Emerging markets investors would be wise to look at the growth in sub-Saharan Africa.
By Bill Powell, contributor
FORTUNE – Scanning the global economy for hot spots and opportunities, most business executives, no matter where they are, usually think first about China and India, the two biggest and most rapidly growing of the so called BRICs (though as one participant at the Coins2Day/TIME/CNN Global Forum, which concluded today in Capetown said, “you should drop the R–for Russia– and insert another, for Indonesia. The fastest growing emerging economies are the “BIICS.”)
Not so fast. Part of the point of the Capetown Forum was to shine a business spotlight not only on South Africa, but on all the countries of sub Saharan Africa, and to educate those who are largely ignorant about what is happening economically in many of its 48 nations.
I’m was one of the ignorant ones — I’ve spent most of my career as a foreign correspondent in east Asia — but after three days of drinking from the fire hose, I’ve learned, along with a lot of the other attendees at the conference, that any number of African nations need to be included on any list of emerging “Hot Spots.” An illuminating report on growth and opportunity in Africa by the McKinsey Global Institute had a lot of the conference goers shaking their heads and saying, in effect, “I had no idea…’’
At conferences like the Forum, there is always a bit of cheerleading by and for the host nation. The beauty of the McKinsey report, as Norbert Dorr, the director and managing partner of the firm’s sub Saharan office, put it, is that it’s full of data, not sentiment. Data doesn’t lie, and facts are stubborn things. So consider these facts: real GDP grew 4.9% continent-wide in the first eight years of this decade. Productivity growth—the key to rising living standards—is surging. And the most eye-popping stat of all is this: the rate of return on foreign investment, the report states, is “higher in Africa than in any other developing region.”
It’s true, that is due in part to investments in oil and other natural resources in an era of high commodity prices. But it’s not only energy and mining where returns have been significant. Two thirds of all GDP growth continent-wide is coming from non-resource sectors. I wouldn’t have predicted that, either.
So where are the opportunities? A big one, clearly, as my colleague Jon Fortt posted earlier, is telecom, or perhaps what’ s better called connectivity. I won’t bore you with more stats; rather I’ll relay some conversations with entrepreneurs who are at once creating and benefiting from the connectivity boom. One is Brian Herlihy, the CEO of Seacom, a privately-funded venture that is laying fiber optic cable in east and southern Africa. Seacom is creating enormous capacity, Herlihy says, which will drive everything from HDTV to peer to peer networks, not to mention surging Internet demand. Herlihy raised all of the capital for the project in Africa, including a significant sum from one private investor who told him, ‘hell, this is the type of thing Cecil Rhodes would have done. Go for it.”
Or consider Nathan Eagle, the brains behind txteagle Inc., a company that allows many back office tasks, like forms processing or image tagging, to be done over the mobile phone. It enables, as Eagle says, any mobile phone subscriber in the world to do work and earn money. Stunningly, he says that just one month after launching in Nairobi, Kenya, txteagle Inc became one of the largest employers in Kenya. He was in Capetown seeking to expand to other countries on the continent, South Africa included. To many, a “hot spot” in Africa used to have bad connotations. Still does, in some places. It means a war zone, a place of strife and conflict.
I learned–as did a lot of others at the Forum– that entrepreneurs in the connectivity space are plainly redefining what those words mean in Africa.
More coverage from the Global Forum:
Video: Bill Clinton: Blow up the well!
China and Africa’s Deepening Ties (from Time.com)