Time for Africa to shine

Forecasts from the International Monetary Fund show that seven of the world’s 10 fastest-growing economies in the next decade will be from Africa. This statement was made by Alec Hogg, founder and CEO of Moneyweb, speaking at a recent event hosted by The

Hogg shared insights gleaned from the May 2012 Africa Economic Summit in Addis Ababa, Ethiopia, and gave his view on Africa’s place in the world economy in the coming years.

“A lesser-known fact is that in the previous decade, six out of 10 of the fastest-growing economies were from Africa. In fact, Africa has outperformed the Asian Tigers in eight out of the last 10 years.”

Africa is starting to come into its own and the real risk lies possibly in not investing into the continent. Hogg said that today, Africa is where China was in 1980. And as we know a lot can, and does, happen in 50 years. The same level of growth is expected to take place in Africa over the next 50 years.

According to Hogg, China’s natural share of world GDP is roughly 25% compared with Africa’s 13%. Currently, China is at about 8% and Africa on 2%. These figures illustrate the potential growth expected to take place on our continent.

But success comes with caveats and there are pre-conditions to be met. According to the head of the Chinese Central Bank, the way to wealth is through infrastructure. It’s no surprise that locally, our last Budget Speech and State of the Nation address both focused on the importance of infrastructure. For Africa to flourish, it needs sufficient ports, airports and rail-links.

Hogg said that with China keen on investing in our infrastructure, African countries have learnt to negotiate better to ensure knowledge-transfer and end-benefits to the countries involved.

“We currently have a R1.7 trillion market consisting of one billion people needing products and services. Companies that have done their homework have much to gain by investing into this market.

“Smart investors will target the right places and recognise that there’s money at the middle and top end of the market. Deals in the $5m to $15m range hold potential. Sectors of interest include agriculture, infrastructure projects, mining, banking and consumer goods.

Hogg said that trying to compete in the lower end of the market could see companies up against countries such as Ethiopia where there is a culture of working 24/7, with no minimum wages. Ethiopia wants to compete with the Far East and is currently experiencing growth of 10% a year.

Sanlam has also been strengthening its presence in Africa with a specific focus on businesses in niche markets. We favour the partnership approach, resulting in an exchange of specialist technical information while gaining from the local partner’s knowledge and understanding of the market.

Individual investors should not be excluded from the Africa success story. Individuals looking for exposure to Africa should remember that money can be made from investing in good quality companies, regardless of the political environment. They can also invest in developed market stocks listed outside of Africa, but with investments and earnings in Africa.