Africamania? The world's Poorest Region Becomes the Chosen Place for Investors

Portuguese Translation of the Week

[caption id="attachment_2491" align="aligncenter" width="583"] Photo attributed to Dietmar Temps on Flickr Commons[/caption]

A few years ago, Ethiopia was, for many, synonymous with starving children, territorial and sectarian conflict, lack of infrastructure, and extreme poverty. Today, reports created by business consulting firms show a very different scenario: an ambitious consumer market, an economy that has been growing more than 8% annually for the past decade, and an environment for business that, though complex, can guarantee returns on investment of 20% to 30%.

"Há alguns anos, a Etiópia era, para muitos, um sinônimo de crianças famélicas, conflitos territoriais e sectários, falta de infraestrutura e pobreza extrema. Hoje, relatórios de consultorias de negócios pintam um cenário bastante diferente: um mercado consumidor empolgante e em expansão, uma economia que cresce a mais de 8% ao ano há uma década e um ambiente para negócios que, apesar de complexo, pode garantir taxas de retorno aos investimentos de 20% a 30%."

This article has been translated from Portuguese. Click here to read the original version on Folha de S. Paulo.

The story of the second most populous country in Africa (after Nigeria) is not an isolated case.

When looking at six of the ten fastest growing economies in the world between 2001 and 2010, according to the IMF – and seven which are expected to grow the most by 2015- Africa has become the new "darling' of investors, consultants, and market agents.

Africa is no longer 'The lost continent," but instead has become a "land of opportunity," the "last frontier of capitalism" and a "future engine of global growth" – as defined by Shinzo Abe, Japan's Prime Minister.

With the same speed as Ethiopia, countries like Mozambique, Tanzania, Angola, Nigeria, Kenya, and Ghana have become, to consultants and part of the international media, the so-called "African lions," – in reference to the "Asian Tigers" who in a few decades overcame poverty and became technological powers.

The discourse about the continent has changed so dramatically that some are beginning to put it in check. "Do we have a new Africa or a new wave of markets?" questioned Ioannis Gatsiounis, journalist and writer from Ghana in an article for the New York Times.

ADVANCES

For specialists on Africa such as Elsie Kanza, from the World Economic Forum, and José Flávio Sombra Saraiva from the University of Brasila, although there is some doubt about whether the region's economic growth is sustainable in the long run, there is no denying the immense advances in recent years and the ample business opportunities that have been generated.

Since 2000, trade between Africa and the rest of the world increased by 200%. The commodities boom helped boost the economy of many countries in the region, and the adoption of more balanced macroeconomic policies provided some financial relief for local governments.

There has also been progress in reducing conflict and political instability – even though the region continues to be one of the most unstable in the world.

"Poverty rates began to decrease in several countries at the same time as their middle classes expanded." Said Kanza to BBC Brasil.

It is estimated that today 70% of Africans still live on less than USD$ 2 per day. According to McKinsey & Company, however, half of the population in the continent will be considered consumers of luxury goods (included in the category of 'middle class' or "emerging consumers") by 2020.

With economic and political advancements in place, it did not take long for the continent to attract all kinds of investments. According to a study by the Center for Global Development, China alone has invested USD$ 75 billion in Africa. Just last year, the market for private borrowing companies increased by 50% in countries such as Nigeria and Kenya.

OPPORTUNITIES

According to Anthony Thunstrom, head of the Global Africa Project, created in 2001 by KPMG, three factors have made the continent attractive to foreign companies.

First, the abundance of natural resources like oil and minerals – and, to a lesser extent, the immense availability of arable land.

These are areas of great interest to China as well as other African partners like Brazil.

Countries like Ghana, Guinea, Mozambique, Angola, Tanzania and Nigeria are among the particularly attractive in this regard.

The second factor is related to the opportunities created by the need of local governments to solve the huge infrastructure deficit in Africa.

"Africa has an urgent need for all types of infrastructure: roads, dams, sewer systems, etc. - Which means many contracts for foreign construction companies," said Thunstrom to BBC Brazil.

In fact, Brazilian construction companies have been looking to seal deals in various countries of the region, from Liberia and Libya to Ghana, Mozambique and Angola, and in most cases, they face competition from companies from China and other countries.