Sub-Saharan Africa’s ‘sleeping giant’ economies have the potential to treble UK exports to reach $3.6bn by 2020, according to the recently released Barclays Africa Trade Index 2015.
The continent’s economies are increasingly opening up to international investors. South Africa ranked first in the index for opportunity and openness, followed by Nigeria and Kenya.
The index measures the opportunities, openness and intra-African connectivity of 31 leading sub-Saharan economies, ranks them in order of performance and identifies a group of rising performers who are seeing rapid growth in investments. Nigeria, South Africa, Ethiopia, Angola and the Democratic Republic of Congo lead in trade opportunities, while Ethiopia, the Democratic Republic of Congo and Tanzania have shown the greatest average GDP growth over the past five years.
These countries are predicted to be the key players fuelling the UK-Africa trade corridor in coming years.
Nigeria, now Africa’s second largest economy and with a population of 175 million and counting, offers great opportunity for UK businesses. However, “its performance in terms of openness (12th) and intra-Africa connectivity (16th) means that Nigeria still has a long way to go before it can hope to compete with South Africa as a regional trade hub or as a gateway to other African markets", according to the report.
East African countries outperform their sub-Saharan competitors Nigeria and South Africa due to improved border administration and a fast growing regional market. Erich Kieck, director for capacity building at the World Customs Organization, points out that the East African Community (EAC) introduced a single customs territory in 2014 and praised the EAC for ‘‘remarkable work done simplifying the control of goods moving across the customs union”.
Kenya ranked third overall in the index following improvements in border administration and transport links. Smaller neighbouring countries such as Tanzania, Ethiopia and Uganda benefit from the associated regional and global air connectivity and have taken steps themselves to support cross-border movement by investing in roads, ports and trade corridors.
Barclays head of global corporate banking Matt Tuck said Africa has become an attractive prospect for international trade, and highlights rising investment flows to top-performing countries like Mozambique and Ethiopia.
Consumer spending hit approximately $1000bn in the sub-Saharan economies in 2014, and is predicted to grow between 4% and 5% over the next decade as the countries’ middle classes expand. Africa was also named the world’s second largest destination for FDI inflows that year, Ernst & Young’s Africa Attractiveness Survey reported. This presents significant growth potential for UK companies across the region as well as for other international investors.
“Major African economies, such as South Africa, Nigeria and Kenya have been the primary focus of UK companies,” Mr Tuck noted. “But with increased competition, especially from Asia, businesses need to diversify their trade and investment markets to broaden their horizons and compete more effectively.”
Consumer spending power combined with rapid population growth is creating business opportunities that investors would do well not to miss. “By 2020, the five ‘sleeping giants’ that we have highlighted in our report, will represent a population of circa 325 million,” Mr Tuck added.