Coronavirus has hit the world HARD.
In the Western World Governments have stepped in, supporting businesses and ensuring that economies did not collapse.
Africa has been different.
Africa has been different. Starting at far lower GDP per capita, it probably had less to lose. With manufacturing lagging behind Europe, the Americas and Asia it entered the pandemic from a lower base. African Governments clearly could not support their populations in the way the Western world did, providing little as a safety net. What has also been clear is that detected infection rates have been relatively low. Nevertheless restrictions in many states has had a serious impact on movement and economic activity.
Will Africa rebound? There is no doubt it will. Uganda was recently claimed to be the most entrepreneurial country in the world. True? Well who knows, it depends how you measure it. But this statement alone suggests that enterprise is buoyant.
As much of Africa has historical colonial ties with several European countries, practices such as legal and accounting are akin to what the Western World understands. Even languages used widely in business are generally English or French. Going back 100 years ago Africa’s relationship with the rest of the world was stronger than that of China.
As for infrastructure roads, electricity supply, storage and office/factory space all need investment. But with industrialisation comes an improvement in infrastructure. Demand for Corporate offices and manufacturing bring new buildings, new roads, new means of power, new housing, schools, hospitals and supermarkets. And not to be overlooked, JOBS!
For outsourcing of production, Africa represents a great, and many would argue better alternative to China.
Africa has the fastest growing population of any continent in the world, 50% of the population are under 25. By 2050 one in 4 consumers will be African.
So, some facts and figures:
- By 2025 Africa will have a GDP of £2.5 trillion
- 8 of the 15 fastest growing economies are in Africa
- 50% of the top 10 most improved economies in the World Bank “Ease of doing Business Index” are African
- UK – Africa trade was £35bn in 2018
- Agriculture alone will be a £800bn sector by 2030
- The removal of tariffs within Africa is likely stimulate economic growth
- There are more than 400 companies in Africa of £800m turnover or larger
- There are more than 400m people in Africa aged between 15-35, the youngest continent
- Consumer spending rapidly growing, forecast £1.6 trillion by 2025
- An abundance of low cost and willing staff, keen to learn new skills
The African Continental Free Trade Area which was due to be operational in July 2020 includes 54 of the 55 nations (Eritrea being the exception). The current pandemic has meant the project is on hold, awaiting stabilisation of the health crisis. Upon implementation it will mean that 90% of goods can be traded tariff free. Enter one country, and you will be able to trade freely in 53 more! The timing is good to look at trade.
Those who invest NOW will undoubtably yield first class rewards. There are many economic drivers, not least the prediction by practically every ‘macro economist’ that Africa will be the next economic superpower. And a superpower with that added advantage that it is not one massive country.
So, those massive Western corporations, now is the time to look at the bigger picture and strategize about future manufacturing locations. Maybe those countries with an abundance of well-educated people grateful and eager to work to improve their living standards.
Africa needs investment and creating jobs bring greater longer-term sustained benefits for the population than Aid packages. Universities in Africa are increasingly active in business, and the Banks are creative too.
Some countries are offering Corporation Tax holidays, in some cases up to 10 years, and you may even get free land. Airports are being modernised, new ones being built, investment in rail, roads, power, it is happening now. Investment in Industrial Parks is evident across the continent.
Entering Africa needs local know how, the culture, the customs, the nuances that make the market unique. And of course, there are legal considerations, accounting needs. Try doing it alone? Jump on the plane, meet the people, come back, achieve nothing! It needs staying power, and feet on the ground, and most importantly LOCAL KNOWLEDGE to keep the initiative moving in the right direction.
The Authors, Ian Thomas & Julius Mugabo are Directors of Crested Crane Connections Ltd, registered in Uganda and the UK, and offering services to companies wishing to invest in or export to Sub Saharan Africa. Key offering includes a know how of the needs and drivers of African business and Western Corporations. www.crestedcraneconnections.com