“Africa will continue to be one of the largest FDI destinations and will retain its position of having at least six of the fastest growing countries in the world!” says Yunus Suleman, Chairman of KPMG Africa.
And, with increasing political stability throughout the continent, the report indicates that what we have seen in terms of Africa’s attractiveness to date is only the tip of the proverbial iceberg – the continent has much more to offer and investments will continue to flow. In addition, the continent is improving in the areas of human rights, social development, education and health. All these make for a growing, healthy and stable marketplace.
Klaus Findt, KPMG Chief Operating Officer of Global Infrastructure and Projects Group Africa, emphasises this point, “... the continent is quickly burying some of the ghosts of its past. Across most of Africa, state-owned enterprises have been privatised or are planning privatisation, trade borders have been opened, corporate taxes have been lowered, and regulatory and legal systems have been strengthened.”
FDI into Africa has followed the oil over the past decade, and this will likely increase, as it is projected that at least another 100 billion barrels of oil are available off the continent’s shores, only waiting to be discovered. Although Africa’s oil, gas, mineral, and metal endowment will remain important draw cards for investment on the continent, focus is shifting increasingly to the potential contained in the size of and growth in Africa’s consumer market. In addition, enormous agricultural potential exists on the continent – while at the same time two recent global food price increases have highlighted the vulnerability of the world’s population.
The report finds that East Africa may be an area whose potential is underestimated, as a result of poor data collection. A case in point is the rise of Kenya, where oil was recently discovered in March 2012. Kenya also has among the most sophisticated financial sectors on the continent. Moreover, in a regional context, Kenya’s manufacturing sector is quite well developed. As a result, this gives investors the opportunity to take advantage of the combination of an established manufacturing base and a large and growing consumer market in the East Africa Community (EAC).
While much of Africa remains on the poverty datum line or below, there is nevertheless a growing middle class that is demanding access to luxury goods, electronics‒ including visual and audio systems, white goods, upmarket services (mainly financial), entertainment goods and services, telecommunications, high-end retail stores, quality food and beverage outlets, and motor vehicles and accessories. The list could go on and is virtually unlimited. But thorough market research, an understanding of wealth distribution and location, disposable income levels and government policies regarding new ventures and merger and acquisition (M&A) activity would be prerequisites.
“Africa is described as ‘investor hungry’. In fact, it currently has an insatiable appetite for growth. And this growth it good for investors ‒ there is undoubtedly money to be made in Africa. As KPMG, we are excited about this journey to assist companies expanding their reach in Africa,” notes Suleman.