Despite Africa's image as a continent of poverty and conflict, she has tremendous political, economic, cultural, and scientific potential. Such African countries as Angola, South Africa, and Nigeria are among the fastest-growing economies in the world (Africa News, 2023).
In this article, we explore the opportunities that make it worthwhile to do business in Africa and the challenges that still need to be overcome.
Africa — A Continent of Opportunities
1. Emerging growth and attraction of foreign investment
Over the past two decades, the continent as a whole has achieved impressive growth rates of up to 6.5%, even though major differences exist between individual countries (Signe and Fakim, 2019). Therefore, Africa is becoming increasingly relevant and presents new opportunities despite major challenges. Many Western countries are also investing in Africa, particularly in economies like Egypt, South Africa, and Nigeria. Although foreign direct investment in Africa fell to $45 billion in 2022 from $80 billion in 2023, the announcement of greenfield projects shows promising signals (Unctad, 2023).
2. Natural resources
The fast-growing African continent is also endowed with natural resources ranging from arable land, water, oil, natural gas, minerals, forests, and wildlife (UN Environment Programme, 2023). Africa alone has 8% of the world’s natural gas, 30% of the world’s mineral resources, and 12% of the world’s oil reserves. Further, minerals constitute an average of 70% of total African exports and about 28% of the gross domestic product (Africa Natural Resource Centre, n.a). Such richness provides opportunities to foster human and economic development.
3. Growing population as an opportunity
Africa has a young and fast-growing population of over 1.4 billion. While this could present challenges on the continent, it could also unlock opportunities like consumption potential and labour force availability. In fact, with the continent projected to hit a population of 2.5 billion by 2050, this could lead to more than 3 trillion in consumer spending (Mckinsey, 2023). Moreover, the continent is already a source of IT talent for Western countries facing shortages in IT skills. One case is Adaire, a Namibian technology company training and supplying tech-oriented African specialists as remote employees with European companies.
4. Promising sectors for investment
African economies are resilient and will grow at the fastest growing rate in the world between 2023 and 2024 (African Development Bank Group, 2023). The continent is offering trillion-dollar market opportunities for the private sector. Such opportunities lie in renewable energies and electric vehicles, energy-efficient buildings, climate-resilient infrastructure, improved dryland crop production, and water.
5. The Continental Free Trade Area
The African Continental Free Trade Area serves as a gateway for the growth of businesses across Africa. This will open new doors for African countries as well as the potential for collaboration between African players and players in advanced countries.
Although the continent has lucrative opportunities, there are still challenging issues that call for concern.
3 Main Challenges In Africa
1. Inadequate infrastructure
Africa is still presented with an Infrastructural challenge despite efforts made by the African Development Bank to build the continent’s infrastructure (United Nations, 2022). About $170 billion per year up to 2025 is needed both for new infrastructure and maintenance (Jerry Haar, 2023).
2. Political Instability
Africa is also plagued with political instability. Armed conflicts in Mozambique, the Democratic Republic of Congo, Somalia, and Sudan continue destabilising these economies (Dizolele, et al., 2023). Moreover, the recent political turbulence in Niger not only poses significant challenges to the nation but also raises concerns about the uninterrupted advancement of the African Continental Free Trade Area (Rwanda Post, 2023).
3. Slow progress on UN Sustainable Development Goals (SDGs)
African countries are falling behind in achieving the UN SDGs. Only 30% of sub-Saharan Africa has access to clean and safe drinking water relative to the world average of 74% (African Business, 2023). The United Nations estimates that at least $1.3 trillion is needed yearly to meet the SDGs by 2030 (African Development Bank, 2023).
Nevertheless, the continent’s existing gaps in infrastructural development, healthcare, food security, water and sanitation as well as access to clean energy can be leveraged as business opportunities.
These challenges present areas in which African actors could work together with actors in advanced countries to enhance growth and sustainable development. For instance, Verena Utzinger, president of the Swiss-African Business Circle (SABC), once stressed that the huge infrastructural gap opened room for experience sharing and knowledge transfer between Swiss and African actors across the public and private sectors to come up with innovative solutions (Swiss Info, 2019).
Did you find the article insightful? Share your thoughts: How do you envision turning Africa's challenges into a roadmap for progress?
References
Signe Landry and Fakim Ameenah G. (2019). Africa is an opportunity for the world: Overlooked Progress in Governance and human development
https://www.unep.org/regions/africa/our-work-africa#:~:text=The%20continent%20has%2040%20percent,internal%20renewable%20fresh%20water%20source.
African Natural Resources Center. (n.a). Catalyzing growth and development through effective natural resources management.
Haar Jerry (2023). Modernizing Infrastructure Vital to Fulfilling Africa’s Promise
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