What if the so-called Asian Century unexpectedly yielded to the African Century?
Say what?
Yeah, I know, hard to envision. That’s because the rap against Africa has become far too ingrained in the Western consciousness: Corrupt. Uneducated. Emaciated by disease. Riddled with civil war and extremist groups.
The reality is far less dire and not the stuff of media headlines.
Yes, Africa’s poorest countries are riddled with corruption, but a rising number of countries experiencing prosperity have far less of that.
Most Africans are now living in democracies, albeit fragile democracies in many cases. The quality of the leadership across the continent has sharply improved and reforms abound. Democratic forms of government have changed priorities. During the 2012 presidential election in Ghana, for instance, the battle between the two candidates was over education, over who would do most to further education. Consider that sub-Sahara Africa now has education levels equivalent to Mexico and Turkey, which is exactly what the continent needs to attract jobs from direct foreign investment. Africa’s economic growth rate is now 5.5 percent and capable of growing much larger.
Thanks to debt forgiveness by Western nations, rather than spending precious money to service debt, African leaders are investing in healthcare, telecommunications and energy. The continent is already producing 10 million barrels of oil a day, equivalent to that being produced by Russia or Saudi Arabia.
While those tracking Africa’s progress — including Goldman Sachs, which recently issued a report touting the continent’s potential for investors — see its long-term prospects, foreign direct investment is already pouring in, primarily from Western nations. Some 60 percent of that investment is coming from Australia, Canada, Europe and the United States. India is another major investor, and China is also looking to profit from Africa’s abundance of natural resources.
Demographics are also trending in Africa’s favor. While this decade will witness a 20 percent to 30 percent decline in the number of 15- to 24-year-old citizens in China, the very age group that drives factory and manufacturing employment, the number of young Africans in that age group is on track to grow for decades to come.
During the next 30 to 40 years, Africa’s overall population will double from 1 billion to 2 billion, in part because HIV and malaria infection rates have both dropped by 27 percent. Life expectancy will increase by 13 years. Household income will rise by sevenfold during that time period, and Africa will move from a $2 trillion economy today to a $29 trillion economy by 2050. That is larger than the U.S. and European economies combined in today’s dollars.
“If there is any continent that can do what China did in the last 30 years, it’s Africa in the next 30 years,” says economist Charles Robertson.
Africa is booming.
Still, institutional real estate investors are not exactly sprinting to capitalize on Africa. Far from it, the subject never comes up.
Then again, high-yield investing isn’t about where the epicenter of growth is today, but where it will be tomorrow.
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Mike Consol is editor of The Institutional Real Estate Letter – Americas.
