GCC investors to gain from Africa boom

Sub-Saharan Africa has been experiencing strong growth in recent years, which is expected to continue. This boom creates an opportunity for GCC corporations and investors, according to QNB Group, as the region is well endowed with resources and people, but largely lacks the capital needed to fund its development.

The IMF’s latest World Economic Outlook forecasts that Sub-Saharan Africa will grow at a rate of 5.7% in 2013-18, which would make it the second fastest growing region after Developing Asia(largely driven by China). This compares with the 4.2% rate forecast for the Mena region. Growth prospects are also broad based across Africa -- two thirds of the countries are forecast to grow faster than five percent in 2013-18 and all but two above three percent.

Africa’s growth is mainly driven by a youthful population, which is growing at a rapid rate of 2.5% and becoming increasingly urban and middle class. Economic growth is also being supported by the expansion of mobile communications (nearing a 70% penetration rate) and improving transport infrastructure, much of it built with Chinese support. This is helping to harness Africa’s resources which include metals and minerals, oil and agricultural products. The continent is also benefiting from the lowest level of conflict in decades and improving governance in several countries.

Out of the 45 countries in Sub-Saharan Africa, three -- South Africa, Nigeria and Angola -- represent about 60% of the region’s US$1.3 trillion GDP, and so attract much of the attention from foreign investors. Also companies in South Africa and in the Maghreb, which have regional operations, can serve as routes for investment in the continent. The GCC has long established links with countries in the Horn of Africa and the Sahel, and is also increasingly connected with other parts of the continent.

Some of the countries experiencing the strongest growth in Africa are benefiting from the exploitation of their natural resources or are rebounding from a low base after a period of conflict. Both factors contributed to Angola’s rise over the last decade and for similar reasons South Sudan, the newest and one of the poorest country on the continent, is expected to see 21% growth in 2013-18, as it restarts oil exports.