The African continent represents the opportunities of tomorrow, and we at Roland Berger see strong business opportunities being created by Africa's improving economic strength. Mining this unprecedented potential requires sound knowledge and a thorough understanding of the market. That is the purpose of our study titled "Africa – The next growth opportunity". Its main goal is to highlight selected economies with environments conducive to robust economic growth, and at the same time help companies and investors benefit from and contribute to this growth by providing an in-depth analysis of high-potential industries within these economies.

1. AFRICA – THE
NEXT GROWTH
OPPORTUNITY
A Roland Berger Study in collaboration
with the Afrika Verein
ABSTRACT
The African continent represents the opportunities of
tomorrow, and we at Roland Berger see strong business
opportunities being created by Africa's improving
economic strength. Mining this unprecedented potential
requires sound knowledge and a thorough understanding of
the market. That is the purpose of this study titled " Africa
– The next growth opportunity". It is aimed at top decision-
makers and investors. Its main goal is to highlight selected
economies with environments conducive for robust
economic growth, and at the same time help companies and
investors benefit from and contribute to this growth. We
aim to do it by providing an in-depth analysis of the
selected economies and the high-potential industries within
each of them.
Roland Berger
April 2017

2. 2
Africa's wealth of natural resources, demographic advantage and increasingly favorable
business environment will help it emerge as the next growth engine in the world
1. Africa: The next growth opportunity
Home to one-sixth of the world's population, Africa is a continent that global companies and investors
can no longer afford to ignore. While the growth of leading economies in Europe and North America is
stagnating and the economic miracles in Asia are facing headwinds, many investors are still only
throwing a cautious glance towards Africa.
Even today, with Africa's economic progress no longer a secret, many businesses and investors are
still apprehensive about entering the continent. Those who now continue to underestimate Africa will
be left behind. Typical misconceptions amongst investors brand the continent as a monolithic block of
poverty, disease, stagnation; in short, a dangerous environment and a market to neglect. However,
they oversee the fact that Africa possesses huge diversity in its 54 countries, thousands of ethnicities
and languages. It possesses a wealth of natural resources, with 30% of the world's known minerals,
8% of its oil, 8% of its gas resources and the world's largest diamond reserves
1
. Due to the
considerable progress that many countries have made in terms of urbanization, political stability,
macroeconomic health and business conditions, sustainable growth in Africa is the new reality. It is
also poised to become one of the world's largest labor forces, comprised largely of young jobseekers
with most countries possessing a median age of less than 20.
The African continent represents the opportunities of tomorrow, and we at Roland Berger see strong
business opportunities being created by Africa's improving economic strength. Mining this
unprecedented potential requires sound knowledge and a thorough understanding of the market. That
is the purpose of this study titled "Africa – The next growth opportunity". It is aimed at top decision-
makers and investors. Its main goal is to highlight selected economies with environments conducive
to robust economic growth, and at the same time help companies and investors benefit from and
contribute to this growth by providing an in-depth analysis of high-potential industries within these
economies.
Africa has sustained economic growth at a faster
rate than the world average. Growth in Sub-
Saharan Africa has outpaced the world average
over the past decade, particularly in East Africa
which has emerged as one of Africa's fastest
growing regions. The recent decline in growth of
the MENA
2
region is not a concern as it is driven
in part by the stagnating growth of the oil-
producing countries in the Middle East. These
regions are forecast to well-exceed the world
average growth in the near future as well. While
real GDP growth for the world is projected at
2.7% CAGR over 2016-18, both Sub-Saharan
Africa and MENA are expected to witness higher
growth rates of 3.6% and 3.3% CAGR
respectively over the same period
3
. This will put
the growth prospects in the African regions above
those of the advanced economies (United States,
EU and Japan), forecasted to grow at 1.8%
CAGR over the same period.
Source: World Bank 2017. Global Economic Prospects -
January
http://pubdocs.worldbank.org/en/9781464810169/Global-
Economic-Prospects-January-2017-Table1.pdf and
http://databank.worldbank.org/data/reports.aspx?source=2&ser
ies=NY.GDP.MKTP.KD.ZG&country=

3. 3
Africa's demographic trends are further fueling this
growth. Robust economic growth in the past two
decades has helped lift previously poor households
into the middle class category, thereby increasing
their purchasing power. An African Development
Bank (AfDB) report revealed that Africa's middle and
upper class (defined as having a daily income
between USD 2-20) grew to 39% of the population
or about 360 mn people, in 2010. This figure had
more than doubled from 151 mn people in 1980.
Moreover, by 2010, the middle class (included
floating class) had risen to nearly 326 million people
or 34.3% of the population up from about 115 mn or
26.2% in 1980, 157 mn or 27% in 1990 and 204 mn
or 27.2% in 2000. A strong middle class comparable
to the emerging economies of India and China is
crucial to the continent's economic and social
prosperity. 51% of the continent's middle class was
found to be living in the 5 countries of Egypt, South
Africa, Morocco, Algeria and Nigeria. Other countries
with a sizeable middle class (10-20 mn) included
Kenya, Ghana, Ethiopia and Cote D'Ivoire, amongst
others
4
.
Investors, recognizing the promise of countries in
Africa, are moving in to stake their claim. Between
2000 and 2015, foreign direct investment stocks to
the continent increased fivefold from USD 153 bn
to USD 740 bn. This has been driven by Sub-
Saharan Africa (excluding South Africa) where FDI
stocks in the region increased at a CAGR of
12.7% from USD 66 bn in 2000 to 396 bn in 2015,
compared to overall Africa FDI growth at a CAGR
of 11.1% over the same period
5
. The top three
investors in Africa have been the UK, USA and
France, contributing USD 66 bn, 64 bn and 52 bn
respectively in 2014. However, China has
leapfrogged most other investors in the recent past
and has more than trebled its investment in Africa,
making it the fourth largest investor in 2014. FDI
stocks from China in 2014 were USD 32 bn as
compared to just USD 9 bn in 2009 when it did not
enter the top five investor economies
6
.
With these factors favoring the continent, Africa is poised for rapid economic growth. Gains are
expected across the board in Sub-Saharan Africa as well as North Africa. With investment from and
cooperation with the industrialized nations, Africa has an excellent chance of continuing on the strong
growth trajectory it kicked off at the start of the millennium. This self-reinforcing cycle of key private
investment combined with strengthened governance frameworks and expanding domestic demand
makes sustained growth in Africa a trend not to be missed.
Source: The Middle of the Pyramid: Dynamics of the Middle
Class In Africa. 2011. African Development Bank.
http://www.afdb.org/fileadmin/uploads/afdb/Documents/Publicatio
ns/The%20Middle%20of%20the%20Pyramid_The%20Middle%2
0of%20the%20Pyramid.pdf.
Source: "Foreign Direct Investment: Inward stock, annual". 2016.
unctadstat.unctad.org.
http://unctadstat.unctad.org/wds/TableViewer/tableView.aspx

4. 4
Roland Berger assessed the business landscape of selected four countries: Morocco,
Ghana, Algeria and Kenya. A detailed analysis was prepared for each of the selected
countries and the three most promising industries within them
Roland Berger assessed the African landscape and selected four countries on the basis of
quantitative and qualitative analysis. The quantitative factors included the relative size of the
economies as well as their historical growth trends. The qualitative factors included our assessment of
the political, economic, social, and technological scenarios. Based on this analysis, Morocco, Ghana,
Algeria and Kenya were identified as the countries with the most favorable environments and the
highest potential. A detailed analysis was prepared for each of the selected countries and the three
most promising industries within them.
Morocco is one of the safest and most stable countries in the North Africa region for investors.
Morocco's strategic location supported by its FTAs gives the country access to a market of more than
one billion consumers. It has a stable economy with low inflation, high growth, decreasing current
account deficit and increasing foreign direct investments. It also has a highly competitive ecosystem
and offers a relatively easy environment for doing business. Initiatives by the Government have made
it possible to attract big players like Renault to the country.
Ghana is emerging as one of the most prominent investment destinations in the African region driven
by its dynamic economic growth, strategic location, stable democratic political system and wealth of
natural resources. It was one of the top five recipients of FDI in Africa in 2015 attracting USD 3.2 bn in
foreign investment inflow. Ongoing policy reforms to improve the business environment and beginning
of production from new oil and gas fields are fueling a renewed optimism into the country's growth
prospects. Local processing of agriculture produce and real estate construction to support the
burgeoning middle class population are further driving economic growth for the country.
Algeria is a North African giant and was the fourth-largest economy in Africa by GDP in 2015. It has a
resilient economy which is characterized by stable growth, low inflation, low external debt and high
foreign exchange reserves. It offers a direct access to a large consumer market in the North African
and European regions. It possesses some of the largest oil, gas and shale gas reserves in the world
Source: World Bank Data 2017. http://databank.worldbank.org/data/

5. 5
and also has a large potential for renewable energy generation. Algeria's investment attractiveness is
further complemented by ongoing policy reforms to strengthen macroeconomic conditions, improve
the business climate and diversify the economy to reduce Algeria's reliance on the Oil and Gas
sector.
Kenya was selected due to its robust economic growth over the past decade. Resilient to external
shocks and deteriorating fiscal and trade indicators, the economy has emerged as the East African
frontrunner in terms of the opportunities its presents to private investors. Initiatives undertaken by its
pro-investment government have improved the ease of doing business in Kenya. For example, the
planning of large-scale infrastructure projects and the adoption of a PPP-basis of investment has
helped spur private investment. Favorable demographic trends will help Kenya's dynamic economy as
employment amongst its young labor force shifts towards high-productivity sectors.

6. 82
Contact
Study Author:
Dr. Wilfried G. Aulbur
Managing Partner India,
Member of Supervisory Board
Roland Berger
Phone: +91 99 206 30131
E-mail: Wilfried.aulbur@rolandberger.com