Africa’s Growing Stake In The Global Economy: An Overview
Gone are the days when the continent of Africa was not on the map when it came to lucrative investment opportunities and HNIs willing to manage their wealth more effectively. Over time, Africa has witnessed a good amount of economic growth and attracted eyeballs owing to its growing stake in the global economy.
A productive workforce, improved economic stability, and technological advancements have led to Africa’s resurgence in the global economy, transforming it into a land of opportunities for investors across the world.
As opposed to the restricted focus of FDI on extracting and exporting natural resources in the past, investors today focus more on retailing, telecommunications, and the service sector. In 46 jurisdictions of sub-Saharan Africa, natural extractives accounted for more than half of all the investments made in the area between 2005 and 2011.
The Changing Demographics Of The Continent
According to the UN population estimates of 2020, the growth in the working-age population in Africa (15 to 64 years) from 1950 to 2020 was found to be 496%. Over time, especially after the Second World War, the demographics of Africa have changed for the betterment of the continent and its people.
According to the latest statistics, the median population of the continent is 19.7 years, which is younger than most other countries and continents. The younger population is moving away from the traditional extraction businesses and venturing into the realm of telecommunications and other lucrative service industries. It is always important for an economy to diversify its work culture and move away from the traditional practices to invite foreign investments.
For global investors, countries with a young population are always preferable as they provide them with fresh opportunities and a wider scope for economic development. This is because, for several years to come, Africa will have arguably the most number of young individuals as workers and consumers.
A Growing Middle Class With Disposable Income
Despite the economic concerns and debt issues caused by the COVID situation, Africa is home to large and stable markets and a consistently growing middle class with enough disposable income to cater to their needs. When it comes to making global investments, countries with high-income disparities are never advisable for making investments. The steadily emerging middle class in Africa indicates decent economic stability and superior investment opportunities.
One of the major reasons behind the rise of the middle class in Africa is the political climate getting stabilized over time. Over the last three decades, multi-party elections have become the norm in most countries, resulting in peaceful and organized transfers of power. The political stability has allowed young professionals to live the “American Dream” and make money by working in new and profitable industries.
Rise Of Urban Areas And Corridors
Owing to the better investment opportunities arising in varied sectors of the African economy, urban areas and corridors across the continent have started thriving. More often than not, investment rationales are focused on urban cities like Nairobi (Kenya) Lagos (Nigeria), Johannesburg (South Africa), and many more instead of the country-side regions.
According to a report by Fraym, the leading cities of Africa account for 80% of the consumers having a disposable income to invest in assets like televisions, cars, and other appliances. Some of these cities include Luanda (Angola), Khartoum (Sudan), Dar es Salaam (Tanzania), and Addis Ababa (Ethiopia).
Looking at the long-term global investment scene, these urban regions and corridors in Africa have the potential to act as solid anchors for global investors, especially after the announcement of the African Continental Free Trade Area in 2019.
High Priority To Infrastructure
Whenever a region is witnessing economic development and stability at a global level, it is bound to focus on infrastructure and the way the region looks. As the fiscal governance in Africa has improved over time, it has led to better infrastructure in most countries and the establishment of PPP (Public-Private Partnerships) with foreign investors to add to the infrastructure development.
In order to focus on holistic development, Africa has started acknowledging the shortage of rails, roads, ports, power plants, hospitals, and schools in specific regions. The governments in different countries have been aiming at bridging this gap and building all the required facilities through PPP laws, long-term infrastructure contracts, concessions, government guarantees, and dedicated task forces that would work with local and global investors to ensure steady development.
The PPP units and offices of the Kenya Government and the Lagos State are two of the new points of contact for investors to implement PPPs in some of the biggest cities in Africa. In a few projects, dedicated government agencies along with international organizations intend to help global investors in overcoming infrastructural obstacles by providing them with political-risk assurance, sovereign guarantees, financing, and other relevant instruments.
The Need For More Investors
Looking at all the points discussed above, it is certain that Africa has successfully come out of the economic stereotypes it was subjected to for several years. African countries are some of the youngest in the world with the working population moving away from the traditional extraction business towards a plethora of modern sectors, with ample government support.
However, Africa needs more investors.
Statistics show that 41% of all 22 Africa-based funds have been developed merely between 2016 and 2019. Although there is enough startup capital available in the sub-Saharan countries, it is not coming from the sources that really matter for young and potential startups in their early stages.
Invest In The Land Of New Opportunities!
If you are willing to tap into the numerous investment opportunities offered by the Dark Continent, our team at Xanara will be more than happy to guide you at every step of the way. Wealth management experts at Xanara will ensure that you invest in the opportunities that provide you with handsome returns.
About Xanara
Xanara is a private banking and wealth advisory focused on developing and implementing transparent and client-centric, financial solutions that are backed by expertise. We understand the weight of our solutions and act with the utmost care, resilience, and most importantly, integrity.