Is it still all rosy in Africa?
Ernst & Young recently released a report entitled Africa 2030: Realising the possibilities. The report looks at the growth of the continent over the last 15 years (since the Economist dubbed Africa ‘The Hopeless Continent’) and maps Africa’s predicted growth over the next 15 years.
The steady 5% year-on-year growth over the last 15 years has, on the whole, been right across sub-Saharan Africa, with several economies including Angola, Ghana, Ethiopia, Tanzania, Mozambique, Nigeria and Zambia, growing at over 7% and E&Y forecasts more of the same.
The study identifies a number of contributory factors: sound economic management; improvements in business environment; diversification; political reform; and technology. We should add urbanisation and improvements in education and health which are fuelling the rapidly increasing population levels.
The number of requests we are receiving for support and market intelligence from corporate occupiers exploring Africa has never been so high – until recently. Over the last three months the number of actual engagements has slowed, and I believe this is due to a few facts:
• The Ebola crisis has hit West Africa hard, and not only from a humanitarian perspective. There has been a knock-on effect to both international travel and cross border trade. The challenges of excessive bureaucracy and corruption are well documented and this tragic outbreak has not helped to ease the perception of Africa as a difficult place to do business.
• Low oil prices are forcing the Oil & Gas companies, who have vast operations across Africa, to re-evaluate investment plans in the short and medium term.
• An increasing number of investors and occupiers are looking for opportunities, but there is very little quality product and no one seems to be willing to take the plunge without a robust secondary market.
Hopefully these are short term issues: Ebola will be contained; the US will still need African oil and global oil prices will return; and new developments will come on line.
The potential of Africa will not be realised overnight. Africa’s rise has been dramatic yet from a low base, and a firm foundation has now been laid. The next stage in its evolution will be harder as it fights to meet unrealistic expectations, but business continues to be done and the landscape continues to improve.
Author: Nick Lambert, Head of Complex and Emerging Markets, GCS EMEA