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By 2020, sub-Saharan Africa’s share of global GDP will more than double
Nigeria is set to overtake South Africa as the continent’s primary market for international investors in the next five years, according to a new report by the Economist Corporate Network. The report, entitled, “Africa is the horizon; the 2015 African Business Outlook Survey’’ surveyed 200 senior executives directly involved with investment decisions concerning Africa for large companies. It stated that the sub-Saharan Africa region is expected to grow by about 4.5 per cent, making it the world’s fastest-growing economic zone and ahead of Asia’s regional average of 4.3 per cent.
“Over the next five years, sub- Saharan Africa’s share of global Gross Domestic Product (GDP) will more than double.” However, about 71 per cent of executives surveyed said “corruption is a big concern – and negatively impacts profits”. For the Southern African region, one in five respondents cited “safety concerns”, adding to a growing list of investment impediments such as legislative and policy inconsistencies other fund managers, economists and investors have cited for some markets in the region.
Although executives surveyed under the report said southern Africa is one of their focus areas for further investments, Herman Warren, director of the Economist Corporate Network, said: “Many South African executives, for instance, believe most new opportunities are up north, while those to the north of South Africa believe South Africa is an attractive destination.”
More than half of the corporate respondents to the survey said African operating margins are higher than averages in other regions. Southern, East and West African regions are seen as the frontrunners in attracting the most short-term investment in the future. Angola – Africa’s third-largest economy – is not on the priority list for most executives as an investment destination.
The country’s potential as a lucrative investment destination “received relatively little attention” for executives not based in Angola. “For most respondents, their local markets are set to grow in importance, but for southern African executives, particularly in South Africa, their local market is set to decline in importance by 2020 as they look more to West and East Africa,” said Warren. Surveyed executives highlighted numerous issues affecting profitability.
These include the cost, availability and relations associated with labour as well as currency volatility, infrastructure bottlenecks and civil and political unrest. But the executives were excited about the continent’s overall macro-economic growth, technology adoption and the emerging middle class, which were seen as positives.
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