Long-Term Economic Opportunity in Africa: McKinsey

By: EW News Desk Team   Date: 6 July 2010

About The Author

EW News Desk Team

Latest news about the state of the world economy.

EconomyWatch, News Desk Team

 

  • Dot Div
  •      
06 July 2010

Strong prospects await global companies that invest in Africa's consumer, agricultural, natural-resource, and infrastructure sectors.

Africa’s economic growth is creating substantial new business opportunities that multinational companies often overlook.

At least four categories together could be worth $2.6 trillion in annual revenues by 2020:

consumer-facing sectors - retailing, telecommunications, and banking, among others - agriculture, natural resources, and infrastructure,

according to Lions on the move: The progress and potential of African economies.

New projections from the McKinsey Global Institute (MGI) show consumer sectors—the largest opportunity—are already growing

two to three times as fast as those in the countries belonging to the Organisation for Economic Co-operation and Development, or OECD.

This growth will create more consumer markets large enough to attract multinational companies.

Africa’s agriculture holds enormous potential for companies across the value chain.

With 60 percent of the world’s uncultivated arable land and low crop yields,

Africa is ripe for a “green revolution” like those that transformed agriculture in Asia and Brazil.

The barriers to raising production in Africa are well-known and complex,

but if they could be overcome, MGI estimates that the continent’s agricultural output

could increase from $280 billion a year today to $500 billion by 2020 and as much as $880 billion by 2030.

Further growth in Africa’s resource sectors is likely.

MGI analysis suggests that the continent’s production of oil, gas, and most minerals, measured by volumes, may continue to expand steadily by 2 to 4 percent a year.

At current prices, this growth would raise the value of resources produced in Africa from $430 billion annually now to $540 billion by 2020.

Finally, MGI sees large opportunities for companies that help build Africa’s infrastructure.

Currently, African governments and private sources combined are investing about $72 billion a year to do so.

The continent, however, still faces huge unmet needs, which will require at least an additional $46 billion a year in spending.

This goal could be met through a combination of higher outlays by African governments, private companies, and non-OECD investors, along with regulatory reforms to boost operational efficiency.

blog comments powered by Disqus