Foreign direct investment in Africa: the rise of the Phoenix

Under the theme “Delivering on Africa’s Promise”, the 23rd World Economic Forum (WEF) on Africa will provide an important platform for regional and global leaders from business, government and civil society to deepen the continent’s integration agenda and renew commitment to a sustainable path of growth and development.

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!” ~ Yunus Suleman, Chairman of KPMG Africa

Ahead of the World Economic Forum on Africa 2013, we’ve released an updated report on foreign direct investment (FDI) in Africa, titled ‘African Emergence ‒ Rise of the Phoenix.

Foreign Direct Investment into Africa

With increasing political stability throughout Africa, the report indicates that what we’ve seen in terms of Africa’s attractiveness to date is only the tip of the proverbial iceberg – the continent has much more to offer and investments will continue to flow. In addition, the continent is improving in the areas of human rights, social development, education, and health.

All these make for a growing, healthy and stable marketplace. 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.”

Africa’s consumer market

Foreign Direct Investment (FDI) into Africa has followed the oil over the past decade, and this will likely increase – it’s 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.

The report finds that East Africa may be an area whose potential is underestimated, as a result of poor data collection. 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).

Growing middle class in Africa

While much of Africa remains on the poverty line or below, there is nevertheless a growing middle class that is demanding access to luxury goods and electronics ‒ including visual and audio systems, white goods, upmarket services (mainly financial), entertainment goods and services, telecommunications, high-end retail stores, quality food and beverage outlets, and motor vehicles and accessories.

Africa is described as ‘investor hungry’. In fact, it currently has an insatiable appetite for growth. And this growth is good for investors  ‒ there is undoubtedly money to be made in Africa.” ~ Yunus Suleman

But what are the prerequisites for companies expanding their reach into Africa? Thorough market research? An understanding of wealth distribution and disposable income? Knowledge of government policies regarding new ventures and merger and acquisition (M&A) activity? Share your thoughts here!

Download the full report: [download id=”4″]

Read the full article here: African Emergence ‒ Rise of the Phoenix’

David Okwara

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