African Business: 2020-30

Prospects for the Continent

Africa is projected to have a working-age population of 1.1 billion by soon after 2030.

Africa’s population is young.

In many of its constituent countries, over 50% of the population is under 20 years of age. Accordingly, over the next 10 years, many investors are preparing to take advantage of rising demand for labor that cannot be filled by aging populations in the US, Europe, and parts of Asia.

In fact, soon after 2030, Africa is projected to have a working-age population of 1.1 billion, which will be larger than that of either China or India.

Many nations, including Ethiopia, Kenya, Tanzania, and Uganda, are preparing for this trend by aggressively courting foreign investment in manufacturing segments, such as garments, leather, and footwear.

These nations are among those dubbed the “Post-China 16,” whose manufacturing output is increasingly expected to eclipse that of China in the coming decade.

However, economic models that depend on labor have proven to be precarious in recent years, and there’s no reason to think this will change.

Breakthroughs in automation and robotics are likely to dent the demand for low-skill factory jobs from developed countries, and even business process outsourcing (BPO) positions—including accounting, telemarketing, customer support, and data entry—will probably be considered for in situ automation as the years pass.

For countries like Kenya, Ghana, and Rwanda, which name BPO as a key source of future employment, these advances in technology could be especially challenging.

As the nascent Fourth Industrial Revolution ramps up, African countries will be forced to look to new economic opportunities as new technologies change the global economy.

One such opportunity is predicted to be solar power.

Though Africa boasts the most promising solar resources on the planet, the continent currently represents 1% of the world’s solar power efforts, totaling a mere 5GW.

However, many nations are aiming to unlock Africa’s untapped solar potential, especially in sun-drenched southern Africa, where Botswana and Namibia are implementing mega-solar projects, supported by the World Economic Forum’s Global Future Council on Energy.

Such projects in these two countries alone could add an additional 5GW to the country over the next few decades. Some predictions estimate that solar power could soon dwarf natural gas and hydroelectric power, becoming the largest electricity source in Africa by the year 2040.

Public-private partnerships (PPPs) will be critical in fueling the mega-solar projects that can power Africa in the coming decade.

Other renewables, as well as natural gas, are also set to aid Africa in its predicted move away from biomass as its main source of energy consumption. Wind power is projected to greatly expand in countries that are suitable for large-scale wind farm construction, especially Senegal, Ethiopia, and South Africa.

A number of recent natural gas discoveries will also bolster the continent’s efforts to meet its increasing energy needs over the next decade, lending credence to expectations that African countries will soon become some of the world’s major natural gas producers and exporters.

Mining will play an even more prevalent role in the economies of a handful of African nations, such as the Democratic Republic of the Congo and South Africa, due to its critical role in providing the raw materials necessary for the global economy’s transition to renewable energy sources.

This will depend on local governments tackling issues such as corruption, political instability, and under-investment in infrastructure in the near future.

However, most experts with an eye toward the future downplay the traditional resource-centric economic model of many African nations, emphasizing instead a trend that promises to reshape the continent and create a wealth of new business opportunities: urbanization.

The World Bank estimates that a full 50% of Africans will live in metropolitan areas by the year 2030, forecasting opportunities in infrastructure and the housing industries that range from cement production to mortgages.

Business opportunities in financial technology, courier services, and healthcare are set to emerge as Africans move to more prosperous urban areas and join the consumer class, which is also widely projected to include half of the continent’s households within the coming decades.

In cities that grow more bustling by the day, relatively affluent parents are opting to send their children to low-cost private schools, a trend that has caused the number of such institutions to skyrocket and show no signs of slowing.

In Lagos, the number of private schools has ballooned to 18,000, a 50% increase since 2011, whereas the number of government schools has stagnated at around 1,600 in those same years. Indeed, by most accounts, urbanization in many of Africa’s nations will unlock the countless business opportunities that come hand-in-hand with a more diversified economy.