Sub Saharan Africa (SSA) is home to some of the world’s fastest growing economies. Powering this growth is becoming a central focus for investors and presents a vital opportunity for companies in the power sector.
Over the last decade, many economists have argued that markets in Africa are booming. Now confronting the possibility of the “commodity super cycle” collapsing, a few economists have surmised that the sub-Saharan “Africa rising” narrative of the past decade is ready for its curtain call. We believe the reality lies more in the middle ground between these two narratives.
Sub-Saharan Africa should, by any measure, be a global agricultural powerhouse. But governments’ inability or unwillingness to invest in agriculture and the infrastructure necessary to bring it to market has prevented the continent from reaching its potential. Slowly but surely, however, things are changing.
Anyone browsing a statistical table on sub-Saharan Africa will see one country stand out in nearly every area - South Africa is easily the continent’s wealthiest and most developed country. That said, most of the recent news out of South Africa is disheartening. What does it all mean for a business looking at South Africa as a gateway to the continent?
Looking broadly, Sub-Saharan Africa’s economic picture in 2016 is going to be a relatively grim one, particularly in light of the past 15 years’ robust growth. However, the picture is not entirely bleak.
Even casual observers of sub-Saharan Africa are aware of the often explosive growth seen across the continent over the past decade. Since 2014, however, the continent’s economic growth has fallen somewhat back to Earth. That said, the picture for 2016 is far from bleak.
The continued upward trajectory of the China-Africa relationship looks more in doubt than at any time in recent memory. On both sides of the equation, the bloom is off the rose; both Africans and Chinese are starting to see their partners’ warts and flaws more clearly.
Despite its robust growth over the past decade, sub-Saharan Africa will not make real progress toward ending poverty and sparking sustainable development until it can provide its citizens reliable access to electricity. For potential investors and companies in the power generation sphere, this situation poses both immense opportunities but also innumerable potential pitfalls.
Sub-Saharan Africa is undergoing an urbanization boom that could see the region emerge as the world’s most urbanized region by 2050. At present, roughly 40 percent of Africans (south of the Sahara) live in urban areas, defined loosely as cities and large towns, as well as their surrounding areas. For a continent that was almost entirely rural at the start of the 20th century, this growth is remarkable, putting it ahead of India and nearly on par with China. And it is predicted to continue; some estimates see Africa as 70 percent urban by 2050.
Businesses around the world—including Europe and the United States—often use political party donations as a means by which to win influence and get an edge on potential competitors. The potential benefits are obvious. However, the party funding game is one fraught with minefields.
Sub-Saharan Africa contains investment opportunities for US firms in a nearly limitless number of sectors—extractives, power generation, financial services, infrastructure…you name it. However, perhaps the most pressing problem faced by the private sector in Africa (both domestic and international firms) is the scarcity of skilled workers.
If your firm is looking to commence or expand operations in Africa, there is a good chance you will want to establish a local base of operations. Your choice could be a simple one. However, if you are looking for a base for regional or even Pan-African operations, then you must do a bit more thinking about where you end up.