Unlocking Africa’s latent potential
When it comes to the short-, medium- and long-term prospects for Africa, there is no consensus view. Dr Rutendo Hwindingwi, business development leader at Deloitte, refers to it as ‘the African conundrum’. Speaking at PSG’s recent #ThinkBig webinar, Hwindingwi said one thing most people do agree on however, is the latent opportunity in Africa.
“Many people still view Africa as one big country, but of course it’s a lot more complex than that,” said Hwindingwi. The different languages, cultures, political challenges, these all need to be better understood to figure out how to go about unlocking the opportunities on the continent.
Investors looking to Africa for growth
“There is a queue of companies and governments wanting to invest in Africa, regardless of what is happening with Covid, and despite the challenges. The USA, EU countries, and Asian countries all recognise that there is opportunity here, even if they are still grappling to understand how to capitalise on it,” said Hwindingwi.
“These investors don’t look to Africa with a particular country in mind; instead, they are looking to the specific opportunities available. So, if it is extractive, they’ll invest in Zambia and Tanzania because that’s where the iron ore is. If they are looking for a renewable energy opportunity, they’ll look to the Renaissance Project in Ethiopia.”
“These investors see Africa as a big piece of land with a population of 1.2 billion that will make up 40% of the world’s youth population by 2030. They also see the infrastructure gaps that can be filled and thereby create a viable income stream through private equity and venture capital investment in the continent,” said Hwindingwi.
Financial journalist Bruce Whitfield added that there has been an embassy building boom in Africa over the last decade that has been kept very quiet, with 60 countries massively expanding their embassies on the African continent because they view Africa as the ‘final frontier’ in terms of an investable destination.
“If you're a big manufacturing organization in China, or in the UK or in the US, you are always looking for new markets to consume your products,” said Hwindingwi. “And if you find a geographical piece of land with a population of 1.2 billion people who are happy to consume your product, it’s a no-brainer. You are going to pursue that consumer market with force.”
The role of the African Continental Free Trade agreement
Hwindingwi said this is where we as Africans need to be careful. “We cannot become a continent of consumers only because no economy can grow by consumption alone. We need to manufacture, and we need to industrialise. As Africans, the responsibility is on us to think beyond the borders, beyond the different cultures, beyond the different languages.”
“The African Continental Free Trade Agreement is intended to help us do just that, so that all African countries can benefit from the investment drive into Africa,” Hwindingwi.
The agreement will help to leverage the opportunities for Africa as a continent, as opposed to each country negotiating with international investors individually.
“We will have greater economic strength and be able to negotiate from a more powerful position if we do so as an integrated continent,” said Hwindingwi.
Africa in perspective
The GDP of Africa is around 3% of global GDP. If you take the top five fortune 500 companies listed on the New York Stock Exchange, that is the equivalent of Africa's collective GDP. “Our current contribution to the global economy is tiny. When you factor in the large geography and our growing young population base, however, it’s clear to see there is big potential for growth,” said Hwindingwi.
With international investors knocking at the door, the questions we as an African collective need to ask are: Is this really creating employment or is it just targeting us as consumers? How much of the money is staying on the continent and contributing to industrialisation? It’s up to Africa as a collective to put our own long-term best interests at the forefront.
Mike Smith, CFO at PSG Konsult said Hwindingwi’s insights would help investors to view Africa through a more optimistic lens and make the most of the many opportunities on offer.