By Naledi Modisaatsone
Economic improvements and a wealth of opportunities for business in Africa have led to an increased focus on the continent. Over the past three years Ernst & Young’s Africa attractiveness reports have highlighted the continent’s steady rise. Their research provides some quantitative substance to the growing perception that African markets offer an exciting growth and investment opportunity.
Africa’s growth prospects differ not only country by country but also sector by sector. For example, agriculture is Africa’s largest economic sector, representing 15 percent of the continent’s total GDP, or more than $100 billion annually. It is highly concentrated, with Egypt and Nigeria alone accounting for one-third of total agricultural output and the top ten countries generating 75 percent.
Africa’s banking sector has also grown rapidly in the last decade. Sub-Saharan Africa has become a substantial player in emerging-market banking, with total 2008 assets of $669 billion, while North Africa’s asset base has grown substantially, to $497 billion. Africa’s banking assets thus compare favorably with those in other emerging markets, such as Russia (with $995 billion).
However, the Ernst & Young reports also highlight a lingering perception gap between companies already doing business on the continent and those with no business presence there. The respondents with an established business presence in Africa are more positive about the continent’s prospects and rank Africa as the most attractive regional investment destination in the world today. They view it as an exciting, dynamic, high-growth market. In stark contrast, respondents that have not yet invested are negative and rank Africa as the least attractive regional investment destination in the world.
The African business community should spend some time on this issue at the US-Africa Business Forum. It is their responsibility to debunk the myths that some external investors have about operating a successful business in Africa. These business leaders are successfully embracing Africa’s uncertainty, complexity and volatility, understanding that these are common challenges across most emerging markets.
They are actively balancing the three tensions that all companies face in doing business in emerging markets: long-term versus short-term focus, profit-taking versus sustainable growth, and managing the whole versus optimizing the parts. Most importantly, their companies are establishing strong competitive positions in key markets and are poised to benefit from the continued growth anticipated over the next decade.