McKinsey research shows big opportunities ahead in
Africa
Although
Africa's growth has slowed, the long term fundamentals are strong, big business
opportunities lie ahead and the overall outlook is positive. These facts are
contained in the latest McKinseyGlobal Institute Report just released today
titled, Lions On The Move II: Realizing The Potentials of Africa's
Economy.
According
to the MGI’S new report, four fundamentals are likely to underpin Africa's
economic growth. Firstly, Africa has the fastest urbanization rate in the
world. Over the next ten years, 187 million more Africans will live in
cities—equivalent to half the US population today.Secondly, it has the biggest
working-age population in the world of 1.1 billion in 2034—larger than in either
China or India. Thirdly, it has the largest reserves in the world of many key
natural resources (e.g., 60 percent of the world’s unutilized but potentially
available cropland, and the largest global reserves of vanadium, manganese, and
many others). Additionally, Africa has the chance to leapfrog old technologies
using mobile and digital (e.g., penetration of smartphones expected to hit 50
percent in 2020 vs. 18 percent in 2015).
The
new MGI report confirmed that spending by consumers and businesses in Africa
today totals $4 Trillion. By 2025, the total could be $5.6 Trillion. Household
consumption is expected to grow by 3.3% a year and reach $2.1 Trillion by 2025.
The total could be $5.6 Trillion, reflecting an expanding African consuming
class. Business spending is expected to grow from $2.6 Trillion in 2015 to $3.5
Trillion by 2025, and Africa has an opportunity to nearly double manufacturing
output from $500 Billion today to $930 Billion in 2025. AFRICA’S economies are
no longer a story about exporting commodities- but about tapping into vibrant
domestic demand. Accelerated industrialization could lead to a steep
change in productivity and and the creation of 6-14 million stable jobs
over the next 10 years.
AchaLeke,
a McKinsey Senior Partner and Report Co-author, said:“Our new research shows
how in coming years Africa will benefit from strong fundamentals including a
young and growing population, the world’s fastest urbanization rate, and
accelerating technological change. These will help drive rapid growth in
consumer markets and business supply chains, and will offer opportunities to
build large, profitable industrial and services companies. "Tapping
Africa’s consumer markets will require companies to have a detailed
understanding of income, demographic, and category trends. Thriving in business
markets will require businesses to offer products and develop sales forces able
to target the relatively fragmented private sector. But what our research also
shows is how much work needs to be done both by companies themselves and by
Africa’s governments to translate opportunity into tangible economic
benefits.”To make the most of the opportunities, Africa needs more large
companies. MGI’S new database of Corporate Africa, shows that the continent has
700 companies with revenues of more than $500 million, of which 400 companies
have revenues of more than $1 Billion. AFRICA’S companies are growing faster
and are generally more profitable than their global peers. "Africa’s top 100 companies have achieved
success by developing strong positions at home, staying the course to build
their businesses over decades, integrating what other companies would usually
outsource, and investing in building and retaining talent. Further success is
possible in six high-potential sectors with high growth, high profitability,
and low consolidation. These are: wholesale and retail, food and
agro-processing, health care, financial services, light manufacturing, and
construction."
Governments
need to play a stronger role in unleashing renewed dynamism. Six priorities
emerge from this research. Firstly, mobilize more domestic resources,
taking bold steps to mobilize more of its own funding to finance development.
Secondly, aggressively diversify economies, encouraging growth in high-potential
sectors in close cooperation with business, based on a clear understanding of
their countries’ comparative advantages. Then accelerate infrastructure
development and deepen regional integration.
Additionally,
create tomorrow's talent,
ensuring that educational and training systems build work-relevant skills, and
that students are aware of, and encouraged to enter, these vocations and that
the private sector builds on best practice. Finally, ensure “healthy”
urbanization, so that cities grow with the infrastructure required to make the
biggest positive economic and social impact possible. Delivering on these six
priorities will require the vision and determination to drive far-reaching
reforms in many areas of public life—and capable public administration with the
skill and commitment to implement such reforms.
The
McKinsey Global Institute (MGI), the business and economics research arm of
McKinsey & Company, was established in 1990 to develop a deeper
understanding of the evolving global economy. Our goal is to provide leaders in
the commercial, public, and social sectors with the facts and insights on which
to base management and policy decisions
The
partners of McKinsey & Company fund MGI’s research; it is never
commissioned by any business, government, or other institution.The Lauder
Institute at the University of Pennsylvania ranked MGI the Number One private
sector think tank in the world in its 2015 Global Go To Think Tank Index.For
further information about MGI and to download all reports for free, please
visit www.mckinsey.com/mgi
MCKINSEY
& COMPANY AFRICA
McKinsey
has offices in Ethiopia, Kenya, Morocco, Nigeria, South Africa and Angola. The
Johannesburg office opened in 1995, soon after the dawn of South Africa’s new
democracy. We have played an active role in the country’s transformation and
development—helping top companies win on the world stage, supporting the
upgrade of key institutions and infrastructure, building leadership and
capabilities. In South Africa and over 40 other countries in Africa, we shape
strategy and strengthen operations for players in major industries, and help
deliver better outcomes in education and health care. We have over 300 people
based in Johannesburg and have delivered over 1000 projects, with 1400 more
across Africa.
For
more information, please contact: Bonita Dordel at: bonita_dordel@mckinsey.com
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