Investments in Africa Can Lead a Post-COVID Global Economic Recovery
The International Monetary Fund reports that the current global economic crisis, caused by COVID-19, is set to decrease global economic growth to -3% for 2020. To put this in perspective, the 2009 economic crisis only brought the global economic growth rate to -0.1%. Thus, the current crisis is the worst the world has seen since the great depression. To make matters worse, millions of the jobs lost during this pandemic will never come back, as many companies have gone belly up for good. So how can the world recover? Well, one engine of growth is investment in emerging and developing economies. Particularly, I am encouraging more foreign direct investment in Africa.
Africa, with its abundance of location-specific resources, can present the engine of growth needed to recover the global economy for several reasons. First, the continent contains several key emerging markets that present ample opportunities for growth, particularly in retail and mobile telecommunications. The consumption market in Africa has been predicted to reach $2.5 trillion by 2030 (Signé, 2019). With growing emerging market economies such as South Africa and Nigeria, Africa has become a continent that boasts rising consumer disposable incomes, strengthened infrastructures, and improving regulatory environments. In fact, within the World’s Bank’s 2020 country rankings for ease of doing business, several African countries rank in the top 100 (i.e. Mauritius ranks #13, Rwanda ranks #38, Morocco ranks #53, Kenya ranks #56, South Africa ranks #84, Botswana ranks #87, Togo ranks #97, and Seychelles ranks #100). In this same list for 2019, five of the ten most improved countries were in Africa. Also, in 2018, six of the ten fastest growing economies in the world were in Africa (Leke and Signé, 2019). It can thus be stated that the African continent contains several economies that make foreign direct investment worthwhile.
Second, because many economies in Africa are considered emerging or developing, there are plenty of potential industries that provide opportunities for first-mover advantages. In other words, emerging economies in Africa can provide expansion opportunities for companies that may compete in already saturated or stagnant markets in developed countries. Africa’s population is projected to grow to 1.7 billion by 2030 (from the current 1.2 billion), and this population growth is projected to occur largely in urban areas (Leke and Signé, 2019). With growing populations in urban areas, the continent surely provides ample opportunities for first movers to reap economic benefits.
Finally, Africa is home to some of the most beautiful natural sights in the world. From Madagascar’s unique biodiversity that boasts countless endemic plants and animals, to the breathtaking sunrises of Namibia, to the Virunga national park of Uganda, the continent of Africa holds some of the world’s largest opportunities for growth in tourism. Although there are plenty of established touristic destinations, such as the Serengeti in Tanzania, there are plenty of opportunities for untapped touristic opportunities in Africa, particularly in the eco-tourism sector. Therefore, as global travel resumes, investments in African tourism can provide opportunities for growth on the continent and serve as the engine for global economic recovery.
In sum, the African continent provides much more than a cause for charities and non-profits. It can provide opportunities for growth and expansion for interested investors, it can provide an engine for growth and recovery from the COVID-induced global economic decline, and it can provide countless touristic destinations for global travelers. My personal favorite scholar, the late Dr. C.K. Prahalad, dedicated his work to providing evidence that the world’s least developed markets provide large opportunities for profits, and I am saying here that Africa’s economies can be the world’s next booming marketplace.
IMFBlog. Retrieved from: https://blogs.imf.org/2020/04/14/the-great-lockdown-worst-economic-downturn-since-the-great-depression/
Leke, A. and Signé, L. (2019). Spotlighting opportunities for business in Africaand strategies to succeed in the world’s next big growth market. Retrieved from: https://www.brookings.edu/research/spotlighting-opportunities-for-business-in-africa-and-strategies-to-succeed-in-the-worlds-next-big-growth-market/
Signé, L. (2019). Africa’s emerging economirs to take the lead in consumer market growth. Brookings. Retrieved from: https://www.brookings.edu/blog/africa-in-focus/2019/04/03/africas-emerging-economies-to-take-the-lead-in-consumer-market-growth/#:~:text=Countries%20such%20as%20Nigeria%2C%20South,challenges%20to%20create%20high%20returns.
World Bank (2020). Doing Business. Retrieved from: https://www.doingbusiness.org/en/rankings?region=middle-east-and-north-africa