Africa: The New Frontier
Infrastructure
Africa’s infrastructure sector faces enormous challenges. In a presentation to the World Water Forum in Mexico few years ago, African ministers put the total annual investment required in their water sector alone at $20 billion. Separate research from the World Health Organisation indicates that $23.5 billion a year would be saved by providing basic access in sub-Sahara Africa: five percent of the region’s gross domestic product.
Average electricity access in sub-Sahara Africa stands at about 25 percent, and the World Bank expects 60 percent of sub-Saharan Africans to still lack electricity by 2020. A report by Tanzania’s Economic and Social Research Foundation calls for a doubling of generating capacity over the next 10 years, while Nigeria, which has only a tenth of South Africa’s power output for three times the population, plans to more than double its capacity by 2011.
The impact of emerging economies is particularly noticeable in infrastructure. At Kilamba Kiaxi, on the outskirts of Luanda, Angola, Chinese companies are building a new township designed to accommodate some 200,000 people, complete with schools, business sites, access roads, sewage plants and other needed infrastructure.
The United Nations Conference on Trade and Development estimates that southern-owned companies account for 40 percent of all infrastructural commitments made in Africa between 1996 and 2006. According to the donor-led, World Bank-managed Public-Private Infrastructure Advisory Facility, China’s planned investment in hydroelectric schemes could increase Africa’s generating capacity by 30 percent.
Agribusiness
Outside mining, Malaysia’s Sime Darby has recently struck a deal worth $800 million to revive the Guthrie plantation in Liberia to develop rubber and palm oil. Singapore’s Wilmar International has taken a stake in a palm oil venture in Côte d’Ivoire.
More controversial has been the interest shown by some emerging economies—as well as by Western companies—in securing needed food supplies by acquiring large tracts of African land to grow maize, wheat and other food crops. Sudan and Egypt have seen significant amounts of such investment from Saudi Arabia and the United Arab Emirates, among others.
China has largely refrained from investing in food, but has shown interest in commercial crops. It has already launched a major scheme in Zambia to purchase cotton from farmers and is reportedly negotiating a similar scheme for jatropha, a plant whose oil can be used for biofuel production.
Ghana has just approved a $40 million deal with a company in Brazil to help develop the sheanut sector, including constructing a processing plant and providing relevant technology. Benin, Burkina Faso, Chad and Mali have a similar deal with Brazil to help improve their cotton sector. Brazil’s development of ethanol and other renewable energy technology also presents a potential area for expanding African agribusiness sector.
Telecommunication
The International Telecommunications Union recently noted that: “Growth in Africa’s mobile sector has defied all predictions. Africa remains the region with the highest annual growth rate in mobile subscribers.” The UN agency adds that no less than 65 million new subscribers signed up in 2007. “By the beginning of 2008, there were over a quarter of a billion mobile subscribers in Africa and mobile penetration had risen from just one in 50 people in 2000 to almost one-third of the population today.”
World Bank officials now estimate that an astonishing $14 billion has gone into telecommunications in Africa in the past five years, with the number of mobile telephone lines rising to 135 million last year from 15.6m in 2000: a compound annual growth rate of almost 54 percent, compared with 24 percent globally. Yet this growth has only scratched the surface, as mobile penetration across the continent is still only 15 percent. Morgan Stanley estimates that mobile phone penetration in sub-Saharan Africa will rise to 42 percent by 2012. As at 2001, Nigeria had less than 150,000 connected mobile phones, in 2009, the country has over 67 million active mobile phone subscribers.
Africa on the move
As more emerging economies defy the media blitz on Africa and invest in key sectors that are generating jobs and return on investment, Africa is slowly but surely heading towards economic transformation.
The UN’s Office of the Special Adviser on Africa, stressed that African countries, through regional groupings such as the Southern African Development Community and the Economic Community of West African States, could present a common front to potential investors and buyers and thereby maximise the potential of emerging markets to meet the continent’s strategic goals. At the same time, the African Development Bank and the UN can help provide African countries with market intelligence and other assistance.
—Frank Aneke is the principal of OctoberFirst Consulting, an investment communication firm specialising in business opportunities in Africa. OctoberFirst is a member of the NSW Business Chamber.
Got something to say? Join the export forum here at DynamicExport.com.au.
