Africa continues to show promise as a key FDI destination
During the 23rd World Economic Forum on Africa, held earlier this year, regional and global leaders from business, government and civil society engaged in discussion around unlocking and delivering on Africa’s promise and potential. We believe that the continent will continue to show prominence as a key destination for foreign direct investment (FDI) in coming years, with Yunus Suleman, Chairman of KPMG Africa, reiterating:
Africa will continue to be one of the largest FDI destinations and will retain its position of having at least six of the fastest growing countries in the world!”
Ahead of WEF 2013, KPMG Africa released African Emergence – Rise of the Phoenix, a report in which we identified that investors have not yet realised the full potential of our continent. There is still much on offer, with great prospect for growth and further expansion. Increased political stability, improved human rights and social development, as well as improvements in health and education will all continue to aid sustainable growth and retention of our position as a key FDI destination.
Klaus Findt, KPMG Chief Operating Officer of Global Infrastructure and Projects Group Africa, emphasises this point:
… the continent is quickly burying some of the ghosts of its past. Across most of Africa, state-owned enterprises have been privatised or are planning privatisation, trade borders have been opened, corporate taxes have been lowered, and regulatory and legal systems have been strengthened.”
FDI into Africa has followed the oil over the past decade, and this will likely increase, as it is projected that at least another 100 billion barrels of oil are available off the continent’s shores, only waiting to be discovered. Although Africa’s oil, gas, mineral, and metal endowment will remain important draw cards for investment on the continent, focus is shifting increasingly to the potential contained in the size of and growth in Africa’s consumer market. In addition, enormous agricultural potential exists on the continent – while at the same time two recent global food price increases have highlighted the vulnerability of the world’s population.
East Africa’s Emergence
As a result of poor data collection in the region, we believe that East Africa is a region with hugely underestimated potential. A case in point is the rise of Kenya, where oil was recently discovered in March 2012. Kenya also has among the most sophisticated financial sectors on the continent. Moreover, in a regional context, Kenya’s manufacturing sector is quite well developed. As a result, this gives investors the opportunity to take advantage of the combination of an established manufacturing base and a large and growing consumer market in the East Africa Community (EAC).
We have recently been witness to the growth in the middle class, and with this, an increased demand for luxury goods, electronics, upmarket services (mainly financial), telecommunications, high-end retail stores and more. Thorough market research, an understanding of wealth distribution and location, disposable income levels and government policies regarding new ventures and merger and acquisition (M&A) activity would be prerequisites.
Suleman comments that Africa has an “insatiable appetite for growth” and this hunger for investment will continue to spur on progress and development across a number of sectors, he says:
there is undoubtedly money to be made in Africa. As KPMG, we are excited about this journey to assist companies expanding their reach in Africa…”