Grant T. Harris, CEO of Harris Africa Partners LLC, makes a compelling case on why U.S. companies need to map out how Africa’s dynamic markets fit into their company’s business plan
When it comes to talk of Africa’s economic outlook, do not believe the gloom – or the hype. The “Africa rising” storyline took a big hit when commodity prices crashed, but the truth is, no monolithic narrative could ever accurately capture the continent’s dynamism, challenges, and sheer economic potential.
Nonetheless, there are some clear regional trends that should compel American businesses to ask themselves, “How does Africa factor into my company’s growth strategy?”
Frankly, there is no need for a simplistic soundbite about Africa’s economic potential. The region is a complex and diverse ensemble of markets, opportunities, and political and investment climates which, for many different reasons, are undergoing what the International Monetary Fund (IMF) has described as “multispeed” growth. For instance, while the commodity-dependent countries are currently less buoyant, four economies in East Africa – Kenya, Ethiopia, Tanzania, and Uganda – are predicted to see growth above six percent through 2020.
Nevertheless, even as we eschew sweeping generalizations that pretend to lump 54 African countries into one market, there are some region-wide trends that should make businesses sit up and take notice. To get straight to the point: Africa’s long-term economic outlook remains strong, underpinned by a young and growing population that is increasingly urban and technologically savvy. Consumer spending is projected to reach $2.1 trillion by 2025, while African economies as a whole are estimated to be valued at $3 trillion by 2030 – by which time half of the population will live in urban areas. Moreover, demographic shifts mean that Africa’s place in the global economy is only likely to grow. By 2034, Africa will have more working-age people than either India or China. With a current median age of just 19.5 years, Africa will make up a quarter of the world’s population by 2050, bringing inevitable social, cultural, and economic impacts.
Of course, there is no denying that African governments have a lot of work to do to improve investment climates at national and regional levels. According to a recent African Development Bank report, “the continent’s infrastructure needs amount to $130-170 billion a year, with a financing gap in the range of $68-108 billion.” In sub-Saharan Africa, roughly two-thirds of people lack access to electricity. And it is not just insufficient infrastructure; the recent commodities crash highlighted several other persistent challenges, particularly the need for resource-rich countries to diversify their economies. Many African governments would be wise to follow the IMF’s advice to enact “policies to enhance macroeconomic stability, improve education outcomes, bolster governance and transparency in regulation, and deepen financial markets.” Importantly, many countries are working hard to realize these changes. According to the World Bank, governments in sub-Saharan Africa carried out a record number of business reforms in 2016 and 2017 – more than any other region.
Above all, it’s time to realize that misconceptions about Africa’s economic potential – that it is too risky, too poor, or simply irrelevant to most businesses – amount to lost opportunities. As when considering any emerging market, investors must to do their homework, not fall victim to oversimplified narratives, and determine how to navigate political and policy risk. Armed with the right information and foresight, investors should map out how Africa’s dynamic markets fit into their company’s business plan. As the region’s demographic and economic trends make clear, Africa can no longer be considered an “optional” component of global growth strategies.
Grant T. Harris is CEO of Harris Africa Partners LLC and was President Obama’s principal advisor on sub-Saharan Africa in the White House from 2011-2015. Harris Africa Partners LLC is an organizational partner for IGD’s U.S. Roadshow Tour.