Africa the next growth story
The rise of an emerging middle class in Africa is transforming the continent as a group of 11 African nations power past the $1 trillion GDP mark. With tens of millions expected to rise out of poverty in the next decade, it is also providing compelling new opportunities for banks, according to Standard Bank of South Africa.
“The future in Africa is bright,” said Simon Freemantle, senior political economist at Standard Bank. “In 1990, there were three democracies in Africa – now there are 23. We expect to see 14 million people join the middle class in the next 16 years. Nigeria is a $500 billion economy. Ethiopia’s GDP is growing at 10.5 per cent, led by the services sector. It’s a huge opportunity.”
Freemantle presented Sibos delegates yesterday with a barrage of information on how political and economic change is conspiring to present new banking opportunities in Africa. The session focused on 11 ‘standout’ countries: Nigeria, Kenya, Zambia, Ghana, Angola, Ethiopia, Mozambique, Uganda, Sudan, Tanzania and South Sudan. Together, these countries are growing their GDP at 6 per cent per year, compared to the global average of 3 per cent.
Opportunities for banks come from several areas. Remittances is one of the most immediate: Nigeria is expected to receive $25 billion in remittance flows this year alone. Standard Bank estimates that total remittance flows to sub-Saharan Africa through formal and informal channels may be higher than $50 billion. Such flows represent a significant potential market. The bank also notes that domestic production is increasing and that remittances and direct foreign investment now account for a greater share of African GDP than foreign aid.
The high population growth and urbanisation of Africa present another opportunity. Since 1980, Chinese population growth has been eclipsed by that of Africa and by 2050, the UN expects that one in four people will be African. Out of two billion people, 60 per cent are expected to live in cities. Nigeria is leading the way with 170 million inhabitants, but by 2050 the country is predicted to have more than 250 million who live in cities and 400 million in total.
