ABOUT AFRICA'S ECONOMIC FUTURE

Becoming a global economic power: Africa's people hold the key to success
To date, the African economy has largely been overshadowed by Asia in the East and to a lesser extent, Latin America in the West. However, hidden in plain sight, Africa has begun to emerge as one of the world's fastest growing economic regions.
Many global investors still shy away from Africa, retaining the continent's outdated image of war, corruption, political instability, financial chaos and poverty and suffering. However, leading financial consulting firms McKinsey Global Institute (MGI) and Boston Consulting Group (BCG) agree that Africa is now the most profitable place to invest. Not only does Africa provide the best growth rates, but analyses also show that investments in Africa between 2000 and 2009 have yielded the highest profits world-wide.

Africa's economic growth in the last decade
In the past, it was believed that since Africa comprises 20% of the world's land and 15% of its population but only represents 4% of global gross domestic product (GDP), the continent has been under-performing for so long that it would be difficult for it ever to rebound. However, sometime in the late 1990s, Africa's GDP growth began to gather momentum, expanding increasingly rapidly through 2008.

According to Dominique Strauss-Kahn, Managing Director of the International Monetary Fund (IMF), the past decade has been remarkable for Africa even if much remains to be done. Telecoms, banking and retail are flourishing, construction is booming and foreign investment is surging. From 2000 to 2008, global GDP grew 4%, while growth in sub-Saharan Africa has averaged over 5% annually, the best performance in 40 years. During the eight-year period, only five African countries lived up to the reputation of chaos and stagnation, with the Central African Republic (CAR), Côte d'Ivoire, Guinea-Bissau, Liberia and Zimbabwe experiencing no or negative growth rates.

Despite these few poor performances, Africa's collective GDP in 2008 - US$ 1.6 trillion - was roughly equal to that of Brazil or Russia. Poverty has reduced and significant progress has been made towards other important Millennium Development Goals (MDGs).

African economies also showed remarkable resilience during the recent global economic downturn, due in part to the considerable progress made by African countries from the late 1990s and in the first decade of this century, in addressing their fiscal problems and reducing their fiscal deficits. Hence, when the crisis hit, despite many economies suffering lower revenues as a result of the reduced demand for African exports, most countries were able to sustain spending on key priorities.

Foreign investors are now benefitting from the economic and social development progress made on the continent in recent years. The BCG report shows that investors that started putting their trust in Africa in 2003, made far larger profits than those investing in more conventional markets. Between 2003 and 2008, investments in Africa's leading companies yielded more than twice the profits of those made in United States, East Asian or European companies.

Since 1998 the revenues of Africa's 500 top companies, outside of the banking sector, have grown 8.3% annually. Exports have primarily been responsible for the increase, surging from 3% annual growth in the 1990s to 18% in 2000. In turn, increased revenue has allowed Africa's top companies to start investing abroad. Direct foreign investment by African companies has grown 81% annually since 2002; more than double the growth rates of Latin America and Asia.

Economic growth has also created substantial new business opportunities, though these are often overlooked by potential investors. McKinsey analysts project that at least four groups of industries in Africa - consumer-facing industries, agriculture, resources, and infrastructure - could generate as much as US$ 2.6 trillion in revenue annually by 2020, or US$ 1 trillion more than today.

There can be little doubt then that, in the words of Strauss-Kahn, "Africa is back." However, in light of rampant poverty, disease and conflict, Africa's recent economic success has been hard won. The McKinsey report shows that Africa's economic success is primarily due to the efforts of its people and the good governance of its leaders.