{"id":9949,"date":"2016-09-23T10:55:33","date_gmt":"2016-09-23T06:55:33","guid":{"rendered":"http:\/\/www.intelligentcio.com\/africa\/?p=9949"},"modified":"2016-09-23T10:55:33","modified_gmt":"2016-09-23T06:55:33","slug":"mckinsey-research-points-to-new-macro-fundamentals-for-africa","status":"publish","type":"post","link":"https:\/\/www.intelligentcio.com\/africa\/2016\/09\/23\/mckinsey-research-points-to-new-macro-fundamentals-for-africa\/","title":{"rendered":"McKinsey research points to new macro fundamentals in Africa"},"content":{"rendered":"<p>Six years ago when the <a href=\"http:\/\/www.mckinsey.com\/mgi\/overview\" target=\"_blank\">McKinsey Global Institute<\/a> first looked in detail at Africa\u2019s diverse economies, almost all of them were experiencing accelerating growth. The picture today is more mixed. <a href=\"http:\/\/www.mckinsey.com\/global-themes\/middle-east-and-africa\/realizing-the-potential-of-africas-economies\" target=\"_blank\">McKinsey Global Institute\u2019s new report Lions on the move II: Realising the potential of Africa\u2019s economies<\/a>, finds that Africa economies growth paths have diverged.<\/p>\n<p>Growth in the 11 economies accounting for 60% of African GDP \u2014 the continent\u2019s oil exporters and the three countries involved in the Arab Spring Egypt, Libya, and Tunisia, slowed sharply. But the remaining economies generating 40% of African GDP accelerated their annual growth rate from 4.1% in 2000-10 to 4.4% in 2010-15. The overall outlook is positive, with the IMF projecting that Africa will be the world\u2019s second-fastest growing region in the period to 2020.<\/p>\n<p>Various\u00a0fundamentals are likely to underpin Africa\u2019s economic growth:<\/p>\n<ul>\n<li>The fastest urbanisation rate in the world. Over the next ten years, 187 million more Africans will live in cities, equivalent to half the US population today.<\/li>\n<li>The biggest working age population in the world of 1.1 billion in 2034, larger than in either China or India.<\/li>\n<li>The largest reserves in the world of many key natural resources, for example 60% of the world\u2019s unutilised but potentially available cropland, and the largest global reserves of vanadium, manganese, and many others.<\/li>\n<li>The chance to leapfrog old technologies using mobile and digital for example penetration of smartphones expected to hit 50% in 2020 versus 18% in 2015.<\/li>\n<li>Spending by consumers and businesses in Africa today totals $4 trillion. By 2025, the total could be $5.6 trillion.<\/li>\n<li>Household consumption is expected to grow by 3.8% a year to 2025 to reach $2.1 trillion.<\/li>\n<li>Spending on discretionary items is likely to grow fastest, reflecting an expanding African consuming class. Just under half of all consumption growth in the period to 2025 will be in 75 cities.<\/li>\n<li>Business spending is expected to grow from $2.6 trillion in 2015 to $3.5 trillion by 2025.<\/li>\n<li>Africa has an opportunity to nearly double manufacturing output from $500 billion today to $930 billion in 2025.<\/li>\n<\/ul>\n<p>Africa\u2019s economies are no longer a story about exporting commodities, but about tapping into vibrant domestic demand. Three quarters of this potential could come from Africa based companies meeting fast growing demand within Africa. Africa imports one-third of food, beverages, and similar processed goods it consumes. The other one-quarter of the growth could come from more exports.<\/p>\n<p>Accelerated industrialisation could lead to a step change in productivity and the creation of 6 million to 14 million stable jobs over the next ten years, making realising this a priority for governments.<\/p>\n<p>Acha Leke, McKinsey Senior Partner and report co-author, said:\u00a0\u201cOur new research shows how in coming years Africa will benefit from strong fundamentals including a young and growing population, the world\u2019s fastest urbanisation rate, and accelerating technological change. These will help drive rapid growth in consumer markets and business supply chains, and will offer opportunities to build large, profitable industrial and services companies.&#8221;<\/p>\n<p>\u201cTapping Africa\u2019s consumer markets will require companies to have a detailed understanding of income, demographic, and category trends. Thriving in business markets will require businesses to offer products and develop sales forces able to target the relatively fragmented private sector. But what our research also shows is how much work needs to be done both by companies themselves and by Africa\u2019s governments to translate opportunity into tangible economic benefits.\u201d<\/p>\n<p>To make the most of the opportunities, Africa needs larger companies.<\/p>\n<p>McKinsey Global Institute\u2019s new database of corporate Africa, which we believe is the first of its kind, shows that the continent has 700 companies with revenues of more than $500 million, of which 400 companies have revenue of more than $1 billion. Africa\u2019s large companies are growing faster and are generally more profitable than global peers.<\/p>\n<p>However, Africa excluding South Africa, has only 60% of the large firms one would expect if compared with other emerging regions. And average annual revenue of $2 billion is half that of the large firms in Brazil, India, Mexico, and Russia. No African-owned company is in the Fortune 500.<\/p>\n<p>Africa\u2019s top 100 companies have achieved success by developing strong positions at home, staying the course to build their businesses over decades, integrating what other companies would usually outsource, and investing in building and retaining talent.<\/p>\n<p>Further success is possible in six high-potential sectors with high growth, high profitability, and low consolidation:<\/p>\n<ul>\n<li>Wholesale and retail<\/li>\n<li>Food and agri-processing<\/li>\n<li>Health care<\/li>\n<li>Financial services<\/li>\n<li>Light manufacturing<\/li>\n<li>Construction<\/li>\n<\/ul>\n<p>Governments need to play a stronger role in unleashing renewed dynamism. Six priorities emerge from this research:<\/p>\n<ul>\n<li>Mobilise more domestic resources, taking bold steps to mobilise more of its own funding to finance development<\/li>\n<li>Aggressively diversify economies, encouraging growth in high-potential sectors in close cooperation with business, based on a clear understanding of their countries\u2019 comparative advantages<\/li>\n<li>Accelerate infrastructure development<\/li>\n<li>Deepen regional integration<\/li>\n<li>Create tomorrow\u2019s talent, ensuring that educational and training systems build work-relevant skills, and that students are aware of, and encouraged to enter, these vocations and that the private sector builds on best practice<\/li>\n<li>Ensure healthy urbanisation, so that cities grow with the infrastructure required to make the biggest positive economic and social impact.<\/li>\n<\/ul>\n<p>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.<\/p>\n<p><a href=\"http:\/\/www.mckinsey.com\/mgi\/overview\" target=\"_blank\">The McKinsey Global Institute<\/a>, the business and economics research arm of McKinsey &amp; Company, was established in 1990 to develop a deeper understanding of the evolving global economy. The partners of McKinsey &amp; Company fund McKinsey Global Institute\u2019s research. It is never commissioned by any business, government, or other institution. With a presence in Africa of over 20 years, McKinsey &amp; Company has offices in Ethiopia, Kenya, Morocco, Nigeria, South Africa and Angola.<\/p>\n<p>&nbsp;    \t<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Six years ago when the McKinsey Global Institute first looked in detail at Africa\u2019s diverse economies, almost all of them were experiencing accelerating growth. The picture today is more mixed. McKinsey Global Institute\u2019s new report Lions on the move II: Realising the potential of Africa\u2019s economies, finds that Africa economies growth paths have diverged. Growth [&hellip;]<\/p>\n","protected":false},"author":13,"featured_media":9950,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[481,6,103,54,382,13],"tags":[385,3329,3330,740,3331],"class_list":["post-9949","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-government","category-insights","category-mobile","category-research","category-telecom","category-top-stories","tag-africa","tag-commodities","tag-macro-fundamentals","tag-mckinsey","tag-mckinsey-global-institute"],"acf":[],"publishpress_future_workflow_manual_trigger":{"enabledWorkflows":[]},"_links":{"self":[{"href":"https:\/\/www.intelligentcio.com\/africa\/wp-json\/wp\/v2\/posts\/9949","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.intelligentcio.com\/africa\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.intelligentcio.com\/africa\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.intelligentcio.com\/africa\/wp-json\/wp\/v2\/users\/13"}],"replies":[{"embeddable":true,"href":"https:\/\/www.intelligentcio.com\/africa\/wp-json\/wp\/v2\/comments?post=9949"}],"version-history":[{"count":0,"href":"https:\/\/www.intelligentcio.com\/africa\/wp-json\/wp\/v2\/posts\/9949\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.intelligentcio.com\/africa\/wp-json\/wp\/v2\/media\/9950"}],"wp:attachment":[{"href":"https:\/\/www.intelligentcio.com\/africa\/wp-json\/wp\/v2\/media?parent=9949"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.intelligentcio.com\/africa\/wp-json\/wp\/v2\/categories?post=9949"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.intelligentcio.com\/africa\/wp-json\/wp\/v2\/tags?post=9949"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}