Blog 5 min of reading
With the African Economy expanding rapidly, as demonstrated by the high GDP growth rates in various countries, there are increasingly more business opportunities in various sectors of activity, in most countries with great needs.
For many years, the African continent was exploited mainly for its wealth in oil and minerals, which meant that much of the capital inflow was based on this industry. However, times have changed.
From 2005 to 2011, the extraction and oil industry in the region were responsible for more than half of the investment in just one year - but the opposite was true in the following seven years (ending in 2018, the most recent year for which complete and final data are available).
In 2020, Africa attracted less Foreign Direct Investment (FDI) capital, and the level of investment per project also fell. This reflects the shift away from extractive sector investments, which are typically more capital-intensive. However, this decrease does not tell the whole story: other opportunities are developing in sectors outside traditional extractive industries.
The use of technology in Africa is on the rise. The smartphone market is one of the most powerful drivers of investment. In 12 years, the rate of mobile phone usage increased by 2500%. Today there are about 1 billion smartphones in use on the African continent alone. The Kenyan company M-Pesa is an example of those taking advantage of this rise in the technological sector. It is an application for banking transactions. Today it is used for making any type of payment and even requesting money from others (a kind of MBway). With this application, several rural families managed to increase their income between 5% to 30%. The challenges of the Digital Economy generate enormous opportunities for foreign investment and business.
Africa's industrial production has grown above the global average, but this pace needs to gain even more speed. With the new trade agreement opening a market of at least 3 billion dollars and a consumer base of more than 1.3 million people, the African industry is expected to double its weight by 2025 and create millions of jobs.
Currently, many Portuguese companies, from various industry segments, are present in the African market, such as Salsa, Neuce Group, KYAIA, among others. These companies have significant growth and several stores/warehouses spread throughout the continent.
The general idea of internationalizing a company to the African market is often instantly associated with the construction and engineering sector. Indeed, it is a market in constant growth on the continent, as we speak of an area with few accesses and a lack of infrastructure.
The investment of countries in this sector is abrupt, as the need is great.
Today, the presence of Portuguese companies in this sector is enormous. Some of the cases are:
Investments in renewable energies in Africa are very important: on one hand, due to the growing demand, and on the other, because access to energy (especially from renewable sources) is a crucial element to give a definitive boost to sustained economic development. Indeed, to support increasing industrialization, it is mandatory to increase energy production (preferably renewables) and significantly improve energy transport infrastructure and energy efficiency.
The report released in 2020 by the International Renewable Energy Agency (IRENA) revealed that Sub-Saharan Africa could generate 67 percent of its power from clean and indigenous renewable energy sources by 2030. A deeper analysis shows that the energy transition would increase GDP, improve well-being, and stimulate up to 2 million additional green jobs in Sub-Saharan Africa by 2050.
Recently, the European Union announced that it will provide grant financing of 30 billion euros for Sub-Saharan Africa, which will have a very significant component in renewable energies.
The new EU funding cycle, until 2027, should finance a partnership that fosters the energy transition, moving African production away from more polluting fuels and fostering more "environment-friendly" opportunities.
Currently, we are aware of a Portuguese company present in the renewable energy market in Africa - Resul.
Africa's economic base is supported by agriculture and the extractive industry, with two types of agriculture: commercial agriculture and subsistence agriculture.
Commercial agriculture and the extractive industry mainly serve exports and are usually the source of revenue for the GDP in various African countries.
Subsistence agriculture, however, is developed by 70% of the population and women make up 60% of the workforce. Only one-fifth of the female workers in the fields own their own lands.
Yet, the African continent annually pays 45 billion dollars just in food imports, when the continent has 60% of arable land to produce for Africa and the world. African countries should take advantage of this, and we can already identify several significant investments in the agricultural sector by French, English, and Dutch groups.
Galucho, a Portuguese company of agricultural machinery, has been present in the African market since 1974. Between 1960 and 1970, it purposefully created a range of machines to meet the needs of farmers in the former Portuguese colonies in Africa, especially in Angola and Mozambique.
With all this information we have for you, would your company be interested in exploring the African market?
Send us an email to comercial@oportoforte.com and we will help your company on the path to new markets.
Sources:
Bank of Portugal | Supertoast | United Nations | World Bank | Euro News