Economic ExpertSpeak: Africa has tremendous potential but must ensure inclusive growth
Jeff Gable, Head of fixed income and macro research at Barclays, spoke to AfricaMoney on the potential sectors to be exploited in Africa and the stock markets’ capacity to general favourable returns. He also touched upon the labour market situation in the continent and highlighted that development should not leave behind the people of the continent. (Image:Wazna Gunga)
Jeff Gable has an eight-strong highly-rated analyst team in Johannesburg that publishes fundamental macroeconomic and market strategy research on South Africa and a dozen other Sub-Saharan markets. Our economic expert also boasts three years’ experience in the research department of the International Monetary Fund.
Edited excerpts from an exclusive interview with AfricaMoney:
Africa is a young continent that offers loads of opportunities for entrepreneurs and investors alike. What are the sectors, in your view, that have the maximum development potential and offer the best investment avenues?
As a macro research expert, I view that there are three main sectors that have enormous growth potential in Africa. Firstly, resources remain the biggest opportunity with Mozambique possessing the second largest gas reserve worldwide. The country also has tremendous potential opportunities to explore gas and commercialize the product for exports, which can transform it into a very important global gas exporter in the world economy.
Secondly, there is agriculture for which Zimbabwe in particular has strong potential. There also other countries opening their doors to international investors and actively looking for investors to develop and commercialise the agriculture sector in terms of bringing expertise to famers and providing long-term leases of land.
Moreover, there is infrastructure provision which is not just about new airports but also about rail, electricity and water and broader services such as banks that will generate future economic returns and finally, there is also anything that relates to consumers. Africa has more than 50 cities, which are greater than Europe or India, and it is expected that a quarter of a billion people will move to the continent in the next 20 years. Therefore, anything relating to fast moving consumer goods – such as household appliances and vehicles – pose tremendous business opportunities.
What about the financial sector across the various economies of the continent?
The financial sector touches upon all sectors and it is widely considered that the financial services sector will grow faster in the economy. The sector would be a critical part of raising finance and helping companies to access the opportunity in Africa. This sector will also advance consumers in terms of individuals who are willing to go towards financial products such as mortgage finance and other secured forms of finance.
Does Africa have the necessary skilled human capital/expertise to work towards the development of the continent, together with the foreign investors who are willing to explore this continent?
It is an issue everywhere where there is a skill mismatch, but the crux of the matter is that Africas with the highest levels of education need to find ways to employs other individuals to improve their quality of life. There is a skill mismatch in Africa where the continent is falling short of skilled workers in financial services and call centres. In most regions of Africa, people hold down modest jobs, and the continent is falling short of knowledge workers in financial services and call centers. We need employers to find ways to employ people with modest education at 45 years. We have to ensure the new economy does not leave behind the people; we need to find ways to ensure inclusive growth in Africa.
In terms of investment opportunities, does the African continent boast dynamic stock exchanges to derive fruitful returns? Do you have in mind any robust stock exchanges across certain African economies that have not been highlighted enough and need to come to the fore?
Yes, certainly, in terms of new IPO and price discovery, global investors are seizing the opportunity to invest in Africa. For example, on the JSE in South Africa, listed companies such as MTN derive only a minority of their revenues in South Africa whereas the rest is derived from other market such as Nigeria, which contributes as much as 40%. Thus there is stock which has good exposure to the continent. In terms of size, important equity markest are mainly in Egypt, Nigeria and Kenya. However, other parts are relatively small, making it challenging for domestic companies to raise finance as well as for investors to access those opportunities.
Finally, currently, which country is attracting maximum interest from foreign investors and which cluster specifically?
Ernst & Young’s 2014 Africa Attractiveness Survey ranked the 15 top African states and provinces in terms of foreign direct investment (FDI) projects where the most striking observation was that Africa has risen to become the second most attractive investment destination in the world tied with Asia. South Africa, Nigeria and Kenya are considered the most attractive investment destinations whereas Morocco is seen as the leading destination for doing business in North Africa, largely on account of its relatively stable political environment.
- By Wazna Gunga