twelve pillars of africa's future
every so often, someone declares that this is africa's moment, and the declaration tends to age badly. so let me not declare anything. let me just lay out the forces, twelve of them, and you can decide how much to believe.
growth in Sub-Saharan Africa rebounded to about 2.4% in 2017 after slumping to 1.3% in 2016, led by Nigeria, South Africa and Angola, helped along by recovering commodity prices, easier global financing, and cooling inflation that let households spend again. that's the floor. here's the case, pillar by pillar.
favourable demographics
the continent is young in a world that's getting old, and that's an asset before it's anything else. by 2034, Africa is expected to have the largest working-age population on earth, 1.1 billion people. it's already creating jobs, if not fast enough: 21 million stable, wage-paying jobs over five years, 53 million over fifteen, with stable employment growing 3.8% a year, a point faster than the labour force itself. not the trajectory the continent needs yet. but a real one.
rapid urbanisation
most of the payoff from urbanisation is still ahead. city workers are roughly three times as productive as rural ones, and 187 million more Africans will live in cities within the decade. that's a consumption engine. household spending grew 4.2% a year to $1.3 trillion in 2015, faster than GDP, and is headed for $2 trillion by 2025. but it's concentrated, not spread: 75 cities made up 44% of all consumption, and Nigerian consumers alone could account for 30% of the continent's consumption growth. "the African market" was always a few hundred specific cities wearing a trench coat.
innovation and technology
the one i care about most. Africa can skip the cost and lag of physical infrastructure by going straight to digital, and it's already happening. East Africa leads the world in mobile payments. smartphone penetration was set to climb from 2% in 2010 to 50% by 2020, and cellular machine-to-machine connections to grow about 25% a year toward 30 million, reshaping everything from healthcare to power. the interesting part isn't the adoption curve. it's the spillover, technology solving problems specific to this market that no imported playbook was built for.
expanding middle class
income growth came slower than the optimists promised, but it came. a middle-class household, one spending beyond food and basics, is the thing that pulls an economy up a level: more demand, more business, more jobs. Africa's middle class is projected to grow from 355 million (34% of the population) to 1.1 billion (42%) by 2060. it's fragile, though. leave the infrastructure gap of power, water and sanitation unaddressed and that class stalls before it consolidates. what's held it together so far is less income than disposition, a stubborn optimism that turns out to be its own economic input.
sustained economic growth
growth roughly doubled over a decade to nearly 6% a year, with Angola, Nigeria, Kenya and Ghana topping global tables while richer economies were still nursing the 2008 hangover. foreign investment grew more than tenfold; health, education and worker productivity all ticked up. the obstacles are the honest part: youth unemployment, soft commodity prices, climate, missing infrastructure. and growth that shows up in GDP but not in people's lives doesn't stay peaceful, it has to become inclusive or it becomes unrest. diversify, or catch the resource curse: let oil appreciate the currency, let agriculture and manufacturing wither, wake up exposed.
increasing foreign direct investment
Africa is the fastest-growing region for FDI. when global flows fell 16% in 2014, Sub-Saharan Africa's actually rose 5% to $42 billion, riding out Ebola, regional conflict and falling commodities. Central and East Africa grew 33% and 11%. China became the world's second-largest investor after the US, and five of the ten economies where its influence runs deepest are African. Nigeria is the biggest host on the continent and an investor itself, putting $1.3 billion into greenfield projects abroad. the surprise was tiny Togo at fifth, pulling in $500 million on the back of its pan-African lender, Ecobank. leaning on foreign capital for 14% or more of funding is a real risk. but the flows are real too.
commodity and energy resources
Africa sits on enormous sustainable energy resources and has tapped a sliver of them. the trick isn't having the commodities, plenty of cursed economies have those. it's managing the rent with long-term, structural discipline instead of short-term grabs, and capturing more of the value chain at home. do that with any consistency and resources become a foundation instead of a trap.
offshoring destination
the things that made India an offshoring hub already exist in pockets of Africa: English fluency, a real talent base, cultural fit, workable time zones. in North Africa, Egypt drew IBM and EDS years ago, and Morocco moved from call centres into banking, telecom and IT for the French market, Capgemini among them. in West Africa, Nigeria's software-development offshoring jumped with Andela, Google and a spread of local hubs growing the talent pool, and the indigenous companies behind it. further south, Accenture, Wipro, IBM, Genpact and Deloitte put South Africa in line as the next hub. the relationships are getting more complex, which is the tell that the market is maturing.
finance and business services
as the internal market grows, so does the hunger for banking, personal, business and micro. only a quarter of Africans have a bank account, which is the opportunity, not the indictment; retail banking is set to grow about 15% a year for the rest of the decade. new forms are leapfrogging the old: M-Pesa now reaches a reported 70% of Kenyan adults, with similar systems running through major banks across the continent. Johannesburg stays the financial centre, Casablanca, Lagos and Nairobi consolidate as regional hubs, and Port Louis is becoming the offshore one.
infrastructure investment
poor transport, power and telecoms remain the single biggest drag, and the clearest urgency. the cost of doing anything here is an infrastructure tax, and the funding to cut it is rising, much of it Chinese: hydro power in Nigeria, road and rail across DR Congo, Mozambique, Tanzania, Kenya and Angola, communications in Ethiopia. with existing cities straining under rapid urbanisation, there are bets on new satellite ones, Konza Techno City outside Nairobi, Eko Atlantic off Lagos. fix this and the rest gets easier. don't, and every other pillar carries extra weight.
rapidly evolving commercial real estate market
a real-estate boom is the natural byproduct of urbanisation and a rising middle class. the upside is lopsided today: of roughly 23 million m² of shopping-mall space, 21 million sits in South Africa, and office space tells the same story. veterans will tell you the "Africa opportunity" can clear north of 25% annual returns, but only after surviving poor urban planning, half-finished neighbouring infrastructure and unreliable local developers. blank slate, high ceiling, real hazards.
improving economic management
governance is getting more rigorous, selectively. investor worries haven't vanished, and Africa stays a balance of risk against opportunity. but the risk side is improving in specific places: Accra, Lusaka, Dar es Salaam and Maputo pair some of the region's most favourable risk profiles with high growth, which is exactly the mix capital looks for.