Macro Economics and Connectivity, a powerful combination

Africa remains a compelling investment prospect in 2015, despite negative headlines dominating coverage of the continent over the past 12 months. Technology and better transport links, on top of demographics and macroeconomic factors, should further drive development in 2015, says Geoffrey White, chief executive of Agility.

Africa remains a compelling investment prospect in 2015, despite negative headlines dominating coverage of the continent over the past 12 months. Technology and better transport links, on top of demographics and macroeconomic factors, should further drive development in 2015, says Geoffrey White, chief executive of Agility.

The news from Africa in 2014 was not pretty. It was not about growth, prosperity nor an emerging continent full of new opportunities. Instead, the headlines were about Ebola, terrorism and political turmoil. 2014 was challenging in the rest of the world too, with financial scandals continuing in the banking sector, many developed countries still struggling with the fall out of the financial crisis, the evolution of ISIS terrorists and the rumblings of a re-emergence of the cold war with Russia.

Yet compellingly, in this global context, investment in Africa continues to progress and African GDP will grow well above the global average in 2015 with several countries in Africa growing at over twice the rate of the developed world.

Those who understand the African opportunity on the ground are bullish — the ‘macro is right’.  But there are challenges. Ebola has been devastating to the economies it has engulfed, Boko Haram and Al Shabaab have committed unthinkable atrocities. But on top of all of this is the unstoppable, fundamental progression of a continent on the rise.  Africa has a billion consumers today, expanding to 2 billion by 2050. The forward economic momentum of Africa is no longer a debate, but a fact. In growth terms it is comparable to a teenager; it will have tantrums, take some wrong directions, but overall it is developing into a mature and very important economic adult that will have an increasing global impact.

The transformation that is taking place across the continent is evident everywhere, from the futuristic glass tower blocks appearing on the newly completed waterfront in Luanda, to the arrival of low cost carriers such as FlyDubai transforming people’s ability to travel.

Africa is growing in stature and presence and companies that have not already realised and engaged with the opportunities the continent is delivering run a real risk of being left behind.

Across Africa there are hundreds of new shopping malls being developed to meet the growing demand from the emerging middle-class. Anchored by the major food retailers on the continent, the number of new openings from Shoprite, Pic n Pay, Makro/Game (Walmart), Carrefour and others is impressive.

The demographics for the continent are exciting. What appeals to many investors is a young population that is increasingly urban centric and fashion conscious — a stark contrast to the developed world where populations are getting older, becoming non productive and shrinking in size.

Standard Bank recently concluded that in 11 of Africa’s top economies, the number of middle-class households has risen 230% in the past 14 years and will continue to develop at these rates until well into the next half of the century. The increasing prosperity and demographics of the billion people on the continent is the macro driver of sustainable growth. The continent has always had mineral wealth, which historically has brought a limited benefit to the society where it has been mined. New demand for agriculture, for both domestic consumption and export, is becoming of significant importance as the world expands from 6 billion to 9 billion people and food security becomes a serious concern.

Africa holds 60% of the world’s unused arable land. Agriculture and the very significant oil and gas discoveries in both west and east Africa, are attracting huge FDI into the continent and are the drivers of economic growth. East Africa will, in the next decade, become the 3rd largest gas-producing region in the world, at a highly competitive price. These macroeconomic drivers are combined with a population that is hungry to develop, and has demonstrated that it can leapfrog other markets in adopting new technology and cultures. From practically no market penetration in the 1990’s, Africa today has over 750m cellphone users, twice as many as the USA. and has become one of the most sophisticated markets in the world for adopting cellphone banking, data access and services. Internet use has grown exponentially over the past five years, giving access to education, markets and empowering people politically and socially.

Cellphones and the Internet are propelling Africa from behind the curve into the global mainstream. And having arrived, the opportunities are boundless.

The progress is by no means plain sailing; there are significant challenges to overcome. Power and infrastructure are necessary for development but the momentum is, in my view, unstoppable. Africa is now a global player and the number of returning diaspora to the continent, bringing established skills and standards, would indicate that this is no longer a secret.