World Economic Forum Africa
Infrastructure projects and free trade zones to drive Africa’s high growth
Addis Ababa,
Ethiopia – Thursday, 9 May 2012 - Despite the global
economic crisis, Africa’s growth and development trajectory remains positive
with sub-Saharan Africa set to grow at more than 5%.
International
investors, business and political leaders have gathered in Addis Ababa this week
to debate Africa’s remarkable transformation at the 2012 World Economic Forum
(WEF) Africa.
Africa offers the
highest returns on investment of any region and is home to seven of the ten
fastest growing economies in the world. The Economist projects that WEF Africa
hosts Ethiopia’s economy will grow at 8.1% between 2011- 15 making it the 3rd
fastest growing economy in the world. Over the last decade the continent’s
economic output has tripled while sub-Saharan Africa is set to grow at about 5%
for the next 10 years, second only to emerging Asia as the fastest growing world
region.
Yet, according to
Miller Matola, Chief Executive of Brand South Africa, “Africans have not defined
their economies and growth prospects to the world but have allowed international
bankers, political analysts and credit ratings agencies to take the initiative
and write up, or sometimes even belittle, the African growth story”.
Speaking in Addis Ababa, Matola said Africans were now demonstrating
greater confidence in their continent. “According to recent Ernst & Young
research three of the top five fastest growing investors into new projects in
Africa between 2003-2011 were the African economic power houses: South Africa,
Nigeria and Kenya.” South African investment into Africa has grown at a rate of
64.8% in this period.
Explaining the many
factors behind Africa’s phenomenal growth since the turn of the century, Matola
said these included greater democratisation and stability, economic reform,
urbanisation, improved uptake of ICT and financial services, a younger, growing
and more affluent population, and the on-going resources
boom.
To encourage further
continental growth South Africa is orientating its government policies,
regulations and institutions to support African investment and integration.
According to Matola,
the world is slowly waking up to the massive projects underway to build new
roads, rail, ports and other infrastructure that link previously isolated
countries and regions, and that is accompanied by the expansion of free trade
areas which will eventually encompass the whole continent.
“Over the last
decade South Africa has been the leading foreign direct investor in Africa
though it is now being joined by China and other developing nations. Now our
state institutions have been authorised to invest – particularly in
infrastructure and industrialisation” said Matola.
The Industrial
Development Corporation (IDC), South Africa’s Government-owned development
finance institution has expanded its remit to include African investment and has
established relationships with development finance institutions and regional
forums in 34 African countries. It will consider new or existing companies
within Africa with funding needs up to R1billion (USD125million).
South Africa’s
Public Investment Corporation (PIC) – which mainly manages government workers’
pensions and has over R1trillion (USD125billion) in funds – has set 10% of its
funds aside for international investment, of which half of which will be in
Africa. Of this 40%-60% (up to USD3.8billion) will be earmarked for private
equity.
According to the recent Ernst & Young 2012 Africa attractiveness
survey, foreign direct investment projects in Africa grew 27% between 2010 and
2011. “Unsurprisingly,” said Matola, “the report found that people already doing
business in Africa were extremely positive. There are lingering negative
perceptions – but only amongst those who are not yet doing business in Africa.
Executives who don’t do business here, those who have the least exposure, and
one presumes the least knowledge, are the most negative about Africa.”
To participate in the African growth story Matola said South Africa
was investing heavily to improve its competitiveness and reduce unemployment.
“Over the next few years we are spending hundreds of billions of dollars on
regional and South African infrastructure. This will enhance our advanced
network of roads, ports, rail and communication networks which offer a trade
link for the landlocked countries in southern Africa to the world, making South
Africa a regional transhipment hub for sub-Saharan
Africa.”
According to Matola no country in Africa can reach its full potential
by working in isolation. “As South Africa we will leverage our membership of
BRICS to increase trade and investment into Africa and support the African
Agenda.
“African countries
should also promote their regional as well as their national advantages.
Investors are very excited about the pending 26 African nation free trade area
covering Southern, Central and East Africa. By June 2014, nearly 60% of the
economy of Africa with a combined GDP of $1trillion and encompassing 600 million
people will be a single free trade area. Already we are creating the urban
development corridors, the networks of interlocking regional infrastructure, and
the reducing the non-tariff barriers which will unlock these huge
markets”
South Africa with
its sophisticated and well-regulated banks, capital markets and services sectors
is being used as a deal-making, financial and professional services hub for the
entire region to provide access to capital for African businesses and support
inward investment and trade.
Matola said there was an uplifting optimism in the air of Ethiopia’s
capital. “There is a strong feeling that the continental progress in good
governance and the more than decade long growth spurt can be made sustainable.
African countries and businesses seeking investment must tell their own story or
risk being misunderstood by potential investors and supporters”.
“Africa’s time has
come” he said, “Its time the world knew”.
About Brand South Africa
Brand South Africa, previously known as the International Marketing
Council of South Africa, officially changed its name to best align with its
mandate of building South Africa’s nation brand reputation in order to improve
its global competitiveness.
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