Africa is the world’s second fastest growing region and a prime trade destination for businesses. With average annual GDP growth of 4.6% from 2000 to 2016, Africa has seen steady economic growth that is projected to continue heading towards 2022.
The United Nations Department of Economic and Social Affairs projects that between 2018 and 2035, the world’s 10 fastest growing cities will all reside in Africa.
According to the International Monetary Fund (IMF), Africa’s explosive growth stems from hosting several premiere emerging economies, including Ethiopia, Rwanda, Côte d’Ivoire, Kenya and Burkina Faso among others.
“About half of the world’s fastest-growing economies will be located on the continent (Africa), with 20 economies expanding at an average rate of 5% or higher over the next five years, faster than the 3.6% rate for the global economy,” writes Brahima Coulibaly, director of Brookings’ Africa Growth Initiative.
Here are six ways that businesses around the world can benefit from Africa’s great economic growth.
Openness to Foreign Investment
With a stable political climate and a massive population of young skilled workers, Africa has never been more prepared for the global market. On top of the continent’s great business potential, they are also attracting foreign investment by developing Investment Promotion Agencies.
These organizations have been built to serve as a single destination for international businesses that need to learn more about permits, registrations, regulations, taxes and more.
Eliminating the ambiguity of doing business in Africa will motivate foreign investors to enter the African market with confidence, bringing new ideas while benefiting from the continent’s economic growth.
Heightened Economic Diversity
International businesses can no longer ignore Africa’s trade potential. Natural resources — which Africa is notably abundant in — makes up for only one third of the continent’s growth, highlighting Africa’s economic diversity for interested foreign businesses.
Africa’s strategic move away from specializing in commodities has allowed them to become competitive in several other industries, diversifying what they can offer foreign investors to broaden the interest they recieve on the global market.
Although Africa and China have a strong business relationship, Africa has also invested in additional trade partners to help mitigate the effect of external market forces. This has allowed them to stay competitive on the market by have the flexibility to deal with other countries, while opening the gates to new products and ideas from other markets.
Plus, Africa’s labor costs are some of the lowest in the world, even while costs in India and China are increasing over time. This provides foreign businesses with bountiful outsourcing opportunities that can streamline their costs and help them deliver a more competitive product on the market.
In particular, many foreign countries could be interested in the low labor costs associated with high-skill industries such as the pharmaceutical and telecommunications sectors
Little to No Market Competition
Over the years, Africa has seen far less foreign investment than what would be expected from the world’s second largest continent in terms of size and population. This is due to a variety of different factors, including political strife and the crashing commodity market that took place in 2014 and 2015.
Africa has proven to be a safer bet for foreign investment with an increase in political stability across the region over the last few years. According to World Bank rankings, countries like Botswana, Namibia and South Africa have received increased global scores for their governance in recent years.
And, as is often the case with market volatility, the commodity sector has bounced back in a big way, especially with hard commodities like gold.
This swift change in Africa’s business prospects has led it to become a hidden treasure for many international businesses. However, doing business in Africa requires a thorough understanding of the business culture, regulatory nuances, and the importance of building relationships.
Being one of the first businesses to enter the African market, you can get a headstart on the competition that can lead to immense profits.
High Infrastructure Demand
Although Africa’s economy is continuing to grow at a rapid pace, there is still a high demand for the essential infrastructure that is present in other more developed countries. This absence can hinder international trade and limit the foreign interest attracted to the growing continent.
In fact, Africa’s lacking transportation infrastructure results in as much as 50% of fruits and vegetables spoiling before they even reach market. With similar effects occurring in other African industries, reducing unnecessary waste and improving market efficiency is crucial for improving the continent’s foreign marketability.
Although Africa’s lacking infrastructure may seem like a negative to some, international businesses that can solve this problem by connecting the developing continent internally, as well as externally, with the tools and resources they need can win big.
International businesses have seen similar success in helping emerging countries like Singapore and Dubai with their rush for infrastructure, gaining from the early investment and establishing fruitful relationships before competitors enter the market.
Ease of Innovation
One of the greatest benefits of fast-growing economies like Africa’s is that their lack of prior infrastructure allows them to easily adopt the latest technology and innovations.
While many developed countries have already heavily invested in coal, oil and other resources that are becoming obsolete with the rush towards sustainable fuel, Africa has the flexibility to openly embrace new ideas and technologies.
Africa has the most unused arable land in the world, allowing the continent to experiment with the latest innovations in agriculture, energy and other industries.
With the growing demand for new technology and environmentally-friendly solutions, international business leaders can turn to Africa for the answers.
Similarly, Africa is one of the global leaders in mobile adoption, pushing past the boundaries of other developed countries to become the pioneering force behind the industry’s innovation.
Mobile data usage in Africa is expected to increase twenty-fold between 2013 and 2019, showcasing the unprecedented growth and adoption of Africa’s mobile industries.
Without the banking infrastructure of other developed countries, mobile payments have emerged in Africa is a way to bank the unbanked, delivering businesses and individuals the tools they need to interact with the global market.
International businesses involved in telecommunications can benefit from supplying the African market with the products that they need to interact in their mobile-dependent society.
Growing Middle Class
According to McKinsey Global Institute, consumer spending in Africa is expected to grow from $860 billion in 2008 to $1.4 trillion by as early as 2020.
This massive population and boom in spending provide international businesses with an enormous increase in marketable consumers.
In particular, the growth of Africa’s middle class presents a prime opportunity for international products to find a home in African markets while helping to supply Africans with the goods and services that they need.
Getting Ahead in Africa
International businesses have plenty to gain from doing business in Africa. The continent’s growing economy, untapped business potential, and political stability provide a strong foundation for businesses from around the world to flourish. However, it won’t be long before the world fully recognizes the benefits of investing in Africa.
One way to get ahead of the competition is by doing business in the local payment methods that African markets are accustomed to. This helps to streamline the business process while providing African businesses with a payment method that they’re comfortable with.
Emergent Payments helps businesses pay and receive funds in local payment methods, allowing them to seamlessly integrate into emerging economies around the world.
Representing over $1.1 trillion in e-commerce payments, Emergent Payments specializes in emerging economies, providing payments solutions for over 70 high-growth markets.
We know firsthand how to drive profits in emerging markets. Our team of payment experts have extensive experience at some of the world’s leading digital merchants.
This has allowed us to build a comprehensive payment solution powered by state-of-the-art technology that delivers the scalability, reliability, security, and performance that businesses need to succeed on the global market.
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