Trends Shaping Business in Africa in 2019
January 14, 2019 (Ezega.com) - The economic outlook of some of Africa’s signature economies didn't inspire confidence in 2018. Angola and Nigeria have just recovered from a recession triggered by a decline in oil prices. And for the first time in a decade, South Africa experienced a recession.
But away from these economic giants, there are emerging global trends and emerging powers that provide the prospect of new stories in the continent.
In 2018, Countries like Ethiopia, Djibouti, Senegal, Ghana, Ivory Coast, and Tanzania featured among the fastest growing economies globally. According to the World Bank, sub-Saharan Africa is likely to witness a growth of 3.6% in 2019-2020.
The global consulting company, Mckinsey and Company suggest the region is at the same stage China was before its explosive economic transformation. They say African countries should follow china’s blueprint if we want to experience economic progress.
With the consumer spending projected to hit $25 trillion by 2025, Africa’s emerging markets offer immense opportunities for mergers, acquisitions, and global trade. Urbanization will likely increase consumer spending and business, rising from $4 trillion in 2015 to $5.6 by 2025 according to Mckinsey and Company.
Africa should be optimistic because key industries look to drive economic growth, reduce the poverty levels and create jobs. You can look forward to better infrastructure and improved living standards.
In this regard, here’re the trends and stories shaping business in Africa in 2019;
Agriculture remains one of the most important sectors in the continent because it employs a majority of Africans. It’s also one of the drivers of the economic progress being witnessed in Africa. The UN projects Africa’s agribusiness will be worth $1 trillion come 2030.
In terms of being a powerhouse in agriculture, Africa is still a sleeping giant. Why? 60% of the continent comprises unused arable land with a favorable climate for growing grain, fruits and vegetables.
Through ‘crowd farming’ business techniques and the availability of new technologies, landholders can upgrade the slow and outdated farming methods and increase their yields.
2. Surge in manufacturing
According to Africa’s Business Revolution, the value of manufacturing in Africa will increase to $1 trillion by 2025. During the same period the sector will create more than 14 million jobs. This is good news because it will lead to self-sufficiency and a healthy trade balance especially when you consider Africa’s exports.
In some instances, unstable commodity prices have forced governments to find alternative ways of diversifying their economies, leading to long-term resilience. Like in the case of Nigeria; the crash in the oil prices made the government rethink its economic strategies. Emphasis was put on manufacturing which should help scale-up the country’s exports in the years to come.
Africa stands to gain a lot from advanced manufacturing, Morocco’s car industry is an example of what African countries can achieve.
On the same note, Ethiopia’s industrial parks have shown great possibilities. It is delivering solid returns and can be profitable if adopted elsewhere.
Establishing collaborative strategies with Chinese firms, drawing on their skills and resources, can be a major asset for African countries seeking to explore the manufacturing sector in the coming years.
3. Close ties with neighboring countries
The Continental Free Trade Area agreement (CFTA) looks promising. It’ll make cross border trade easier across Africa. Presently, 44 countries have agreed to it, and therefore, allowing free movement of goods between their countries. More are expected to do the same.
If Africa can realize free movement of goods from Egypt to South Africa, the continent will achieve tremendous economic growth. At the same time, it offers an incentive for the development of cross-border infrastructures, thus further expanding the continent’s emerging markets.
Africa’s financial sector is underdeveloped with only 34% of the continent’s population owning bank accounts or can access financial services via formal channels.
Subsequently, the existing financial products are inflexible, but the growth of internet connectivity in the continent is helping ease financial access, therefore, bypassing the traditional barriers.
At the same time, financial institutions are doing away with traditional banking models. There is a growing desire in people to bank anywhere anytime, and it makes digital banks dominate Africa’s financial space.
In essence, this development means a simple gadget like the mobile phone becomes your wallet. In this regard, businesses in Africa must strategize on this latest trend in a way that makes them secure a competitive advantage over their global rivals, who seek to set foot in Africa’s market space.
The continent’s fine tech space is powered by young innovators and entrepreneurs who seek to provide affordable solutions to help established businesses and startups issue bills, manage payments online and create bulk disbursements and many other financial transactions.
5. Affordable housing
There’s a high demand for jobs in cities, and rural to urban migration is still a common occurrence in many African countries. This has increased the demand for affordable accommodation.
At the moment, a majority of the continent’s housing projects tend to focus on first-class segments and the ever-growing middle class. For instance, Ethiopia’s flagship social-housing project is probably the most notable program in Africa as suggested by The Economist.
But for many residents, these houses are unaffordable. A majority of the population are poor, which is the case with other African countries and they can’t even afford a deposit for the most subsidized units. Others decide to rent out the houses and live elsewhere because they can’t afford the repayments.
Angola launched an ambitious housing project two years ago, with an estimated budget of $3.5 billion. In the capital, apartments went for $84,000, in a nation where the average income per person is about $4,000.
In Cameroon, the government’s social housing program is out of reach to almost 80 percent of the citizens.
The mass migration of people from rural to urban areas increase the demand for affordable and efficient transport. And with companies like Toyota, Mercedes, Volkswagen among others continue to set up their assembly plants across Africa, vehicle sales are projected to exceed 10 million units annually in the next ten to fifteen years.
Africa has a bright future because its economy is improving, hence offering new opportunities for improvement in different sectors. This will create more business opportunities for innovators, entrepreneurs, and skilled workers in crucial industries. The good thing is there will be an improvement in the standards of living on the continent that is yet to realize its full potential.
By Solomon O. for Ezega News