDI Projects 2018

Different countries also have received
their FDI around varied sectors.

Leading Sectors for FDI in Africa 2014-2018
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RAPIDLY GROWING FINANCIAL MARKETS AND FINANCIAL SERVICES SECTOR

In recent years, two other critical factors have propelled the growth of Africa’s sectors. Both the growth in FDI and intra-regional investment led to the growth of the African financial services industry and the rapid increase in African remittances from the continent’s diaspora and migrant labour force. The financial services sector has grown to become a US$107 billion sector industry. Although the leading recipient of remittances was Nigeria, accounting for $22.3 billion in remittances in 2014, remittances comprise a large share of the GDP of a number of countries.

In the financial services sector, both the banking sector and the capital markets have grown, with regional banks emerging from West Africa and Southern Africa in particular (i.e. South Africa’s Standard Bank, which operates in 18 countries in Africa and Togo’s Ecobank, which has businesses in 32 countries; and Nigeria’s United Bank for Africa (UBA), which is in 19 countries). While a number of the institutions are thinly traded with a small number of listed companies, Africa’s stock exchanges number has swelled to 28, of which 23 belong to the Africa Stock Exchange Association (ASEA) (*indicates ASEA membership).
Activity within Africa’s stock markets are concentrated, however, sixty- eight of sub-Saharan Africa’s 100 largest companies, in terms of market capitalization, are listed on the Johannesburg Stock Exchange, including the five largest companies in Africa.
In addition to the Egypt Stock Exchange, which is the continent’s oldest, portfolio investment activity is focused on the most active and liquid stock markets – South Africa, Nigeria, Kenya, Mauritius and Zimbabwe. Nigeria is the continent’s second-largest stock exchange and in 2012 accounted for 7.7% of total market capitalization in sub-Saharan Africa. Other stock exchanges on the rise include the Nairobi Stock Exchange, which grew from a market capitalization of $14.7 billion in 2012 to $22.33 billion in 2013. From a sector perspective, mining and metal companies account for 23% of the market capitalization of the 100 largest companies listed in sub-Saharan Africa.

Remittance share of the GDP for a number of countries:

Lesotho

Gambia

Liberia

Senegal

Cape Verde

African Stock Exchanges

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IMPROVING INTRA-REGIONAL TRADE

Between 2010 and 2016, the level of trade within Africa’s Regional Economic Communities (REC) (see below) more than doubled. The Southern African Development Community (SADC – 15 member states) had the most substantial trade with the rest of Africa, averaging $53.8 billion during the period from 2007 to 2011. The Community of Sahel-Saharan States or CEN-SAD, which is the continent’s largest REC with 28 member states, was the second leading intra-regional trader with $46.1 billion in trade. Beyond SADC and CEN-SAD, Common Market for Easter and Southern Africa (COMESA – 19 member states) was third with $29.7 billion, Economic Community of West African States (ECOWAS – 15 member states) fourth with $26.5 billion, Economic Community of Central African States (ECCAS – 10 member states) was fifth with $12.8 billion, Arab Maghreb Union (AMU – 5 member states) was sixth with $12.4 billion, the East Africa Community (EAC – 5 member states) was seventh with $8.4 billion and Intergovernmental Authority on Development (IGAD – 7 member states) was eight with $8.0 billion in intra-regional trade.

From a regional purchasing power standpoint, in Southern Africa, 26 countries counted South Africa among their five main export destinations; in West Africa thirteen countries counted Nigeria among their five main export destinations; among the North Africa countries, thirteen countries counted Egypt among their five main export destinations, and six countries counted Algeria among their main export destinations. The fact that four countries, Algeria, Egypt, Nigeria, and South Africa, account for 67% of Africa’s total GDP helps explain the prominence that these countries have as key export outlets/ purchasing markets on the continent. While Cote d’Ivoire was also an important market among Francophone states on the continent, those four countries purchased 63.8% of the continent’s intra-regional exports.

An increase of intra-regional trade in Africa has also been a catalyst for continental growth, expanding from $45.9 billion in 1995 to $200.1 billion in 2019. The expansion of intra-regional value chains has created more dynamic regional markets across the continent.

Intra-African Trade 2010-2016: Distribution of Shares (% Africa Trade out of Total Trade and % Inter-REC trade out of African Trade

Africa’s Regional Economic Communities
Click for full table

Intra-regional African Trade 1990-2014

Over the period from 2015 to 2017, the top performers in terms of most exports to Africa as a share of their world exports were:

Eswatini

Namibia

Zimbabwe

Uganda

Togo

The top five importers from Africa in terms of African imports as a share of their worldwide imports were:

Botswana

Eswatini

Zimbabwe

INCREASING NUMBER OF MIDDLE-INCOME STATES

All of these factors are projected to have a continued positive impact on the growth of the African economy and continue to improve the continent’s appeal as a global and continental business destination. Before the pandemic, data suggested that the continent was expected to average 3-5% a year in GDP growth. More than a third of the countries in Africa are expected to have GDP growth higher than 6%, and 40% are expected to have GDP growth between 4 and 6%. By 2025, the continent is projected to be a “middle income” continent, with an average GDP per capita of over $1000.

Africa’s Progress Towards Middle Income Status

AFRICAN STOCK EXCHANGES

There are 30 stock exchanges in Africa, representing 39 country’s capital markets. The Egyptian Exchange (EGX), founded in 1883, is the oldest stock exchange in Africa. The second and third oldest exchanges are the Johannesburg Stock Exchange Limited, established in 1887, and the Casablanca Stock Exchange of Morocco, founded in 1929.
Africa also has two regional stock exchanges: the Bourse Régionale des Valeurs Mobilières, or BRVM, in French speaking West Africa, located in Abidjan, Cote d’Ivoire and serving the countries of Benin, Burkina Faso, Guinea Bissau, Côte d’Ivoire, Mali, Niger, Senegal and Togo; and the Bourse Régionale des Valeurs Mobilières d’Afrique Centrale, or BVMAC, in French speaking Central Africa, located in Libreville, Gabon, and serving the countries of: the Central African Republic, Chad, Democratic Republic of Congo, Equatorial Guinea and Gabon.
22 of the 30 stock exchanges in Africa are members of the African Securities Exchanges Association (ASEA). The ASEA was incorporated in 1993 in the Republic of Kenya. ASEA’s aim is to provide a formal framework for the mutual co-operation of stock exchanges in the African region. Its functions include the exchange of information and assistance in the development of member exchanges. ASEA members are indicated below by an asterisk (*).
The leading stock exchanges on the continent in terms of listings and market capitalization are: the Johannesburg Stock Exchange, the Egyptian Stock Exchange, the Nigerian Stock Exchange, the Mauritius Stock Exchange, the Casablanca Stock Exchange, and the Nairobi Securities Exchange.