Lions on the moveJune 10, 2014
The Japan-Africa Business Forum 2014

This is Africa …

McKinsey & Company | 1

This is also Africa …

McKinsey & Company | 2

Africa is forecast to be the 2nd fastest growing market over next 10 -12
years
Historic global compound annual real
GDP growth
2000-2013, %Expected global compound annual real
GDP growth
2013-2025, %Emerging
Asia

Emerging
Asia

7.8

6.5

Middle East

4.9

AfricaAfrica4.7

Middle East

4.0

5.0

Latin
America

3.7

Latin
America

4.0

Central andEastern Europe

3.3

Central andEastern Europe

3.9

World

2.8

World3.4Developedeconomies

1.5

Developedeconomies

SOURCE: Global Insight GDP data and forecasts; Global Insight GDP data and forecasts; International Monetary Fundregion definitions; World Bank region definitions; McKinsey Global Institute

2.2

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> 7% GDP growth

25 out of 54 countries are expected to grow at a rate of>5% p.a. till 2025
Compound annual real GDP growth
2000-2013

5-7% GDP growth
2-5% GDP growthCompound annual real GDP growth
2013-2025

Burkina
Faso
Mauritania
Niger

Niger
GuineaSenegal
Ethiopia
UgandaRwandaGhana
Burkina
FasoEquatorial

Central African
Republic

GambiaChadNigeria

Sierra
Leone

Libya

Congo
Tanzania

Nigeria
SierraLeone
Liberia
Ghana
Cote dIvoire
Congo

Ethiopia

Congo
Dem.
Rep.

Kenya

UgandaTanzania

GuineaSeychelles
AngolaZambiaBurundiAngola Zambia

MalawiMozambique

Mozambique

8 countries (South Africa, Nigeria, Egypt, Algeria, Angola, Morocco, Libya, Sudan)
will account for ~70% of Africa’s total GDP growth between 2013 and 2025
SOURCE: Global Insight

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Africa’s economy is diversifying; wholesale & retail trade, agriculture andtelecom were the top 3 contributors of growth over last 6 years

Sectors

Sector share of
GDP growth1,
2002-07
Sectors
Percent

Resources

24

Sector share of
GDP growth1,
2007-13
Percent

Wholesale & retail

2221

Wholesale and retail

13

Agriculture

Agriculture

12Transport, telecom

12Transport, telecom

10Resources

11

Manufacturing9

Construction

8

Changefromlast
periodFinancial intermediation

6

Public administration

7

Public administration

6

Real estate, business serv.

5–

Construction

5

Financial intermediation

3

Real estate, business serv.

5

Manufacturing

2

6–

Tourism2Tourism

1Utilities

2

Utilities

1

Other services2

6

Other services‘Resources’
share estimate
for 2007 – 2013
period excludes
Libya due totemporarychallenges inthe country.
Libya if included
will reduceoverall resourceshare to - 5%

1 In 2005 dollars (except for Tanzania 2001) The total is the sum of 15 countries for which data were available, and that together account for 81 percent ofAfrica’s GDP: Algeria, Angola, Cameroon, Egypt, Ethiopia, Kenya, Libya, Morocco, Nigeria, Senegal, South Africa, Sudan, Tanzania, Tunisia, Zimbabwe2 Education, Health, Social Services, Household Services
SOURCE: Global Insight; Arab Monetary Fund; African Development Bank; Bureau of statistics; UN; McKinsey Global
Institute

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Africa’s growth story has 6 key drivers
1

The▪ Projected increase in world commodity demand, e.g., 2.3% p.a. for oil
commodity ▪ Africa is resource-rich and a globally cost-competitive location to source many
mineralsboom

2

Macro andpoliticalstability

3

Ongoing
economicreforms

4

Access tointernational
capital5

Seismic
demographic shifts

6Africangreenrevolution▪ Governments reduced inflation from 23% (1995-2005) to 8% (2005-2013),
debt from 105% to 52% and currency volatility from 29% to 12%▪ Political and economic risk rating of African countries are comparable to theBRIC countries▪ Widespread business-friendly reforms are making it easier to do business inmany African countries, e.g., EAC announcement to adopt a common
currency in 10 years; power sectors reforms in Nigeria▪ Mutual agreements between African countries to facilitate cross-border trade▪ Capital inflows of USD 84 billion p.a., exceeding remittances and aid flow▪ Highest return on FDI (9%+) across all emerging markets▪ Many countries and institutions, like the World Bank, are providing aid in theform of funds and grants▪ World’s largest working age population by 2035 of 1.1bn ~2X jump from today▪ 100+ cities with population of more than 1mn by 2025
▪ 60% of African households with discretionary spending power1 by 2020
▪ Africa has 60% of the world’s available arable cropland- 590m hectares,
attracting a lot of FDI investment, e.g., ZTE international (China) secured 2.8m
ha for biofuel oil palm plantation▪ Many countries have further potential to improve yield and land utilisation

1 Discretionary spending power implies income > $ 5,000 at PPP
SOURCE: USGS; Business Monitor International; World Bank doing Business 2013; UNCTAD – World Investment Report
2013; McKinsey Global Institute Press Search; Team analysis

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In Africa, 47 cities comprising 14% of the population will drive nearly 50%of GDP growth to 2025
Share ofNumber
population, of cities,
2010 (%)
2010

Contribution to GDP growth, 2010–251% of total GDP growth
Large cities>5mMid-size
1-5mSmall200k-1m

103818Africa GDP growth100510427163

7935

Other cities and rural4$1.9 trillion

1 In 2025 USD at predicted real exchange rates
SOURCE: McKinsey; CityScope 2.0

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Africa’s labour force will grow by 122 million over the next ten years,
and will be the largest in the world by 2035
Million people
Growth of the labour force, 2010–20
Labourforce,
2020

Size of the working-age population (15–64 years)
1,200
AfricaIndia

1,000Africa

122

India

78

Latin
America45

SoutheastAsia

40504

China

534

800

316600Southeast Asia
Latin America
Europe331400

China

12792

NorthAmerica

8178

North America
200JapanEurope-43540
1970 80

90 2000 1020

SOURCE: International Labour Organization; United Nations World Population Prospects; McKinsey Global Instituteanalysis

30 2040

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Size ofGDP per capita
bubble<$500
proportional$500–1,000
to GDP$1,000–2,000

Africa’s future growth prospects differ
across four groups of countries
Exports per capita, 2008, $10000

Libya
Equatorial
GuineaGabon$2,000–5,000>$5,000

Oil exporters

Mauritius

Diversified
Botswana

Algeria

AngolaTunisia
Egypt Namibia

Congo, Rep.

1000

Côte d’Ivoire
ChadNigeria
SudanCameroon

Mali100

Sierra Leone

DRC

MoroccoZambia

Ghana
Madagascar

South Africa

SenegalKenya
Mozambique

Tanzania

UgandaTransition

RwandaEthiopiaPre-transition
10203040506070

8090100

Economic diversification
Manufacturing and service sector share of GDP, 2008, %NOTE:

We include countries whose 2008 GDP is approximately $10 billion or greater, or whose real GDP growth rate exceeds 7% over 2000–08. We
exclude 22 countries that account for 3% of African GDP in 2008.

SOURCE: Organisation for Economic Co-operation and Development; World Bank World Development Indicators;
McKinsey Global Institute

McKinsey & Company | 92011

Consumer facing sectors, including banking, will dominate growth

2020

Growth, 2011-20

Africa revenue growth
USD b, 2011-20968

Consumerfacing
455
540
324

Agriculture

Total%

407

485

2176

5109

9~777

41,375

Resources

Infrastructure2

USD b

5001
91200~1,838~2,615

1 Took 2030 value of $880bn, and calculated straight-line equivalent for 2020
2 Investment. Assumes need remains as same share of GDP through 2020
SOURCE: McKinsey ‘Lions on the Move’ research

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