A few years ago, the financial press was full of talk about Africa's investment potential. But the story has gone off the boil amid the downturn in commodity prices and an especially disappointing performance by continental heavyweight South Africa in the past few years. Between 2010 and 2015, Africa's GDP expanded by an annual average of 3.3%, compared with 5.4% between 2000 and2010.
However, the GDP statistics tell a "misleadingly negative story", says a new report by the McKinsey Global Institute. The slowdown stemmed largely from the northern African states, whose performance was dented by the Arab Spring and the slide in the oil exporters' economies. In the rest of the continent, average GDP growth accelerated slightly in 2010-2015. The "overall outlook remains promising".
Africa is the region with the fastest rate of urbanisation in the world. Over the next ten years, another 187 million Africans will live in cities equivalent to ten more Cairos, according to McKinsey. Productivity in cities is always higher than in the countryside, which bodes well for income growth and consumption. Another factor in Africa's favour is its young population and growing labour force. The latter is expected to number 1.1 billion by 2034. The spread of the internet and smartphones should galvanise growth; electronic payments "are sweeping cross the region and changing the business landscape".
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Still, as David Pilling points out in the Financial Times, there are no guarantees. The "sweet spot" that saw Asia take off consisted of an expanding workforce and fewer children; "stubbornly high fertility" may prevent Africa making this demographic transition. Meanwhile, if basic infrastructure isn't provided, technology may prove more of "a scrappy fix than a productivity-enhancing miracle". Yet you get the feeling that "something is going on". It may be time for global investors to rediscover the Africa story.
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