Building the Future of Africa: Markets and Opportunities for Private Investors

In a report titled « Building the Future of Africa: Markets and Opportunities for Private Investors »,the International Finance Corporation (IFC) recommends developing public-private partnerships and strengthening financial markets to fill the gap. the continent’s infrastructure deficit, while governments’ room for maneuver is increasingly limited.
Looking back on the economic situation, the IFC stresses that an economic recovery is underway in sub-Saharan Africa, with growth estimated at 2.7% in 2017 after 1.3% in 2016, thanks to the improvement of the environment economic growth, the rise in the price of raw materials and more favorable overall financial conditions. While growth is weak in the region’s major economies – Nigeria, South Africa and Angola – other countries, mainly agricultural exporters, have recovered more rapidly, 6% per year for Ethiopia, Côte d’Ivoire, Senegal and Tanzania. Sub-Saharan Africa BIP by sector (in billions of dollars) © IFCIn the medium term, these trends are expected to continue, with growth accelerating to 3.2 per cent in 2018, and 3.6 per cent in 2020, according to the IFC report. Excluding South Africa, Angola and Nigeria, growth in sub-Saharan Africa is expected to reach 5% over the next few years, supported by infrastructure investments that will be above average for developing economies. This positive medium-term outlook should be moderated by the rapid rise in public debt levels, averaging 10 percentage points of GDP since 2014, which puts these economies at significant risk, especially in the current context of tightening policy. monetary policy.Despite these economic difficulties, “Africa is a fast growing market,” notes IFC. The size of the African economy has increased fivefold in the last two decades, from $ 300 billion in 2000 to $ 1.6 trillion in 2017, and is expected to exceed $ 2 trillion in two years. This economic expansion has been driven by the services sector, with an average annual growth rate of close to 7% over the past decade, now accounting for half of the region’s production. By 2030, 100 million people should join the “middle class” and high-income groups bringing their number to 160 million in sub-Saharan Africa. Household spending is expected to increase at a rate of 5% per year, compared with an average growth rate of 3.8% for developing economies. IFC anticipates that the most dynamic sectors in the coming years will be transport and ICT.
In the area of ​​infrastructure, progress has been significant. For
telecoms, the number of telephone lines per 1000 people increased from 3 in 1990 to 736 in 2014, while access to drinking water increased from 51% of the population in 1990 to 77% in 2014. But needs remain significant: only 35% of the African population has access to electricity, the density of the road network has decreased in 20 years and the coverage rate of sanitary facilities is only 30% .Develop PPPs and strengthen the financial markets“Given the limited room for increased public investment, governments in the region will need to attract private investment to fill this gap.” The international donor therefore recommends the development of public-private partnerships (PPPs) and the strengthening of financial markets.
The PPP market remains very limited in sub-Saharan Africa, with four countries (South Africa, Nigeria, Kenya and Uganda) accounting for 48% of the 335 PPP projects in the region over the past 25 years, and 62% of the 59 billion PPP projects in the region investment commitments. Their development requires the establishment of a favorable regulatory and institutional framework, this form of financing being highly dependent on the “country risk” perceived by investors.
For IFC, another way to attract investment is to strengthen financial markets, which have seen significant improvements in recent years. “Over the last fifteen years, African countries have implemented 112 reforms that have increased access to credit,” notes the international organization. “As a result, the median ratio of private sector credit to GDP (a measure of financial depth) increased by 15 to 20 percent between 2008 and 2015,” she adds.
Similarly, market capitalization has increased significantly and now reaches 50% of GDP. Since 1990, the number of fellowships has increased from 5 (South Africa, Zimbabwe, Kenya, Nigeria and Uganda) to 18 currently. Recent years have also been marked by increased access by African governments to international capital markets for financing, with external debt issues rising from $ 3.5 billion in 2010-2013 to 6, $ 3 billion in 2014-2017.


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