Africa has vowed to become the “future continent” after being labeled the “forgotten continent” in the past. Africa is one of the last frontiers in untapped markets, which are only now beginning to emerge.
Do African countries attract the most Foreign Direct Investment (FDI)? Yes. For example, Nigeria, South Africa, and Egypt are the top three African economies in gross domestic product (GDP). Because of their considerable size, these African economies are the main targets for foreign direct investment (FDI) after Mauritius. They alone account for 35% of Africa’s inward flows.
Investment flows to Africa reached a record $83 billion in 2021; FDI to Southern Africa increased almost tenfold to $42 billion. West Africa sees FDI increase by 48% to $14 billion. Investment flows to East Africa increased by 35% to $8.2 billion. Central African FDI remained flat at $9.4 billion. FDI to North Africa declined by 5% to $9.3 billion in 2021.
According to experts, ten percent of the world’s oil reserves and 40 percent of the world’s proven gold reserves are found in Africa. In addition, Africa contains 90 percent of the world’s platinum reserves, about 80 percent of its cocoa and diamonds, 60 percent of its phosphate, 50 percent of its bauxite and chromium reserves, 20 percent of its titanium, and close to 15 percent of its oil and natural gas. As other countries like Brazil, Russia, India, and China continue to industrialize, they will demand more and more of these commodities. (Source: US Geological Survey).
Africa is blessed with vast quantities of natural resources, most of which are yet to be exploited. Investors in the manufacturing sector are eyeing these resources with a bated appetite as they are readily available and cost very little to procure. Moreover, Africa has some of the largest chunks of unexploited land, ideal for large-scale farming.
Manufacturers, therefore, don’t have to import raw materials as they have enough fertile land to grow them. Farmers in many African countries are being forced to dispose of their farm produce or sell them at throwaway prices because the local market is already saturated. This creates a perfect opportunity for investors looking for affordable raw materials.
With technological advancements, Africa has started realizing its potential with more investment opportunities in key sectors. Telecommunications, the internet, and general ICT are wide open with unmet business needs. For example, many African countries are yet to migrate from analog to digital television signal dissemination. In addition, most government institutions are still trying to figure out the best ways to automate their operations. It’s up to smart investors to identify and tap into opportunities that promise the greatest returns.
The conversation about Africa is shifting from “deficits” and “gaps” to opportunities, prospects, ventures, and creativity. That’s not news to companies that have paid close attention to the continent and invested there.
The fast-growing youth population, the urbanization expected to drive over 50% of Africans to cities by 2050, and Africa’s formalizing economy are all well known. These trends and other developments have driven a half-century or more of growth in Africa and will continue to do so.
The labor market is near its breaking point because of the ever-growing number of graduates leaving institutions of higher learning in Africa every year and the ever-diminishing job opportunities. This explains why thousands of Africans migrate to the West and other continents in search of greener pastures. It also means the cost of labor in Africa is significantly lower compared to other continents. It’s, therefore, time entrepreneurs and other investors considered Africa as a place to set up shop.
Business leaders are hungry for vibrant new markets, and consumers know the reality: globalization means there are too few remaining frontiers. As the developed world matures and becomes increasingly difficult to trade in due to factors from legislation to terrorism, opportunities for corporate growth are limited.
There are too few places where entrepreneurs and businesses with ideas and a risk appetite can bring value and find long-term growth if they are persistent, creative, and determined. But they know something else: Africa is still such a place. People perceive a lot more risk in Africa than there is.
Africa is open for business in an extraordinary way. I think people have perceptions of corruption and poverty and chaos, the kind of “Old World” story of Africa, and they expected to see a lot more of that, and the delegation hasn’t. They’ve met dynamic business people, extraordinary entrepreneurs, and governments liberalizing and welcoming foreign investment.
