Local businesses should capitalise on Africa’s rising opportunities

By on July 9, 2014

Africa is home to seven of the 10 fastest growing economies in the world and the continent is fast becoming top of mind for many global businesses. According to Sumesh Rahavendra, Head of Marketing for DHL Express SSA, local businesses should also be encouraged to capitalise on the continent’s increasing economic growth.

The Ernst & Young 2014 Africa Attractiveness survey recently revealed that Africa has become the second-most attractive investment destination in the world, up from the third-from-last position in 2011. In 2013, Africa’s share of global foreign direct investment (FDI) projects reached 5.7 percent, its highest level in a decade.

“The rise of Africa has been well documented over the past decade and has now become one of the biggest frontiers for trade and investment,” says Rahavendra. He points to recent figures by the International Monetary Fund (IMF), which also tell the story of Africa rising. Its latest Regional Economic Outlook: Sub-Saharan Africa (SSA) April 2014, revealed that real GDP growth in SSA is forecasted at 5.4 percent this year.

He adds that this overall economic growth forecast is surpassed by many of the African countries prospects, especially low-incomes states, such as Rwanda and Sierra Leone, which are projected to grow by 7.5 percent and 13.9 percent.

The 2014 Africa Attractiveness survey revealed that South Africa remained the largest destination for FDI projects; however, countries such as Ghana, Nigeria, Kenya, Mozambique, Tanzania, and Uganda have become more prominent on investor’s radars.

For example, FDI projects in Mozambique grew at a compound annual growth rate (CAGR) in excess of 30 percent since 2007. In 2013, Mozambique received 33 FDI projects, up 32 percent from the previous year. While coal deposits and offshore gas fields attract investors, infrastructure projects are another focus, with the country currently having more than R300 billion worth of active infrastructure projects.

Although FDI projects into Angola declined in 2013, the country remains the fourth-largest recipient of FDI. The country is focused on increasing its infrastructure, especially airports and ports, to meet its aim of R40 billion in non-oil investments by 2017.

Rahavendra adds that the discussion of foreign investment often overlooks the real potential of Africa, namely its people and businesses. “Many local entrepreneurs and small and medium enterprises (SMEs) have so much to offer to their respective countries, both in terms of services and sustained economic growth.”

As economies grow in Africa, as will the demand for its services, and this demand will offer numerous opportunities to inspired entrepreneurs. “As household expenditure has increased over the years, resulting in rising consumer demand, there is a definite opportunity for SMEs to fill the gaps which are not being serviced by large global companies.”

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