Africa is on the tip of the tongues of business people and investors all over the world. But what has brought the ‘dark continent’ into the limelight?
Africa represents a unique opportunity in a global environment where developed economies are not providing investors with reasonable return on investment. Advanced economies are only expected to grow by around 1.5 percent in 2013, whilst the International Monetary Fund forecasts that Sub-Saharan economies will grow by 5.7% this year, up from 4.7% in 2012. These higher growth rates can be ascribed to a combination of favourable factors, including growth in export volumes, higher commodity prices and foreign direct investment (FDI) inflows.
In fact, according to the United Nations Conference on Trade and Development (UNCTAD), FDI flows to developed countries fell drastically in 2012, reaching levels last seen almost ten years ago. FDI flows to Africa, however, grew by 5.5 percent between 2011 and 2012. 
The continent represents somewhat of an open playing field, with significant potential in largely untapped markets waiting for development.
The attractiveness of Africa as an investment destination has been positively impacted by a number of developments in the regulatory environment in African countries, making it easier to do business for potential new entrants to markets, transparency with regard to macroeconomic policy and a focus on more market-friendly economic policies, a focus on addressing corruption and the introduction of investment incentives. In addition, increases in productivity on the continent, the diversification of African economies as they move away from resources, the size of the African market and rates of urbanisation are creating conditions that could potentially be favourable to investment.
Interest in Africa is driven by two mega-trends: The first is the well-documented, enormous global demand for Africa’s resources from mining, oil and gas to fertile, unused agricultural land. The second is consumer-based demand resulting from the rapidly growing ‘one billion plus’ population, rapid urbanisation and a growing middle-class of young, globally minded and largely well-educated people.
Africa is home to 10% of the World’s oil, 40% of its gold, between 80-90% of the chromium and 60% of the world’s total of arable uncultivated land is found in Africa. This presents investors with unique opportunities to get involved in different parts of the value chain in both the agricultural and resources sector.
Africa’s population demographics does not follow the ‘inverse pyramid’ seen in developed countries, where there is real concern regarding the aging workforce that puts strain on young people to support those who cannot work anymore. This factor has contributed significantly to the sovereign debt crisis in Europe. In Africa, the growing young middle class outnumbers the older members of African society and investors should take advantage of this trend while it still exists.
To take advantage of these trends, however, it is important to realise that the economies that will be really successful in Africa will be the ones that can diversify their economies, using the income they receive from resources to develop other sectors such as retail, banking and services.
Attracting FDI into diversified and higher value-added sectors remains an ongoing challenge for Africa’s economies. The primary sector consistently remains the main focus of foreign investment, resulting in significant commodity dependence. In addition, Africa predominantly exports primary products and imports manufactured products, and as such, African economies have not been able to harness the benefits of the commodities sector to increase the productive capacity throughout other sectors of their economy. This hampers the possibility of growth in the consumer expenditure related parts of the economy, such as retail and wholesale, smaller manufacturing industries and the housing market.
Reducing inefficiencies related to poor transport infrastructure, including maintenance of existing infrastructure and the provision of new infrastructure, adds to Africa’s challenges. For instance, only 29.7% of the African road network is paved. The continent’s railway network is also very poor and on average, it takes much longer to transport a container across borders in Africa than anywhere else in the world. These factors contribute to higher transport costs on the continent if compared to the rest of world.

Most African countries rank in the bottom half of the Global Competitiveness Index with regards to the quality and availability of transport infrastructure. In terms of trading across borders, Africa also does not fare particularly well, with Sub-Saharan Africa being the most expensive region in the world with regards to the US dollar cost of importing and exporting a container of goods.


A further challenge is the lack of a coherent regional approach to managing and harnessing partnership agreements and reducing inter-Africa trade barriers, which could improve the competitiveness of the countries within Africa and drive FDI. On the back of the need for combined and coherent strategies, it is crucial that there is a greater degree of cooperation between the private sector and government.
Linked to this challenge, is the lack of bargaining power in multilateral negotiations. Currently, the only significant agreement that holds weight on the international scene is the Brazil â€" South Africa â€" India axis. It is critical that Africa comes together as one bargaining power so as to promote an agenda that will harness the capabilities and resources of the African continent to the benefit of all Africans. However, this is easier said than done as each country has unique political, humanitarian and economic requirements.
So, the question is now what steps should be taken to reduce these challenges and to position the continent to take advantage of the growth opportunities that exist?
The best place to start would be to consider the concerns highlighted by investors and addressing those in a practical manner. Some of these considerations, mostly related to increasingly connecting African countries, include:
• Increased mobility of highly skilled labour across borders in Africa;  
• Where inter-Africa projects are undertaken, ensuring that skills transfer takes place;
• Streamlining of border management to reduce transport inefficiencies along trade corridors, through, for example, the use of technology to reduce time-consuming procedures and red-tape;
• Creating uniformity and increasing coordination with regards to import and export procedures;  
• Ensuring that African countries focus on the areas of production where they have the relative advantage to their neighbours, and allowing each country to gain a competitive edge in that area;
• A continued focus by governments on infrastructure investment and infrastructure maintenance, in order to reduce transport costs; and
• Political will from governments to work together and focus on reducing corruption. 
Africa’s time has come. For investors, now is the time to get a foot in the door. For African countries, however, it is time to realise the benefits to be had from increased connectivity and reduced barriers with its African neighbours. XX