Africa is the world’s most profitable region, says Econometrix chief economist Azar Jammine. At a presentation in Johannesburg yesterday, he cited an analysis by the University of Oxford which showed that, adjusted for risk, Africa came out “way above” Asia and Latin America, the Business Report newspaper avers.
Jammine, with Frontier Advisory chief executive Martyn Davies, presented the findings of the MasterCard Worldwide Insights report, entitled Taking Stock: The State of Sub-Saharan Africa.
The report shows growth in the region has not been dominated by mining. Between 2002 and 2007, the fastest growing sectors were hotels and restaurants, with annual growth of 8.7%; financial services at 8%; transport and communications at 7.8%; construction at 7.5%; and utilities at 7.3%.
“Services are just as important, if not more important, than resources, in terms of economic opportunities,” Jammine said, but noted manufacturing and agriculture lagged, the business daily noted.
Jammine and Davies painted a convincing picture of the recent continental success story, after decades of lagging the world. Since 2000, when The Economist magazine labelled Africa “The Hopeless Continent” in a controversial cover story, the region has experienced the third-fastest economic growth in the world. “Ironically this publication appears to have marked the turning point in perceptions of economic opportunities on the continent,” the report said, predicting Africa would take over from China and India as the world’s engine of growth.
The report showed sub-Saharan Africa was the only region in the world that saw an increase in foreign direct investment (FDI) during the 2007/08 financial crisis and the global recession that followed. The continent is vast – 30.3 million square kilometres – big enough to accommodate China, the US, western Europe, India and Argentina. And it has the fastest growing population in the world, set to top 1 billion within the next six years, providing a major share of the world’s future workers, Jammine said. “We are talking about an increase of 700 million working age people over the next 40 years, bigger even than the 600 million increase we are looking for in Asia.” He contrasted it with western Europe, where there would be a 23% decline,” Business Report said.
Sub-Saharan Africa is urbanising rapidly – with cities growing faster than in any other region. It has 52 cities with more than 1 million people, more than double the number in 1990. This pattern of development created a massive demand for infrastructure, goods and services, Jammine said, “and offers immense opportunities to supply the requirements of an urbanising population”. A resource that is still relatively untapped is land.
Jammine said Africa had 60% of available arable land and had the potential to be a bread basket to the world. Only a third of arable land had been cultivated in Africa which meant there were “enormous possibilities if one can develop the farming acumen and acquire the technology within the continent to develop the agricultural resources”. But there are challenges.
Davies pointed out an anomaly: despite its growth rate Africa is falling behind in terms of competitiveness. South Africa, which performs best, ranks only 54 out of 139 countries on the World Economic Forum’s competitiveness index. Davies warned that the region’s growth could stall and even decline without greater competitiveness.