Fred Razak, Chief Trading Strategist from CMTrading, discusses his thoughts on Africa’s position in the post-pandemic global economy. What happens next?
“Before the pandemic, Africa (or prominent African countries collectively) was a major global emerging market with ever-growing economic focus on infrastructure and housing. Despite the challenges and upheaval in the wake of COVID and contrary to what many may see at face value, this hasn’t really changed. By and large, Chinese companies are still focusing their efforts on Africa and products have, in many cases, shifted from production in Asia to Africa, with a lot of manufacturing moving away from India and China.
“Despite COVID, investors still see the advantage of Africa’s tremendous population. One of the greatest assets Africa has to offer is a very large workforce, offering affordable labour by global standards. That continues to make the continent a very attractive place for foreign investors.
“That said, in a not-too-distant future somewhere, Africa could really be the next China, which will significantly affect countries like Turkey – the “China of Europe” in terms of manufacturing. The big ‘if’ with Africa, however, is widespread corruption. If this can be managed, Africa has tremendous opportunity for growth in the next 10 to 20 years.
Weathering the storm – “No country has been left unscathed by the COVID-19 pandemic, and the added fallout from the Delta variant can’t we weathered forever either. Sub-Saharan African countries were burdened with even more pressure on their already stressed economies. In perspective, though, no country is weathering the storm in a better fashion than any other, really. If anything, the world is just trying to weather it together.
“Countries focused on either goods or services as opposed to production appear to have had an advantage during the pandemic, but only because production hasn’t caught up with what’s been going on around the world. The pendulum will probably swing soon enough.
“A great leveller for Africa has been the internet. It has exposed the population to education and investigating new ways to make money. Aspiring entrepreneurs have been able to pick themselves up and tap into the market. In countries like South Africa, large and fast-growing populations can potentially lead to immense growth. This is converse to developed countries in Europe or Japan, for example, which have population bottlenecks – large older populations, where the burden lies on the smaller young population to fund social services on which the older population rely.
“The smaller, younger population is not effectively producing the GDP in order to cover the older generation’s ‘rent’. This creates huge stress on economies. Africa has a much more robust, younger population coming to the fore. Unfortunately, the corruption bugbear still looms, but younger generations can seize opportunities if they are able to keep it in check.
Untapped markets – “South Africa’s online retail business has yet to really be exploited. Compared to much of the world, it is in its infant stages. Africa skipped a big step in the Internet boom. In most markets, companies developed alongside the growth of the internet. Consider a company like Amazon. 20 years ago, Amazon didn’t have the product capacity it does today. It was buying products and reselling them in-house. You would need a computer to log in and access their catalogues. African consumers did not experience this on a broad scale, as they would largely access the internet via mobile devices. This took away from the user experience.
“A major new focus from investors should be on developing the African market to overcome that. Online consumption will grow rapidly in the next five to 10 years. It’s a way of the future that cannot be turned. It’s just a matter of time.
Closing thoughts on potential investors – “The trend of venture capitalists and foreign money seeking investment opportunities in Africa is probably likely to continue. Developers have come to the forefront and are competing on an international level that has not been seen before.
“This once again highlights the need for education and the standards of education being raised throughout the continent. Access to education provides opportunity and scope to aspiring entrepreneurs, inspiring developers to lower the threshold in terms of access to big money. And bitcoin trading or cryptocurrencies in general are freely giving new opportunities to people who want to invest in their economic independence. The future is open and full of opportunity for developing economies. I think we should keep watching this space”.
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CMTrading is the brand name of Global Capital Markets Trading Ltd (A Seychelles company, company no. 104785)