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Although Africa’s growth prospects are bright, they differ not only country by country but also sector by sector. In these articles, we examine the possibilities for seven of them: agriculture, banking, consumer goods, infrastructure, mining, oil and gas, and telecommunications. Perhaps the most fundamental point is that Africa’s growth story is hardly limited to the extractive industries. As many as 200 million Africans will enter the consumer goods market by 2015. Banking and telecommunications are growing rapidly too, and infrastructure expenditures are rising significantly faster in Africa than in the world as a whole. Not that the growth of the extractive industries won’t be impressive. The continent has more than one-quarter of the world’s arable land. Eleven of its countries rank among the top ten sources for at least one major mineral. Africa will produce 13 percent of global oil by 2015, up from 9 percent in 1998. For many companies, this is a future worth investing in.
Africa is the second largest continent in terms of size and population with one of the shortest coastlines. However, there is no dearth of beached whales all around in terms of growth and profit capacity. Most of the African countries are combining programs of structural adjustment with traditionally profitable businesses to derive maximum output and increase employment rate. In this attempt, some of the industries have managed to surpass their projections. These top 10 industries in Africa are heading the developmental goals of the continent by delivering on key promises of output, productivity, innovation, and employment. Let’s dive deep into the fastest-growing industries in Africa that are turning out to be the center of attention.
Africa was probably the first continent to begin the process of iron ore extraction for painting on rock surfaces. 20,000 years ago, the Ingwenya mine in Swaziland (Southern Africa) was the first mine to be extracted. Later, the mines facilitated global trade led by European countries. Post-independence, several countries took to 100% nationalization of the sector owing to the need for industrialization. However, the stakes were lowered eventually to facilitate inclusive growth and bring in the private sector for improved financial gains.
Africa is a major producer of some of the most precious minerals and metals in the world. From precious metals like Gold and Platinum to production-inclined metals like Iron and Nickel, the economy reeks of reserves in every region. DR Congo is the third largest diamond producer in the world whereas Rwanda and DR Congo together form the biggest producers of Tantalum. The sector is an attractive one for FDI from various countries of the world. Moving forward, a positive state outlook can be seen in the form of assistance offered to the industry. For instance, Both Uganda and Tanzanian mineral policies make it imperative for the sector to contribute to the national GDP. There is also growing public sentiment to participate in the growth of the mining industry.
The step-by-step methodology adopted by African Mining Vision (a joint plan by African nations to bolster mining-related growth) led to the establishment of the African Minerals development center. The center offers strategic assistance to realize the aim of the plan, adopted in collaboration with the United Nations Economic Commission for Africa (UNECA) and the African Development Bank. The social and environmental impact of the industry is often under scrutiny but the large-scale adoption of protective gears, adherence to safety laws, and standards and procedures for handling conflicts at the site are bearing fruits for the industry.
African countries have a huge appetite for planned infrastructure projects, the result of which can be seen in terms of increased FDI and government expenditure. Since 2000, infrastructure investment has hovered around 3.5% every year, leaving behind a huge gap between supply and demand. According to numbers, the investment in this area needs to increase by 1% to ensure equitable access to public and real GDP growth. Infrastructure spending has risen substantially in the past 15 years. However, a lot needs to be done in areas like internet and electricity connectivity, rail density, road density, mass transit system, and affordable housing.
According to a report by Mckinsey, most infrastructure projects in Africa can be turned into a success story by planning, securing offtake agreements, openness and not an aversion to risk management, conducting feasibility studies, and proper coordination between different departments.(4) The report also mentions that the right programs can bring in close to $550 billion worth of investment into the sector.
Over the last few years, African countries have shown unparallel readiness to transition into an infrastructurally strong continent. In 2017 alone, the government spending in the sector was 42% of the total investment. Between 2013-2017, the per year spending in the sector has been around $77 billion, which is twice of what the continent was spending between 2000-2006. As Africa continues to tread on the path of development, infrastructure spending is only going to rise. With a growing population, the industry is set to see major FDI from the world.
Agriculture in Africa was mainly done for sustaining the growing population. Over time, the sector transformed into a powerful one, with renewed capacity for innovation, data analytics, use of artificial intelligence and machine learning for field tracking, etc. Africa experiences bi-annual rainfall, which assists the growth of diverse natural vegetation. The sector contributes 23% of the GDP, along with employment generation for more than 60% of the population.
Farmers in Africa usually have small holdings instead of large acres but the expansion can be done easily due to the large area of unattended agricultural land. According to a report by Mckinsey, the extent of untapped agricultural land can be as much as 840 million hectares.(5) The report also mentions how large-scale investment in the sector could attend to both the African food demand and Global food security. The major crops grown in the continent are- cocoa, Cashew, tobacco, Coffee, oranges, Cotton, Sesame seeds, black tea, cocoa paste, fresh grapes, etc.
However, a major thrust is needed to ensure the export of higher valued and finished agricultural goods. African goods that leave the border are usually raw items that are further processed for gaining high-end value. Small processing units find it difficult to acquire affordable inputs for a time long enough to sustain themselves, eventually losing out to bigger market players. This is essentially the problem that Special Economic Zones (SEZs) are trying to solve in several regions of the continent, such as the ones in Nkok and Togo. These integrated industrial zones developed in collaboration between Arise IIP and the African government create solutions that ensure the realization of optimum production value of every raw product.
Africa is home to 1/6th of the top oil-producing countries in the world and contributed around 9.6% to the world’s output in 2019. During the first decade of this century, the oil contribution to the world supply was even higher. However, as prices came to a standstill, production also followed the trend. Between 2000 to 2011, the African oil industry experienced unprecedented growth in terms of labor productivity and inflation- the former went up and the latter went down. Countries like Nigeria and Angola have been able to attract investor interest due to their large oil reserves. Other popular countries include Gabon, Tanzania, Uganda, and Mozambique. Despite having large oil reserves, Africa’s oil industry is not able to effectively realize its potential. Reasons include but are not limited to:
• Lack of pipeline infrastructure and refinery capacity to enhance oil production
• The huge distance between final consumers and processing sites
• Gaps in investment to build up investor sentiment
• Need for embracing digitalization to quickly acquire data for key decisions
• Risk planning
Several positive events have also followed up the remarkable performance of the sector. For instance, countries like Ghana and Mozambique have recently entered the competitive ground with staggering production value. The recent discovery of oil reserves and continuous exploration, closer proximity to Asian countries, and investment in newer processing units like the Coral floating Liquified Natural gas development in Mozambique are significant steps.
A healthy financial sector propels the economic health of a country. Africa underwent liberalization during the 1980s-1990s, closely followed by several reforms in the financial sector. Steps have been taken to ensure wider financial inclusion, improving the business environment, quick adoption of regulatory frameworks, banking system overhaul, and increased investment in market infrastructure. Combined with structural reforms, the sector portrayed invincible numbers that are in line with the global trend.
The African financial industry has also shown great resilience and flexibility in terms of the insurance sector’s ability to ride the Covid wave. According to data, 69% of insurance companies and agents agree to have adopted resilient business models to help them stay profitable in the long run. Positive changes can also be seen concerning financial institutions’ plans for the next decade. More than 50% of financial institutions have suggested seeking collaboration with profitable and technologically upgraded businesses, rather than choosing to compete with them. Decision makers in these institutions are much more open to independent directors in financial committees than ever before. The risk appetite has also grown due to changes in the regulatory environment and growing digitalization across the continent.
Africa’s journey to full-scale development rides high on its transportation sector. With the rising African population comes the trend of urbanization. As more and more people continue settling in popular urban areas, the transportation sector in Africa becomes even more attractive.
Logistics make up more than 70% of a product price in Africa, as compared to less than 6% in the United States. Decoding the logistics of the transportation sector, therefore, lies at the heart of new start ups and companies. The development of e-logistics in the continent has gained investment from companies like Google, mobilizing the vast population and commercial goods. The continent has established a fair share of air routes, port networks, rail networks, and road networks. According to data, even with year-on-year growth in developing transportation routes, Africa currently has lopsided growth, e.g. majority of highway network in the continent is restricted to the Central zone.
There has also been slight reduction in terms of revenue from last year, driven primarily by Covid-related restrictions. According to African Union, the port infrastructure in the continent requires upgrades to ensure large-scale handling of passengers and bulk cargo. Maritime ports in Africa handle almost 10% of the global trade. According to AfDB, cargo volume moving through these ports has tripled in the last decade. Therefore, the transportation sector has a lot of development to experience in the upcoming years with growth expected to more than just double.
The healthcare industry in Africa has experienced a revolutionary change over the last decade. The Healthcare system in Africa runs via the closely built partnerships between government, private sector, donations from Not-for-profit organizations, and community participation. Substantial investment can be made in the quality and quantity of hospital beds, provision of better processing units for pharmaceuticals for bulk production, and qualified human resources to aid in comprehensive patient care.
The African healthcare industry is estimated to exceed the valuation of $250 billion by 2030. This number opens up a gap of 14% in terms of resource allocation. With an advancing population growth rate and changing dietary patterns of the continent, the continent with a 25% of disease load poses a lot of challenges to the world. Rising cases of both non-communicable and communicable diseases provide an opportunity for closer collaboration between leading medical institutions for inclusive growth that leaves no one out of the basic healthcare ambit.
Further, technology and innovation are being embraced to assist in medical procedures for patients in the region. From drones that deliver medications and reports in a remote area to solar-powered cribs for jaundice-affected babies, African healthcare is embracing solutions that promote equity and healthcare access. Governments across the region are also coming up with policy frameworks to ensure all-weather safety nets for their citizens.
Like most of the world, the African space sector is government driven with year-on-year interest build up from commercial players as well. Space activities have accelerated the growth of thousands of start ups that continue to deploy spare faring for commercial gains. The African satellite TV market has an edge with a bigger pie in terms of the total share. More than 250 start ups have already started working towards the democratization of Space activities. The current value of the sector stands at more than $19 billion and is expected to surpass $22 billion by 2026. Geospatial technology is gaining momentum with a push from both the private and public sectors. Earth observation (EO) technology provides a route for targeted delivery mechanisms and improved location maps. The data is highly sought after by newer businesses whose entire business model stands on the shoulder of EO data tracked from satellite activity.
The lengthy development time in the construction of large satellites becomes a road blocker. The integration of IoT and early warning system can also strengthen the prospects of the industry for worldwide recognition and taking up of space programs. Investment can trigger innovation that propels growth and development in the right direction.
The textile industry in Africa has been active since pre-colonial times. While some regions advanced with a relatively greater number of industries, others competed on a small scale with small industries that grew like mushrooms. These industries were given an upper hand by low-wage daily workers who were available in plenty, thanks to the ever-growing population of the continent. The wealth of these industries can be pictured in the words of Heinrich Barth who was a popular German African traveler. According to Barth, the textile occupation was largely carried out post-harvest period, ensuring unparallel quality and skillset. The items were then sold in markets that stretched from present-day Senegal to Chad along with European nations.
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