Africa as a blue ocean: The next economic powerhouse
Eric Newman, Treasury Manager, City of Stamford, explains how Africa can reshape the global economy over the next 30 years
Africa is a blue ocean, with its transformative potential to reshape the global economic landscape over the next 30 years. Today's Africa is vastly different than thirty years ago, and thirty years forward promises even greater divergence. Africa's 54 countries are collectively larger than Europe, China, and the United States, adding to the continent’s future economic force.
Africa is a blue ocean with transformative potential to reshape the global economic landscape over the next 30 years. Today’s Africa is vastly different from thirty years ago, and thirty years hence promises even greater divergence. Africa's 54 countries are collectively larger than Europe, China, and the United States, enhancing the continent’s future economic power.
The continent is diverse in languages, cultures, regions, and industries. In North Africa, the largest growth. West Africa boasts Nigeria, Ghana, Côte d'Ivoire, and Senegal, while Southern Africa comprises South Africa, Botswana, and Namibia. Each region offers opportunities in technology, agriculture, healthcare, education, e-mobility, and consumer goods.
The African Union is now a member of the G20, similar to the European Union, and the recent expansion of BRICS to nine member countries has resulted in Ethiopia and Egypt joining South Africa as members. Africa accounts for 19% of the world’s population today, totalling 1.5 billion, and is projected to reach 26% or 2.5 billion by 2050. This means one in four individuals will be of African descent, with an average age of just twenty-four.
Urban migration continues to surge, with 60% of the population expected to reside in cities by 2050. Consumer spending in Africa is anticipated to surpass $2 trillion within the next few years, a 30% increase from 2015 levels. Growth sectors include food and beverages, pharmaceuticals, healthcare services, education, and transportation, with food and beverages approaching $740 billion in spending.
The inflationary pressures of recent years have prompted global institutional allocators to explore agricultural and real asset strategies. Investing in agriculture and ag-tech companies and funds not only diversifies global portfolios but can also protect against inflation while contributing to the region’s development.
The Democratic Republic of the Congo (DRC), located in Central Africa, stands as a prime example of Africa's agricultural and real asset potential, with vast untapped resources across its landscape. It is the second largest land area in Africa and the 11th largest globally. The DRC possesses over eighty million hectares of arable land, a substantial portion of which remains underutilised. Its expansive grasslands and savannahs can support a significant livestock population, while the biodiverse Congo Rainforests cover 52% of the country, offering opportunities for sustainable, forest-friendly products.
The DRC benefits from rich fisheries along its Atlantic Ocean coastline, the Congo River, and numerous lakes, capable of yielding an impressive 707,000 tonnes of fish annually. This abundance of natural resources positions the DRC as a key player in Africa's agricultural and environmental sectors, with significant potential for sustainable development and economic growth.
Throughout the continent, governments and the private sector are investing in electric vehicles and the battery and charger ecosystem. Ghana has recently joined a growing list of countries that have waived import duties on electric vehicles to develop local manufacturing. This complements Africa’s concentration of essential minerals needed for renewable energy technologies, further highlighting its strategic importance on the world stage. Senegal has launched West Africa's first 100% electric Bus Rapid Transit system, financed with local and international investors using a public-private partnership model. More than 90% of Kenya’s electricity is produced from renewable sources, and by 2040, it is projected that there will be a 50%-65% adoption of electric vehicles in Sub-Saharan Africa. Venture-backed electric vehicle start-ups are now emerging in Kenya, Zimbabwe, Ethiopia, Uganda, South Africa, and Egypt.
Today, Africa is home to three of the world’s megacities, defined by populations of ten million or more. The United Nations projects that by 2050, Africa will have fourteen megacities. The migration of millions from rural areas to cities in search of high-paying jobs and a better quality of life will create opportunities for corporate and institutional investors. Historically, Africa’s "big four" referred to giraffes, elephants, rhinos, and lions. Today, it refers to the four largest African tech and fintech hubs located in Nigeria, Egypt, Kenya, and South Africa. Kenya is known as the "Silicon Savannah" for its highly educated workforce of engineers working in e-commerce, cleantech, fintech, e-vehicle manufacturing, and enterprise investments. As urbanisation and a rising middle class occur, the demand for upscale goods and services, housing, higher education, transportation, and consumer products will increase.
For investors looking to allocate capital in Africa, partnering with African managers can provide several advantages. These managers often possess local expertise, cultural insights, and established networks, enabling them to identify and capitalise on unique investment opportunities. Emerging managers tend to be more agile and entrepreneurial, allowing them to adapt quickly to changing market conditions and seize emerging trends.
Investing in Africa also comes with challenges, including political instability, regulatory hurdles, infrastructure constraints, and currency translation risks. It is critical to conduct due diligence and risk management when selecting investment opportunities and partners. Consider reaching out to your country’s State Departments, Prosper Africa, development finance institutions, and other institutional investors who are active in the region as you begin your journey. Investing in Africa and other emerging markets requires the four P’s: patience, persistence, personal relationships, and partnerships.
There are many strategies and vehicles to gain exposure to and returns from venture capital, private equity, private credit, or publicly traded securities through one of the twenty-nine stock exchanges. Africa’s vast untapped markets are open and seeking long-term global investors and partners.
Africa's 54 countries are collectively larger than Europe, China, and the United States, enhancing the continent’s future economic power.
