Africa presents bounteous opportunities – the region’s economies are diversifying and new sectors are growing rapidly such as telecommunications, consumption and infrastructure. Africa is also experiencing a massive population boom. Currently, 17% of the world’s population is African. The continent is growing by the equivalent population of France every two years and its total population will double by 2050.
Africa’s GDP per head has also been growing. Unless this trend changes, strong demographic growth should lead to strong GDP economic growth. Africa should experience rapid growth owing to rapid growth in its working population.
Real GDP in Africa is projected to grow by 3.4 percent in 2021, according to the African Development Bank. This implies recovery from the worst recession the region has experienced in more than half a century – Africa’s real GDP contracted by 2.1 percent in 2020. Economic activity was constrained by the unprecedented COVID-19 pandemic. Recovery will now be fueled by a resumption of tourism, a rebound in commodity prices, and the rollback of pandemic-induced restrictions.
Which economic sectors will thrive this year? We have answers.
Agriculture is by far the most important economic activity in Africa. It provides employment for about two-thirds of the continent’s working population. More than 60 percent of the population of sub-Saharan Africa is smallholder farmers. For each country, agriculture contributes an average of 30 to 60 percent of gross domestic product and about 30 percent of the value of exports.
Yet, Africa’s full agricultural potential remains untapped. A McKinsey report suggests that Africa could be two or three times more productive if it intensified its agricultural productivity.
Africa is consumption-driven, retail’s contribution to GDP continues to increase. According to Euromonitor International, retail sales in the region amounted to over USD500 billion in 2018.
Traditionally, Africans source goods informally – from local shops and stalls. Rapid urbanization however presents a group of people who prefer to spend in supermarkets and malls. Also, an increasingly sophisticated distribution network is enabling the expansion of supermarket chains. Food, beverages, toiletries and appliances – goods with low-costs, low shelf-life and high demand present great opportunities in Africa as they take the largest share of total spending for African households.
Increase in GDP per capita alongside population growth also implies a development in the disposable income of the average household. There are 350 million middle-class Africans, according to the African Development Bank. The low-income and middle-class households have an estimated disposable income of $680 billion. As Africa’s middle-class expands, so will consumption.
According to a recent report by GSMA, around 477 million Africans are unique mobile subscribers today, 272 million of whom have access to mobile internet. The mobile industry directly and indirectly contributes about 9% of sub-Saharan Africa’s GDP, directly supporting 650,000 jobs.
The telecommunications sector grew even stronger during the pandemic, thanks to a surge in demand as hundreds of Africans reached for their phones. Employees worked from home and sectors including education and entertainment headed online. Data networks witnessed huge upsurges in traffic.
African Business explains that with so many potential customers still unconnected, operators now intend to push towards universal coverage, boost 4G, and diversify revenues by introducing new services. The key challenge is how to invest in network capacity upgrades amid a tough economic climate, while consumers and governments plead with them to cut prices.
In January, we noted that opportunities abound in resilient sectors like FinTech. Acceleration in digital transformation (increased digital adoption by businesses, uptake of digital platforms and a rise in the digital urban consumer) are presenting interesting opportunities.
Before the pandemic, fintech was already thriving in Africa. According to WeeTracker, in 2019, fintech attracted more than 50% of the $1.34-billion raised by African start-ups. During the pandemic, it as one of Africa’s most resilient. Its mobile-enabled payment platforms ensured that large volumes of transactions were processed hence supporting vital economic activity.
The manufacturing industry is widely viewed as the path to economic growth on the African continent. Manufacturing holds potential as Africa navigates the path to recovery post-pandemic. Experts project that the sector could hit 666.4 billion dollars by 2030. That’s over $200 billion more than it did in 2015. A strong African manufacturing industry is a prerequisite to the success of the African Continental Free Trade Area (AFCFTA).
According to the World Bank, the next 12 months will be a critical period for leveraging the African Continental Free Trade Area, to deepen African countries’ integration into regional and global value chains. The best time to invest in Africa is now. Get involved.
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