Africa: A bright spot for economic growth and opportunity

“The centre of gravity is shifting towards the developing world. The brightest spot on the economic map is Africa, and particularly Sub-Saharan Africa,” says Herman Warren, network director of the Economist Corporate Network Africa.

The 2015 African Business Outlook Survey, of over 200 executives, conducted by The Economist Corporate Network (ECN) shows that of the 20 fastest growing economies, nine of them are from Africa. The high growth in these markets is attracting foreign investment. In 2013 Foreign Direct Investment (FDI) flows rose to 4% or US$57bn, according to the ECN report.


The survey collected insight of country and regional business performance, explains Warren. The “critical mass” of respondents came from South Africa, Kenya, Nigeria and Angola. These markets make up the bulk of the Sub-Saharan Africa GDP, according to Warren.


By 2020, Nigeria will rise to economic prominence, and South Africa will decline even more, followed closely by Kenya which is growing at a faster rate than South Africa, says Warren. However, he says South Africa remains an important market.

Currently Sub-Saharan Africa generates 1.4% of global GDP, by 2019 this level will be at 4.5%, indicating rapid growth says Warren. This level is greater than the 4.3% average of Asia’s region.


In 2014, about 60% of respondents reported that more than 40% of revenue came from Africa. By 2020 most firms expect an increase in Africa’s source revenue. Currently, 18% of the respondents believe that Africa will source less than 5% of global revenue. By 2020 only 4% of respondents expect this to be true, indicating more optimism among multi-national companies becoming more prevalent in the region, according to the report.



From a market growth perspective, JJ van Dongen, CEO of Philips Africa says Africa’s GDP growth accelerates faster. Businesses should lay a foundation for growth in local markets. He suggests businesses and governments work together and discuss ways to harness opportunities. Philips has identified business opportunities in health and lifestyle for example. Ross McLean, President of Dow Sub-Saharan Africa says the science and technology company is focussed on bringing solutions and knowledge to African markets.

Robust growth in sales is expected from East, West and Southern African regions, says Warren. There is more optimism for investment in these regions than in North and Central Africa.

Investments in North and Central Africa will either stay the same or be reduced. About 55% of executives plan to increase investment in Southern Africa.

Garth Klintworth, head of trading at Absa Capital says infrastructure development in the East, West and Southern African regions are in the pipeline, although businesses are “bullish” about the continent as a whole. He says Kenya is one of the main economic drivers and a gateway for growth.

Operational challenges in the regions include corruption, bureaucracy, infrastructure deficits, the regulatory and legal environment, skills and the personal safety of local employees. The top rated challenge in East, West and Central Africa was corruption. In Southern Africa, five respondents ranked bureaucracy and skills shortages as the top challenge. Van Dongen adds that the regulatory and bureaucracy is not supportive of business and “hampers” the expansion of business opportunities.

Some of the risks executives identified for doing business in the continent include safety concerns. This is linked to crime in South Africa, the Boko Haram attacks in Nigeria and violent and geopolitical conflicts in Kenya, according to the report. However, McLean says there is great interest in Nigeria, despite the challenges the country faces. “The growth potential is great in Nigeria,” he says.

AFRICAN WEALTH: Herman Warren, Economist Network Director Africa. Photo: Provided

AFRICAN WEALTH: Herman Warren, Economist Network Director Africa. Photo: Provided

Poor infrastructure is another risk. According to the World Bank, Africa’s infrastructure deficits require US$93bn annually, this poses a drag on economic growth. Also, executives are challenged in finding suitable talent and keeping skilled employees.

Profitability in the region is broadly impacted by economic growth, says Warren. Other factors include technology adoption, the emerging middle class of consumers and FDI, according to the report. On the flipside, Warren says profitability is negatively impacted by political unrest, corruption, crime and labour costs. About 71% of executives indicated that corruption was their biggest concern.

McLean says standardised programmes need to be rolled out for businesses to comply with and due diligence processes must be conducted for anti-corruption. He adds that code of conducts should be placed and adhered to.

Local markets are growing in importance. Van Dongen suggests local teams be set up to research markets and develop relevant business models and innovations to meet needs. “We need key solutions that are African and scale it globally,” he says. McLean agrees in saying that businesses should take local solutions globally. It is important to raise local entrepreneurship to meet local needs of the African consumer. He adds that businesses need to bring in technology innovations relevant to fulfil market needs.

We live in a world of extremes.

So far, businesses have been running profitable operations that contribute to the growth and development of economies and societies. Warren says that businesses should take a long-term view on African opportunities and suggests agility and a localisation strategy are key for businesses to compete in markets. Despite the risks of the West, South and East Africa are regions, businesses displayed optimism at the economic prospects the continent holds.

Global outlook: A world of extremes

We live in a world of extremes. The 2015 global outlook survey of over 200 countries around the world indicates a projected global GDP growth of 3.6%. However, within the growth there is a lot of variation and risk, says Elizabeth Bramson-Boudreau, global director of ECN.

TRENDING: Elizabeth Bramson-Boudreau, global director of ECN. Photo: Provided

TRENDING: Elizabeth Bramson-Boudreau, global director of ECN. Photo: Provided

“We’re in the midst of a great separation of global economies. There are political uncertainties,” says Bramson-Boudreau. In a breakdown of the economic forecasts for 2015 in different parts of the world, she explains that despite the extremities, this is a world of “revolutions”.

Oil Price

Bramson-Boudreau says the oil surplus will remain. However, demand for oil is challenged. European economies are in a decline, resulting in a lower demand for oil. The rise in demand for oil, from emerging markets like India (for its agriculture sector) and Africa (driven by urbanisation and the automotive boom) will not be enough to offset the drop in demand from the developed world, she says.

The US may demand increased levels of oil, however its shale industry can meet some of its needs. The oil price is expected to settle at US$58 per barrel for 2015 but will rise to US$80-90 per barrel in the next five years. Top 10 net oil export countries will lose US$500bn in export earnings. “This is not ideal for the producing countries,” says Bramson-Boudreau.

BRIC Countries

The BRIC countries are encountering a “brick-wall” effect, says Bramson-Boudreau. This is because developing countries are growing at rates of rich countries instead of rates of developing countries. An economic reform needs to take place to combat the brick-wall effect.

According to Bramson-Boudreau, Brazil’s economy is in shambles and will shrink by 1% due to high inflation, rising interest rates, a weak currency and corruption scandals. Contrarily, India is on the rise with a GDP growth to 7% from 6.6%, this is brought on by the lower energy crisis. However reforms still need to be implemented in the country.

China is shifting towards a “new normal” and the economy is expected to grow by 7%. This is a lower level than was observed in the past three years, says Bramson-Boudreau. Since 2007, economic growth has risen by 78%. “This is the biggest increase of an economy of any note,” she says. Growth for 2019 is predicted to be at 5.6% as China is implementing structural changes, moving from an exports-led economy to serving the rising consumer demand of its own middle class. Further, Chinese investment in Africa will rise beyond extractive sectors to others like services and tourism.

Russia has been on a decline since before the sanctions, says Bramson-Boudreau. Household demand continues to be low. There is no innovation nor are there small business enterprises. “It’s a very much oil-based economy,” she says. With the falling oil price, government can’t do anything to stabilize the fall.


Europe is characterised by delayed, slow growth and political uncertainty. Its recovery since the 2008 economic crisis is stalling, says Bramson-Boudreau. There has been a failure in policy and the “bail-out” approach or Quantitative Easing introduced may have kept exports competitive, but there is still high debt and high unemployment.

The Greek exit from the European Union is unlikely, at a chance of 40%. The economy has shrunk by 30% since 2008, which is a strange observation in a “peace-time” situation says Bramson-Boudreau.

The UK’s economy will grow by 2.7%, says Bramson-Boudreau. Unemployment is at a 6-year low and the housing market is “healthy”, she says. There is a wealth effect in the country, however policies are unpredictable. This was seen in September 2014 when the Scottish independence vote appeared to be successful, she explains. There are more political voices than there were in the past, with increasing political factions in addition to the liberals and democrats.

The United States

The US is still recovering from its fiscal problems, but fundamentally it is a strong economy, says Bramson-Boudreau. Consumer confidence is at an 8-year high and the economic growth is “buoyant”. However, China has overtaken the US as the global driver of world economies.


The situation in the Gulf is “pretty dire” as Bramson-Boudreau describes it. The Middle East is risky for investment given the advancement of the Islamic State and the “spill-out effects”. The problem is that movements and activities in the Middle-East often have a global impact.

This article was featured in Finweek magazine.


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