Africa Has USD5.6 Trillion Business Opportunities by 2025 – MGI Lions Report

MGI Lions

The McKinsey Global Institute, MGI has released the MGI Lions a report to ‘revisit Africa’s growth story’. The report is titled: ‘Lions on the Move II: Realizing the Potential of Africa’s Economies’

The report noted that, because of the mixed picture of the African economic outlook, the report is coming ‘a good time’ to ‘look beyond Africa’s immediate challenges and assess economic prospects to 2025 and beyond’.

Some of the key numbers quoted by the MGI Lions is the fact that Africa has about USD5.6 trillion in business opportunities by 2025. There will be about USD2.1 trillion household consumption and about USD3.5 trillion in B2B spending by 2025.

The MGI Lions report advised that ‘much work needs to be done both by companies themselves and by Africa’s governments to translate opportunity into tangible economic benefits’.

As a summary, see below headline findings and recommendations of the report:

  • Africa’s real GDP grew at an average of 3.3 percent a year between 2010 and 2015, considerably slower than the 5.4 percent from 2000 to 2010. However, this average disguises stark divergence. Growth slowed sharply among oil exporters and North African countries affected by the 2011 Arab Spring democracy movements. The rest of Africa posted accelerating growth at an average annual rate of 4.4 percent in 2010 to 2015, compared with 4.1 percent in 2000 to 2010. Africa as a whole is projected by the International Monetary Fund to be the world’s second-fastest growing economy to 2020.ƒ
  • The region has robust long-term economic fundamentals. In an aging world, Africa has the advantage of a young and growing population and will soon have the fastest urbanization rate in the world. By 2034, the region is expected to have a larger workforce than either China or India—and, so far, job creation is outpacing growth in the labor force. Accelerating technological change is unlocking new opportunities for consumers and businesses, and Africa still has abundant resources. ƒ
  • Spending by consumers and businesses today totals $4 trillion. Household consumption is expected to grow at 3.8 percent a year to 2025 to reach $2.1 trillion. Business spending is expected to grow from $2.6 trillion in 2015 to $3.5 trillion by 2025. Tapping consumer markets will require companies to have a detailed understanding of income, geographic, and category trends. Thriving in business markets will require them to offer products and develop sales forces able to target the relatively fragmented private sector. ƒ
  • Africa could nearly double its manufacturing output from $500 billion today to $930 billion in 2025, provided countries take decisive action to create an improved environment for manufacturers. Three quarters of the potential could come from Africa-based companies meeting domestic demand (today, Africa imports one-third of the food, beverages, and similar processed goods it consumes). The other one quarter could come from more exports. The rewards of accelerated industrialization would include a step change in productivity and the creation of six million to 14 million stable jobs over the next decade.
  • Corporate Africa needs to step up its performance to make the most of these opportunities. The continent has 400 companies with revenue of more than $1 billion per year, and these companies are growing faster, and are more profitable in general than their global peers. Yet Africa has only 60 percent of the number of large firms one would expect if it were on a par with peer regions—and their average revenue, at $2 billion a year, is half that of large firms in Brazil, India, Mexico, and Russia, for instance.1 No Africa owned company is in the Fortune 500. Companies looking to grow across the continent should develop a strong position in their home market, use that as a base for expanding into markets well beyond their immediate region, adopt a long-term perspective and build the partnerships needed to sustain success over decades, and be ready to integrate what would usually be outsourced. They should look for opportunities in six sectors that MGI finds have “white space”— wholesale and retail, food and agri-processing, health care, financial services, light manufacturing, and construction—with high growth, high profitability, and low consolidation, and invest in building and retaining talent.
  • Governments will have to play a stronger role in unleashing renewed dynamism. Six priorities emerge from this research: mobilize more domestic resources, aggressively diversify economies, accelerate infrastructure development, deepen regional integration, create tomorrow’s talent, and ensure healthy urbanization. Delivering on these six priorities will require the vision and determination to drive far-reaching reforms in many areas of public life— and capable public administration with the skill and commitment to implement such reforms.

MGI Lions was first published in 2010 when  Africa had ‘consistently positive growth trajectory we described in our 2010 report on Africa’s economies, Lions on the move: The progress and potential of African economies, the picture today is more complex. Growth paths among Africa’s economies have diverged’.

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