Africa’s $3.2 Trillion Business Opportunity

By M. Isi Eromosele

Tremendous growth in Africa is creating new business opportunities that are being ignored by many global companies, especially those from Western countries.

At Oseme Consulting, our research and projections indicate at least four categories of investment opportunities in Africa that accumulatively amount to $3.2 trillion in annual revenue by 2025.

Consumer Spending Sector

The principal opportunity lies in Africa’s consumer-facing sectors (consumer goods, telecom and banking) among others and they are already growing at two or three times the rate of similar sectors in countries that belong to the Organization for Economic Cooperation and Development (OECD).

In 2008, Africa’s combined households spent an accumulated $900 billion, more than those in India and Russia. Oseme Consulting projects that this will rise to $1.8 trillion over the next decade if real GDP in the continent remains at its current rate.

Food and beverage spending is projected to rise in absolute term than any other consumer category, though spending patterns could shift toward higher quality goods. Consumer consumption in other categories should also show substantial increases as household incomes continue to rise, with the fastest increases occurring in retail banking and telecom.

This growth will result in larger consumer markets that cannot and should not be ignored by large multinational companies. By 2025, the continent’s largest five markets will be in Lagos, Alexandra, Cape Town, Cairo and Johannesburg, with each having $25 billion a year in household consumer spending.

Additionally, another twelve African cities, including Ibadan, Kano, Dakar and Rabat will have developed consumer markets worth more than $10 billion in consumer spending.

Agriculture Sector

Agriculture in Africa holds enormous potential investment opportunities for international companies. The continent possesses 60 percent of the world’s uncultivated arable land with low crop yields. Thus, Africa is ripe for a green revolution, comparable to the ones that have transformed agriculture in Asia and Latin America.

The barriers to raising agricultural production in Africa include lack of advanced seeds and other contribution suited to the continent’s ecological environment; inadequate infrastructure to bring crops to market, stubborn trade barriers and tax incentives, unclear land rights, lack of technical knowledge and adequate financing for farmers.

We confidently say Africa can overcome these barriers and many countries are creating strong and credible plans to do just that. Oseme Consulting forecasts that agricultural output in Africa could increase from $320 billion today to as much as $910 billion by 2025.

Natural Resources Sector

Outlook for continued growth in Africa’s natural resources sector remain strong and highly promising. Our analysis indicates that the continent’s production of oil, gas and other minerals will continue to grow steadily at between 3 percent and 5 percent a year.

At current prices, the value of natural resource production will rise from $480 billion to $640 billion by 2025. If global commodity prices rise further in the future, this estimate will certainly be elevated.

It should be noted that with the entry of China and other new global players, the group of buyers is getting crowded. Deals that are being struck today include inventive ones that call for foreign investment in infrastructure and resource processing as well as extraction.

Construction Sector

At Oseme Consulting, we see large opportunities for global companies in building as well as renovating Africa’s infrastructure. At current levels, African governments and private investors are investing a combined $80 billion a year in new infrastructure across the continent.

Africa’s private infrastructure investment account for 16 percent of the emerging market total, up from 8 percent in 2002. Despite this increase, Africa still faces enormous needs, particularly in the areas of power, water and transportation that require another estimated $56 billion in additional spending per year.

This goal could be accomplished through combined higher spending by African governments, private investors and non-OECD investors, along with regulatory reforms aimed at boosting operational efficiency.

Africa is poised to play an increasingly important role in the global economy. Africa will be home to one in five of the world’s young generation and will have the world’s largest pool of working-age population in the near future.

Global and private investors cannot afford to continue ignoring the huge business opportunities inherent in the vast continent of Africa.

M. Isi Eromosele is the President | Chief Executive Officer | Executive Creative Director of Oseme Group - Oseme Creative | Oseme Consulting | Oseme Finance

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