Is Africa Still A Land Of Opportunity?

With 30% of South Africa’s value-added exports going to the rest of Africa, the fortunes of our economy are closely tied to the state of the continent. But after enjoying years of strong growth, fuelled by the commodity supercycle, many African economies have been struggling with sluggish growth, declining foreign direct investment and rising budget deficits. Is this the end of the ‘Africa Rising’ narrative?

- Peter Fabricius

Until recently, “Africa Rising” had become the welcome new continental narrative, replacing such grim storylines as The Hopeless Continent, the infamous headline of The Economist’s May 2000 cover story.

As if to prove that publication wrong, African economies powered their way into the third millennium, growing by an average 4.9% a year between 2000 and 2008.

They even rode the storm of the 2008 global financial crisis, continuing to grow at an average of 4.7% a year from 2008 until 2012.

Investment largely followed.

Foreign direct investment (FDI) shifted away from ailing industrialised economies towards emerging and developing economies where returns were higher, including many in Africa, where overall foreign investment climbed 22% from 2010 until 2014, according to KPMG. Africa’s high growth rates, burgeoning population, growing middle class, perceived improved political and macroeconomic stability, vast tracts of arable land and attractive geology were the main attractions for investors, says KPMG’s Robbie Cheadle.

She shares the conventional wisdom that much of Africa’s rise then was due to the commodities supercycle, mainly fuelled by phenomenal demand from China.

If so, the party was bound to end sometime, though many naïvely thought it would continue forever, says Duncan Bonnett of South African business consultancy Africa House.

McKinsey Global Institute differed somewhat from the conventional wisdom. No one is more responsible for the Africa Rising narrative than McKinsey, which insisted in a 2010 report that the commodity boom was not the main part of the story. It said commodities had accounted for just 24% of Africa’s GDP growth between 2000 and 2008.