Real Estate Investor Magazine South Africa July 2014 | Page 56

INSIGHTS

BY MALCOLM HORNE

Investing Into Africa
The big story

A

frica is internationalising with more crossborder activity taking place on the continent
than ever before. Increasingly South Africa
and sub-Saharan Africa are being placed on the
boardroom agenda as companies seek fresh markets
for future growth.
“Africa is the story. The big story is Africa” - AHMEND
HEIKAL

Booming middle class
A key attraction for investors is the rise of the African
middle class, defined by the African Development
Bank as consumers who spend between US$2-US$20 a
day. About 34% of the population fell into this category
in 2010, compared to only 26% thirty years earlier.
And forecasts suggest that 42% of Africa’s population
will be classified as middle-class by 2060. The African
Development Bank, for example, estimates that the
middle class is expected to grow from 355 million
people, to 1.1 billion in the next 45 years. Africa is
also characterised by a young population, with 62% of
Africans being under the age of 25 – guaranteeing a
loyal consumer base well into the future.
Middle-class growth is being driven by fast economic
growth, which is trickling down to greater disposable
income and more global spending patterns. Indeed,
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July 2014 SA Real Estate Investor

seven of the 10 fastest growing economies in the world,
according to the World Bank, are in Africa.

Challenges
The continent continues to face problems ranging
from political instability, to religious fighting, to overdependency on minerals and oil, to corruption.
It is also worth noting that Africa needs significant
infrastructure investment to meet the needs of its
growing and increasingly urbanised population.
Some 50% of Africans will be living in cities in the
next 30 years. Demand for electricity and transport
infrastructure is especially high. The Infrastructure
Consortium of Africa estimates that poor road, rail
and harbour infrastructure adds 30%-40% to the cost
of goods traded among African countries. The lack of
social infrastructure (including water, electricity and
information and communications technology) has
been estimated by the World Bank to reduce economic
growth by as much as 2% a year and cut business
productivity by 40%.
A lack of infrastructure creates a very real obstacle to
investment, so providing and maintaining infrastructure
will be crucial to Africa’s long-term growth.

Moving in the right direction
Nevertheless, overall, Africa has experienced stable
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