Breaking News Africa

« »

Friday, September 16, 2016

McKinsey Research Shows Total Consumer and Business Spending in Africa Could Hit $5.6 Trillion by 2025

McKinsey Research Shows  Total Consumer & Business Spending in Africa Could Hit $5.6 Trillion by 2025

Although Africa's growth has slowed, the long term  fundamentals are strong, big business opportunities lie ahead and the overall outlook is positive.

These facts are contained in the latest McKinseyGlobal Institute Report just released today titled, Lions On The Move II: Realizing The Potentials of Africa's Economy.

According to the MGI’S new report, four fundamentals are likely to underpin Africa's economic growth.  Firstly, Aftica has the fastest urbanization rate in the world. Over the next ten years, 187 million more Africans will live in cities—equivalent to half the US population today.

Secondly, it has the biggest working-age population in the world of 1.1 billion in 2034—larger than in either China or India. Thirdly, it has the  largest reserves in the world of many key natural resources (e.g., 60 percent of the world’s unutilized but potentially available cropland, and the largest global reserves of vanadium, manganese, and many others). Additionally, Africa has the chance to leapfrog old technologies using mobile and digital (e.g., penetration of smartphones expected to hit 50 percent in 2020 vs. 18 percent in 2015).

The new  MGI report confirmed that spending by consumers and businesses in Aftica today totals $4 Trillion. By 2025, the total could be $5.6 Trillion. Household consumption is expected to grow by 3.3% a year and reach $2.1 Trillion  by 2025. The total could be $5.6 Trillion, reflecting an expanding Aftican consuming class.

Business spending is expected to grow from $2.6 Trillion in 2015 to $3.5 Trillion by 2025, and Aftica has an opportunity to nearly double manufacturing output from $500 Billion today to $930 Billion in 2025. AFRICA’S economies are no longer a story about exporting commodities- but about tapping into vibrant domestic demand.

Accelerated industrialization could lead to a steep change  in productivity and and the creation of 6-14 million stable jobs over the next 10 years.

Acha Leke, a McKinsey Senior Partner and Report Co-author, said:

“Our new research shows how in coming years Africa will benefit from strong fundamentals including a young and growing population, the world’s fastest urbanization rate, and accelerating technological change. These will help drive rapid growth in consumer markets and business supply chains, and will offer opportunities to build large, profitable industrial and services companies.

"Tapping Africa’s consumer markets will require companies to have a detailed understanding of income, demographic, and category trends. Thriving in business markets will require businesses to offer products and develop sales forces able to target the relatively fragmented private sector. But what our research also shows is how much work needs to be done both by companies themselves and by Africa’s governments to translate opportunity into tangible economic benefits.”

To make the most of the opportunities, Aftica needs more large companies.MGI’S  new database of Corporate Africa, shows that the continent has 700 companies with revenues of more than $500 million, of which 400 companies have revenues of more than $1 Billion. AFRICA’S companies are growing faster and are generally more profitable than their global peers.

"Africa’s top 100 companies have achieved success by developing strong positions at home, staying the course to build their businesses over decades, integrating what other companies would usually outsource, and investing in building and retaining talent. Further success is possible in six high-potential sectors with high growth, high profitability, and low consolidation. These are: wholesale and retail, food and agri-processing, health care, financial services, light manufacturing, and construction."

Governments need to play a stronger role in unleashing renewed dynamism. Six priorities emerge from this research.

Firstly, Mobilize more domestic resources, taking bold steps to mobilize more of its own funding to finance development

Secondly, aggressively diversify economies, encouraging growth in high-potential sectors in close cooperation with business, based on a clear understanding of their countries’ comparative advantages. Then accelerate infrastructure development and deepen regional integration

Additionally, create tomorrow's talent, ensuring that educational and training systems build work-relevant skills, and that students are aware of, and encouraged to enter, these vocations and that the private sector builds on best practice. Finally, ensure “healthy” urbanization, so that cities grow with the infrastructure required to make the biggest positive economic and social impact possible

Delivering on these six priorities will require the vision and determination to drive far-reaching reforms in many areas of public life—and capable public administration with the skill and commitment to implement such reforms.

ENDS

NOTES TO EDITORS

THE MCKINSEY GLOBAL INSTITUTE

The McKinsey Global Institute (MGI), the business and economics research arm of McKinsey & Company, was established in 1990 to develop a deeper understanding of the evolving global economy. Our goal is to provide leaders in the commercial, public, and social sectors with the facts and insights on which to base management and policy decisions

The partners of McKinsey & Company fund MGI’s research; it is never commissioned by any business, government, or other institution.

The Lauder Institute at the University of Pennsylvania ranked MGI the Number One private sector think tank in the world in its 2015 Global Go To Think Tank Index.

For further information about MGI and to download all reports for free, please visit www.mckinsey.com/mgi

MCKINSEY & COMPANY AFRICA
McKinsey has offices in Ethiopia, Kenya, Morocco, Nigeria, South Africa and Angola. The Johannesburg office opened in 1995, soon after the dawn of South Africa’s new democracy. We have played an active role in the country’s transformation and development—helping top companies win on the world stage, supporting the upgrade of key institutions and infrastructure, building leadership and capabilities. In South Africa and over 40 other countries in Africa, we shape strategy and strengthen operations for players in major industries, and help deliver better outcomes in education and health care. We have over 300 people based in Johannesburg and have delivered over 1000 projects, with 1400 more across Africa.

For more information, please contact: Bonita Dordel at: bonita_dordel@mckinsey.com or +27 (0) 11 506-8193

No comments: