In June 2007, a diverse group of African visionaries gathered in Arusha, Tanzania. It was the first (and so far only) TEDAfrica conference.
In the opening speech, Euvin Naidoo made an eloquent case for investing in Africa. If you haven’t already seen it, watch it. I’m sure you’ll find it to be 19 minutes well-spent.
So, that was nearly five years ago. How much progress has been made since then?
Naidoo gave his audience a plethora of “bellwether” indicators of Africa’s progress. Let’s look at ten of them and examine what strides have been made to date.
1. Changing Attitudes
2007: Naidoo begins by asking his audience to call out the worst things they’ve heard about Africa. It’s the predictable litany. Famine, disease, war, slavery. He was trying to illustrate the dominant perception of the continent.
2012: The world’s perception of Africa is changing for the better as this 2011 Ernst & Young study indicates. Nearly 70% of the international investors surveyed for the report believed that Africa’s attractiveness had improved over the past three years.
But, there’s still a long way to go before the continent completely dispels of its negative image. Note that only 38% of North American investors felt Africa’s attractiveness had improved.
2. Improving Electrification Rates
2007: Naidoo next moves on to a satellite photo of earth at night. Africa is conspicuously dark save for a few little glow worms of light around major cities. He uses the photo as a metaphor for the continent’s potential.
2012: That satellite photo was taken in November 2000. At that time Sub-Saharan Africa’s electrification rate was only a shade above 20%. In 2009, the most recent data available, the International Energy Agency estimated it to have increased to 30.5%. Still quite dark, but notably improved. Unfortunately, I haven’t been able to locate an updated satellite photo for comparison.
3. Slowing Inflation
2007: Next, former investment banker that he is, Naidoo made note of decreasing rates of inflation across the continent. He highlighted two countries in particular. Zambia’s inflation decreased from 18% in 2004 to 9% in 2006. And Nigeria, where inflation slowed from 16% to 9% over the same time period.
2012: Many African nations have reined in inflation over the past five years. Nigeria’s inflation quickened, but, as you can see in the chart below, many of Africa’s most developed economies now have single digit inflation rates. And some are even below the 5% mark.
Consumer Price Inflation (2006 - 2010)
|Source: IMF World Economic Outlook|
4. The Rise of the African Consumer
2007: Naidoo then highlights Bain Capital’s purchase of South African retail group, Edcon, as a bellwether indication of progress. Investing in retail, he says, is a long-term bet on the growth of the African middle class.
2012: Fast forward to 2012 and international confidence in the African consumer continues to rise. Walmart purchased a controlling stake in South African retailer Massmart last year. That’s a development that could transform the sector in not just South Africa, but the rest of the continent, too. Clothing retailers, Zara and Gap, have also opened their first stores in Africa in recent months.
5. The Promise of Nigeria
2007: Much of the talk focuses on the progress and exciting potential of Africa’s most populous nation, Nigeria. Naidoo notes Nigeria’s importance to the US as an oil producer, its reformed banking sector, and its rapid growth, which prompted Goldman Sachs to predict would put it among the world’s top ten largest economies by the year 2020.
2012: The years since TedAfrica have been turbulent ones for Nigeria. Oil production was frequently interrupted by aggrieved local communities. Corruption remained a major problem. And, more recently, the terrorist group Boko Haram has renewed fears of religious violence. Even so, Nigeria grew rapidly during the period, with GDP per capita expanding at an annualized rate of 4.2%. The number of mobile phone subscriptions has increased from 32 million in 2006 to 87 million in 2010. Internet access more than quintupled from 8 million users to 45 million during that same time frame.
6. Agricultural Improvements
2007: Naidoo details some exciting agricultural developments on the continent, including the development of an organic food industry in East Africa.
2012: Jump ahead five years and we find that Tanzania’s value-added agriculture (which includes organic produce) increased by nearly 20% between 2006 and 2010, according to World Bank figures. In Ethiopia, it jumped 32%!
7. Africa’s Booming Banks
2007: Naidoo next remarked on the potential of the banking sector and the reforms taking place in Nigeria that consolidated that country’s 85 banks into 25. He noted that only 10% of Nigerians were banked.
2012: Five years later, and 36% of the Nigerian population is now served by the formal financial sector. Analysts at Bain Capital expect the sub-Saharan banking industry to continue growing at 15% annually all the way to 2020.
8. Roads, Roads, and more Roads
2007: In an effort to illustrate Africa’s potential and the infrastructure constraints that were holding it back, Naidoo made note of the lack of adequate paved roads in Africa. As of data available in 2007, only 30% of Nigeria’s roads were paved; 20% of Zambia’s roads were paved; and 10% of Angola’s roads were paved.
2012: World Bank staff estimated in a report published last year that 45% of Nigeria’s roads are now paved; 35% of Zambia’s roads are now paved; and 24% of Angola’s roads are now paved. It doesn’t take much of an imagination to visualize how good this development is for business.
9. Africa’s Stock Markets: No Longer So Sleepy
2007: The presentation includes reference to the outstanding performance of the Egyptian, Kenyan, and Nigerian stock exchanges in 2005 and 2006.
2012: While African stock exchanges posted respectable returns over the past five years, I think a better indicator of capital market development is the total value of stock traded. The more active the exchange is, the more meaningful contribution it makes to the national economy. Take a look at the Nigerian Stock Exchange. Total value traded on the market surged 48% between 2006 and 2010, according to data from the World Bank. In Ghana, trade volume nearly doubled!
10. More Sovereign Credit Ratings
2007: Near the conclusion of his talk, Naidoo references the growing number of African countries who had received sovereign credit ratings from the major ratings agencies. Naidoo explained that this development would portend greater integration into the global investment community. In 2007, 16 countries had received ratings.
2012: As of the end of 2011, 22 African nations had been rated by either Standard & Poor’s, Fitch, or Moody’s.
Turning on the Lights
Early in his talk, Naidoo quoted the geographer George Kimble. Kimble said, “the darkest thing about Africa has always been our ignorance of it.” It’s an insightful obervation – and, as the data above attests, it’s one that becomes even more true with each passing year.