The Economist Corporate Network (ECN) says that for the past twenty years, the centre of the global economy has been shifting from the developed to the developing world. Today, growth rates in developing economies are many times higher than in developed economies. Africa, in general, and Sub-Saharan Africa, in particular, are two notable cases in point. In 2015 Sub-Saharan Africa’s GDP is expected to grow at 4.5%, making it the fastest-growing economic zone in the world, outpacing Asia’s regional average of 4.3% annual growth.
The EIU says that obviously, in terms of overall market size, Sub-Saharan Africa is still quite a bit smaller than Asia, but, when considering the longer term, continued steady growth in Africa will result in an economic bloc with global impact over the next two decades. In the next five years alone, Sub-Saharan Africa’s percentage share of the global GDP is expected to increase from 1.4% to 4%.
The " Africa is the horizon" report provides insights from over 200 senior executives responsible for African commercial operations, including topics such as how their businesses performed in the last year, their expectations for commercial performance over the next five years, where they’re investing, which markets excite them the most and the challenges they face in pursuing their objectives.
Executives see strategic opportunities in Africa as the continent’s growth rate outpaces those in the developed world.
Herman Warren, director of ECN in Africa, says: “In 2015, Sub-Saharan Africa’s GDP is expected to grow at 4.5%, making it the world’s fastest growing economic zone, outpacing Asia’s regional average of 4.3%. Over the next five years, Sub-Saharan Africa’s share of global GDP will more than double.
“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.”
Most executives surveyed by ECN said they were planning to increase investment in East, West and Southern Africa. Executives were least bullish on North and Central Africa.
Warren notes: “Drill down into the numbers, and differences in executives’ outlook emerge by region. 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.”
Angola’s potential received relatively little attention for those executives not based in Angola. The Angolan economy is Africa’s third largest, yet only 13% of respondents cited Angola as their top market, though 17% of all respondents were based in Angola.
But Africa’s commercial environment comes with its challenges. Respondents cited corruption, bureaucracy, the regulatory environment, skills shortages and personal safety.
The weightings of these challenges varied from region to region.
Interestingly, the Ebola virus did not emerge as a significant operational challenge, even in those areas where outbreaks occurred.
Africa profit margins attractive
Notwithstanding the challenges of doing business, 57% of executives reported that margins in Africa were higher than their firms’ global average. West Africa was the region with the highest reported 2014 profit margins.