Investor and philanthropist George Soros has described it as 'one of the few bright spots on the gloomy global economic horizon'.
China’s latest GDP forecast? Growth from one of the Asian tiger economies, maybe?
No. Soros is talking about Africa. It's a continent wracked by poverty, where electricity is intermittent, where corruption soaks up development funding, where political instability and tyrannical governments undermine confidence, and where kidnapping of Westerners is rife. Or, at least that's been the stereotypical image of African countries till now among Western investors. The Chinese have invested in Africa's natural resource extraction for more than a decade, but it is only more recently that other international investors are waking up to the potential from Africa's imminent boom in consumer spending, which is set to rise from USD 860 billion in 2008 to USD 1.4 trillion in 2020, according to the McKinsey Global Institute.
Growth in business technology across the continent is leading the way.
The International Civil Aviation Organization expects Africans to fly 8.3% more miles in 2012, making the continent one of the fastest-growing markets for air travel behind Asia and the Middle East.
New five-star hotels are being constructed: currently 10 in Lagos, Nigeria, alone. Prices for apartments in fashionable districts of Lagos match those of Western cities.
Growth in extraction of natural resources is shown by British Gas’ development along the coast of Tanzania, which is expected to be as large as its extraction along the coast of Qatar.
Analysts say the rate of return on foreign investment in Africa is higher than in any other developing region. Over the last decade, six of the world’s 10 fastest-growing countries were African. In eight of the last 10 years, Africa’s lion states have grown faster than the Asian tigers. The fastest-growing economy in the world in 2011 (at 13%) was Ghana.
As a result, Africa now has the fastest-growing middle class in the world. Some 313 million people, 34% of Africa’s population, spend USD 2.20 a day, a 100% rise in less than 20 years, according to the African Development Bank.
The bank’s definition of middle class in Africa is people who spend the equivalent of USD 2 to USD 20 a day — an assessment based on the cost of living for Africa’s near one billion people. It is acknowledged that many living on USD 2 to USD 4 a day could easily slip back into poverty. But even when you take these people out of the equation, the bank puts the stable middle class at 123 million, 13% of the population. By 2060, says the bank, the number of middle-class Africans will grow to 1.1 billion (42% of the predicted population).
It is, as Soros points out, the world's fastest-growing middle class.
By 2060, Africans living below the poverty line will be in the minority (33%). The bank describes the trajectory as 'unstoppable'. As an indicator of recent trends, The Economist magazine, which in 2000 ran a cover story headlined 'The hopeless continent' recently U-turned with an article headed 'The hopeful continent'.
Investors cannot ignore revolutions in North Africa, and famines in east and west Africa, but the underlying mantra of 'growth, growth, growth' is taking hold. The International Monetary Fund (IMF) expects Africa to grow by 6% in 2012, following another 6% growth in 2011, roughly the same as in Asia and in stark contrast to the Eurozone.
Foreign direct investment projects grew by 27% in 2011, pushing Africa’s share of the world’s investment to almost a quarter.
Significantly, the Africa Attractiveness Survey by one of the Big Four accountancy networks points to a 'stark contrast' between those investors who have already invested in Africa and those who have not. The latter are concerned about corruption and political instability; they view it as 'by far the least attractive investment destination in the world'. But for those already investing in the continent, their experience is 'a story of progress, growth, a story of political and economic vibrancy'.
For example, Zambia enjoyed a 93% rise in investments in 2011 — 'a result of a well-managed economy and a peaceful handover of power'.
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