By  Sunil Boodhoo
Deputy Director, Trade Policy
Ministry of Foreign Affairs, Regional Integration and International Trade

“Lions on the move: The progress and Potential of African Economies”.  This is the title of a report prepared by the internationally reputed Mc Kinsey Global Institute.  It is a must to read for all those who have doubts about the future of Africa.

It has come at the right time to sensitise people on the changes taking place in Africa on various fronts: political, economic, social and the huge untapped potential which is in the offing for those who dare and are farsighted enough to avail of.

Africa’s GDP in 2008 stood at USD 1.6 trillion, roughly equal to that of Brazil or Russia.  It is set to expand to USD 2.6 trillion in 2020 i.e. an increase of 62.5%.  Consumer spending which was at USD 860 billion in 2008 will reach USD 1.4 trillion in 2020, again an increase of over 60%.  Exports from Africa reached USD 414 billion in 2008, while imports stood at 372 billion USD, registering a rise of 22% over the previous year.  This trend will accelerate in the coming years due to higher growth rate and improvements in the living standard of the African population.  The continent boasts of 60% of the world’s total amount of uncultivated available land.  By 2030, 56% of the African population will be living in cities with high levels of discretionary income to spend on items other than basic needs.  In fact by 2020 some 150 million Africans will already have discretionary income to spend.  In sub-Saharan Africa, which is nearer home, per capita growth between 2000 and 2008 was at 54% compared to 15% between 1990 and 1999.  Average growth will remain at 5% with the possibility of an upward adjustment in the near future.

One can surely gauge the opportunities that Africa holds in store.  Added to this, it is to be noted that Africa’s growth over the past decade is not exclusively the result of a resource boom.  While higher commodity and raw material prices have certainly contributed to growth, the most important factors, though as evidenced by Mc Kinsey, are government actions to end political conflicts, improved macroeconomic conditions and a far better business climate which together have helped to spur growth across countries and sectors.  The report reveals that while government politics, wars and other events could disrupt growth in individual countries, Africa’s overall long term prospects are quite strong and it would be a tragedy for global businesses, including that from Mauritius to ignore the potential.

A variety of reforms have led to improved business environment in many countries across the continent on the back of declining costs, a more predictable institutional environment and a wake of economic liberalization.  Examples of great reformers are Senegal, Botswana, Bukina Faso, amongst others.  Rwanda, better known for the 1994 genocide is now pursuing an ambitions reform programme with the result that it has revolutionalised the business environment.   In terms of investment protection, it is now ranked 27th in the world, jumping from its previous ranking by 144 places.  The country has recorded impressive gains with respect to business reforms relating to the availability of credit, employment of workers and starting a business.  Rwanda is not only an example for Africa but for the rest of the world.  It will be a pity if the Business Community in Mauritius does not rush to seize the huge business opportunities existing in that country.   They exist not only in manufacturing, but more importantly in the services sector, namely tourism, consultancy services, ICT amongst others.  With every passing moment, competition for business will exacerbate.  The right time to go is now.

The continent is in the midst of a profound economic transformation.  In an article entitled Africa’s capitalist revolution, Ethan B. Kapstein chair in Political Economy at INSEAD writes:

“It is still a well-kept secret that the African continent has been in the midst of a profound economic transformation.  Since 2004, economic growth has boomed at an average level of six percent annually, on par with Latin America.  This rate will undoubtedly decline as a result of the global financial crisis, but the International Monetary Fund still projects growth of around four percent for 2010 throughout Africa – a relatively healthy figure by today’s depressing standards.  International trade now accounts for nearly 60 percent of Africa’s GDP (far above the level for Latin America) and foreign direct investment in Africa has more than doubled since 1998, to over $15 billion per year.  Overall, private-sector investment constitutes more than 20 percent of GDP.  Furthermore, since 1990, the number of countries with stock markets in sub-Saharan Africa has tripled and the capitalization of those exchanges has risen from virtually nothing to $245 billion (that is, outside of South Africa, which has long had an active stock exchange).  These “frontier” markets have, until recently, given investors huge returns compared to those found in other emerging economies”.

This changing economic landscape is providing immense business opportunities which are there to be exploited.  It is crucial that we in Mauritius not only take cognizance of the developments taking place on the continent but adopt strategies to fully avail of the emerging opportunities.  They exist even more in the regional grouping to which we belong.
 (To be continued)