Africa: Be prepared to go the extra mile

Tony Canny, Liam Naidoo, and Crispin Rapinet

Africa has become an attractive investment destination with the potential to thrive, as investors look further afield than the more established markets such as Kenya, Nigeria and South Africa. Plus, with rising costs in Asia, manufacturers have started to look elsewhere, to Ethiopia and Rwanda, for example.

Africa is open to foreign investment and industrialization because they bring the potential to create jobs and in turn cut poverty.

The continent has a market of one billion people, including a growing middle class. Sub-Saharan Africa, in particular, has a growing working-age population that will both need and want to join the labor force.

33%: Rising middle classes and increasing disposable incomes are changing consumer habits. Manufacturing is now the top business function, attracting 33% of FDI.

China is a big foreign investor into Africa; indeed, almost all African countries benefit in some way from Chinese investment. Construction, manufacturing and financial services account for some 50% of China’s foreign direct investment (FDI).20

Barriers to doing business

But Africa has a well-known corruption problem. For various reasons, bribery and corruption remain rampant throughout the continent. That’s partly because, historically, the economy has been run in a way that makes it hard to detect bribery and corruption and partly because it seems to have become pretty much normalized. The barriers to doing business are not coming down: there’s a massive gap in infrastructure, for example, and there’s widespread corruption. And while this isn’t unique to Africa, of course, certain conditions make it more susceptible than other areas.

US$38bn: World Bank estimates an investment of over US$38bn a year for the next 10 years is needed to plug Africa’s infrastructure gaps.

To increase responsible investment, a number of African leaders have made public their stances on anti-bribery and corruption. In the last six years, presidents Buhari, Condé, and Magufuli of Nigeria, Guinea, and Tanzania respectively were each democratically elected to the presidency of their countries on promises to tackle corruption. They’re also enshrining their anticorruption attitudes in law.

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