Africa open for business: Potential, challenges and risks

Pratibha ThakerEditorial Director, Africa and the Middle East

April 4, 2012

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Today’s Presenter

Pat ThakerRegional Director,

Africa

The state of Africa: mapping growth

Data: Economist Intelligence Unit

• How is this possible?

China & IndiaOil & mineralsDomestic demand

Real GDP growth 2012 (forecast)

• Angola is expected to grow at 10.3%

• And all other countries to grow faster than the long term global average …

• … except for Zimbabwe and Swaziland

Above 98 to 97 to 86 to 75 to 64 to 53 to 4-1 to 3

The engines of growth

• Rising external demand – especially from China and India – also good for commodity prices

• Rising internal demand – driven by urbanisation and “consumerisation”

A Consumer boom

• Urban living and rising disposable incomes will boost demand for modern goods and services

• The rise in supermarkets and other modern outlets

• Many competing demands for available income – consumers are price sensitive

• Small market for top-end products – at least for now

FDI slips but will recover

• Key deals in 2010-11

• Bharti Airtel (India) buys Zain’sAfrican assets for US$10.7bn

• NTT (Japan) completes takeover of South Africa’s Dimension Data for US$3.2bn

• Walmart (US) buys 51% of SA retailer Massmart for US$2.4bn - after winning belated approval from the competition authorities

• South Africa is one of the key gateways to the rest of Africa.

FDI

0102030405060708090

2004 2006 2008 2010

US$

bn

SSA North Africa

The impact of regional integration

• Larger markets & fewer barriers• The SADC, Comesa, the EAC & Ecowas – the main ones• Key problems are non-tariff barriers and weak infrastructure links between members• The EAC introduced a common market in July 2010 but key laws still need to be harmonised• Proposals for a single African trade zone are advancing will be hard to realise• Egypt linked to Africa via Comesa – and via the Nile

The business climate

• Although improving, Africa is still the worst region in the world to do business. African countries dominate the lower reaches of the World Bank’s Doing Business In rankings

• Key obstacles include:1. Cost and difficulty of setting up a business2. Skills shortages and labour market restrictions3. High taxes – and complex tax systems4. Dealing with licenses – and registering property5. Enforcing contracts

An African Spring?

• Some similar underlying conditions:• Authoritarian governments & geriatric

rulers• High unemployment & widespread poverty• Corruption & excessive regulations

• But also key differences:• Larger rural populations in SSA• Less extensive use of the Internet & social

networking• A slightly better democratic record

• But some countries are more at risk than others

Questions and Answers

Africa: Open for business REPORT

Download full report from www.eiu.com

Thank you.

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Holly DonahueSenior Marketing ManagerEconomist Intelligence Unithollydonahue@economist.com+44 (0)20 7576 8379