Unlocking Africa's investment potential: Why investors overlook the continent
Image: Ai
Africa is losing out as an investment destination because it is misunderstood by financial backers due to outdated perceptions based on antiquated data and broad generalisations that it is a monolith and not a continent of striking contrasts – from tourism opportunities to great mineral wealth in a renewable energy world.
Stefano Resi, head of data centre sales for Middle East & Africa at Nokia, points out that the continent is huge, spanning more than 30 million square kilometres, with 1.5 billion people living in 54 countries.
Africa can no longer be ignored, said Casey Sprake, economist at Anchor Capital. Its population is set to hit 2.5 billion in 2050, a quarter of humanity, it has mineral wealth with 30% of the world's critical mineral reserves and large swathes of arable land.
Africa offers a rare and powerful combination of growth potential, resource depth, youthful human capital, and regional ambition in a world characterised by geopolitical fragmentation, supply chain realignment, and demographic ageing in major economies, said Sprake.
'For forward-looking investors, business leaders, and development partners, the question is no longer whether Africa matters but how best to engage with its evolving, increasingly central role in the global economy,' Sprake said.
As long ago as 2010, McKinsey & Company – in its first iteration of its Lions on the Move report - argued that Africa was seeing significant economic growth, increasing urbanisation as well as rapid urbanisation and a growing commercial sector. That report, which advocated investment into the continent, has since been updated three times.
Yet, when it comes to looking at Africa as a possible investment destination, Strake pointed out that insufficient and incomplete data hampers investment decisions as they rely on outdated narratives.
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Investors, policymakers, business leaders, and scholars 'frequently encounter opaque or incomplete information when evaluating African markets,' said Sprake. 'A large portion of Africa's economy remains informal, meaning that economic activity is often unrecorded or difficult to track using traditional methods,' she said.
For example, in 2018, McKinsey & Company could identify only 338 African companies with annual revenues or more than $1 billion, while the estimated number of micro-, small-, and medium-sized enterprises exceeded 80 million, she pointed out.
Compounding the issue of trying to collect data are issues such as corruption and wars. In 2021, 18 countries in sub-Saharan Africa were experiencing active armed conflicts, 12 of which involved high-intensity warfare, according to the Stockholm International Peace Research Institute.
Despite challenges, Sprake says that Africa's perception can change. 'As Africa becomes more digitally integrated and data infrastructure improves, analysts now have access to more reliable and timely information than ever before. These advancements are critical for shaping informed policy, guiding strategic investments, and correcting outdated narratives about Africa's economic potential,' she said.
Resi added that South Africa is a fertile environment for large-scale data centre investment. 'Already, Johannesburg and Cape Town are hosting an expanding constellation of high-capacity facilities,' he said.
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