Africa’s growth story ‘only just starting’


10 May 2012

Africa’s growth trajectory remains positive despite the current global economic turmoil, with sub-Saharan Africa set to grow at more than 5% over the coming decade, Brand South Africa said as international business and political leaders gathered in Addis Ababa, Ethiopia for the World Economic Forum on Africa.

“Africa offers the highest returns on investment of any region and is home to seven of the 10 fastest-growing economies in the world,” Brand South Africa said in a statement on Thursday.

The Economist projects that WEF Africa host Ethiopia’s economy will grow at 8.1% between 2011 and 2015, making it the third-fastest growing economy in the world.

Over the last decade, the continent’s economic output has tripled, while sub-Saharan Africa’s grow over the coming decade, at a projected average 5%, would make the continent second only to emerging Asia as the fastest-growing region in the world.

Yet, according to Brand South Africa CEO Miller Matola, Africans “have not defined their economies and growth prospects to the world, but have allowed international bankers, political analysts and credit ratings agencies to take the initiative and write up – or sometimes belittle – the African growth story”.

Africans ‘more confident in their continent’

Speaking in Addis Ababa on Thursday, Matola said Africans were now demonstrating greater confidence in their continent.

“According to recent Ernst & Young research, three of the top five fastest-growing investors into new projects in Africa between 2003-2011 were the African economic powerhouses – South Africa, Nigeria and Kenya,” Matola said.

South African investment into Africa grew at a rate of 64.8% in this period.

Regarding the various factors behind Africa’s phenomenal growth since the turn of the century, Matola said these included greater democratisation and stability, economic reform, urbanisation, improved uptake of ICT and financial services, a younger, growing and more affluent population, and the ongoing resources boom.

According to Matola, the world is slowly waking up to the massive projects under way to build new roads, rail, ports and other infrastructure to link previously isolated countries and regions – to be accompanied by the expansion of free trade areas which will eventually encompass the whole continent.

South Africa ‘pushing African investment, integration’

To encourage further continental growth, South Africa is orientating its government policies, regulations and institutions to support African investment and integration.

“Over the last decade South Africa has been the leading foreign direct investor in Africa, though it is now being joined by China and other developing nations,” Matola said. “Now our state institutions have been authorised to invest – particularly in infrastructure and industrialisation.”

The Industrial Development Corporation (IDC), South Africa’s state-owned development finance institution, has expanded its remit to include African investment and has established relationships with development finance institutions and regional forums in 34 African countries.

The IDC will consider new or existing companies within Africa with funding needs of up to R1-billion (US$125-million).

South Africa’s Public Investment Corporation (PIC) – which mainly manages government workers’ pensions and has over R1-trillion ($125-billion) in funds – has set 10% of its funds aside for international investment, half of which will be in Africa.

Of this, 40%-60% (up to $3.8-billion) will be earmarked for private equity.

Most pessimistic ‘the ones not doing business here’

According to the recently released Ernst & Young 2012 Africa Attractiveness Survey, foreign direct investment projects in Africa grew 27% between 2010 and 2011.

“Unsurprisingly, the report found that people already doing business in Africa were extremely positive,” Matola said.

“There are lingering negative perceptions – but only among those who are not yet doing business in Africa. Executives who don’t do business here, those who have the least exposure – and one presumes the least knowledge – are the most negative about Africa.”

To participate in the African growth story, Matola said South Africa was investing heavily to improve its competitiveness and reduce unemployment.

“Over the next few years we are spending hundreds of billions of dollars on regional and South African infrastructure. This will enhance our advanced network of roads, ports, rail and communication networks which offer a trade link for the landlocked countries in southern Africa to the world, making South Africa a regional transhipment hub for sub-Saharan Africa.”

Integrated Africa ‘on the way’

According to Matola, no country in Africa can reach its full potential by working in isolation.

“As South Africa, we will leverage our membership of BRICS [the Brazil, Russia, India, China and South Africa grouping] to increase trade and investment into Africa and support the African agenda.

“African countries should also promote their regional as well as their national advantages,” Matola said. “Investors are very excited about the pending 26-nation free trade area covering Southern, Central and East Africa.

“By June 2014, nearly 60% of the economy of Africa, with a combined GDP of $1-trillion and encompassing 600-million people, will be a single free trade area.

“Already we are creating the urban development corridors, the networks of interlocking regional infrastructure, and the reducing the non-tariff barriers which will unlock these huge markets.”

South Africa, with its sophisticated and well-regulated banks, capital markets and services sectors, is being used as a deal-making, financial and professional services hub for the entire region to provide access to capital for African businesses and support inward investment and trade.

Matola said there was an uplifting optimism in the air of Ethiopia’s capital.

“There is a strong feeling that the continental progress in good governance and the more than decade-long growth spurt can be made sustainable. African countries and businesses seeking investment must tell their own story – or risk being misunderstood by potential investors and supporters.

“Africa’s time has come,” Matola said. “It’s time the world knew.”

SAinfo reporter