Whilst investors’ quest for returns steams ahead in a global economy whose prospects are increasingly challenged, isn’t it time to look at Africa more closely?

 Traditionally, the continent has been viewed from a narrow perspective of commodity-based economies or regional hubs like South Africa (Southern Africa), Kenya (East Africa) and Nigeria (West Africa). However, a more nuanced picture can be found, with examples of fast-growth economies, rapid urbanization, innovation and opportunity.

Africa’s emerging economies

Consider this: Ghana, Kenya, Rwanda and Ethiopia are emerging as some of the fastest-growing economies on the continent and in the world, with annual GDP growth rates of 6,6%, 5,6%, 9,5%, and 6,0% respectively in the third quarter of 2019. That’s pretty good compared to the 1,7% for advanced economies or even the 3,9% for emerging economies. And yet, for these countries, these high levels of growth are not a once-off story – they have shown phenomenal and consistent growth over the past 2 decades:

 

• GDP per capita in Ghana has grown from the US $259 in 2000 to the US $2,202 in 2018. That’s almost 8,5 times in 20 years!
• Ethiopia’s per capita GDP has grown 6,2 times over the same period to the US $772;
• Kenya’s per capita GDP has grown 4,3 times to US $1,711; and Rwanda’s 3,5 times to US $773.
• Whilst these per capita GDPs may seem low, it’s worth remembering that India’s per capita GDP in 2000 was US $443 and now stands at US $2,010. A growth of 4,5 times. Indeed, China’s per capita GDP in 2000 was a mere US $959, today it stands at US $9,771. If this sustained growth continues, these countries can be expected to make major transformations in the coming years. 

 Market liberalisation

 Two of these countries (Rwanda and Kenya) are also making great strides in liberalising their economies, as demonstrated by their Ease of Doing Business (EoDB) rankings.

• Rwanda’s EoDB ranking has improved from 67/ 190 countries in 2010 to 38th in 2019;
• Kenya’s ranking has improved from 136th to 56th over the same period.

In fact, Rwanda and Kenya have the 2nd and 3rd highest EoDB rankings in Africa after Mauritius (13/190). Surprisingly under-reported is the African Continental Free Trade Agreement (AfCTFA) signed in 2018, which aims to create the largest free trade area in the world, by a number of countries. The agreement will allow for the free movement of goods and services, people and capital, across the continent. This will be a game-changer for the liberalisation of markets and supply chains across Africa, a continent of 1,2 billion people. The AfCTFA aims to remove tariffs on 90% of commodities, goods, and services, with the first list of tariff-free products expected to be released in early 2020.  This has the potential to herald a new era of trade and industrialisation for the continent.

 A rising youthful, urbanising and entrepreneurial continent

 So, these economies are growing and, in some cases, liberalising. But what about the people. If were to break up the continent on a regional basis, the East African region (which includes Kenya, Rwanda, and Ethiopia) has a population of approx. 280 million; the West African region, in which Ghana is found, is approx. 381 million. These populations are getting wealthier and have an ever-increasing middle class with similar aspirations to middle classes across the world. Unlike many major economies, they have youthful populations which are increasingly urbanising. Compared to 2010, when Africa’s urban population was just 31,4%, this had risen to 40,2% or 472 million by 2018 and it is expected to double in the next 25 years. But also, with an increasing window on the world due to global media (TV, Internet, social media), lifestyle expectations are rising. People expect better infrastructure and services, and demand for household goods and electronics is increasing.

 Already we are seeing interesting changes:

• 2019 saw the launch of the first “Made in Africa” smartphone in Kigali, Rwanda;
• On the back of demand for made-in-Africa entertainment, Netflix’s first original African series is scheduled for global release in February and the company has announced plans for this to be the first of many;
• The Pan-African e-commerce company, Jumia, became the first African tech start-up to reach a US $1 billion valuation, in 2016. The company also broke new ground, listing on the New York Stock Exchange in 2019. And what are the fastest moving goods on the platform? According to their CEO, they are smartphones, fashion, personal care products, and 32-inch screen TV’s;
• A 2017 UN report listed more than 60 ride-sharing companies operating across 21 African countries, many locally-based, like the Kenyan ride-sharing service that accepts that country’s ubiquitous cashless mobile payment system, M-Pesa (M-Pesa itself is an example of successful African innovation to address low banking penetration and that has spread across 10 countries in Africa, Asia and Eastern Europe)

 Just these few examples demonstrate that African consumers and Africa’s urban middle-class bear striking similarities to their compatriots elsewhere in aspiration and drive. With a heady combination of youthfulness, population growth, upward mobility, economic growth and liberalisation in countries such as Ghana, Ethiopia, Rwanda, and Kenya, isn’t it really time we thought of Africa differently?