Panel, Conference Presentation
2014 London Summit - Africa Rising: How Fast?
Milken InstituteMark Cutis, Jay Ireland, Kola Karim, Ben Kruger, Vimal Shah, June Sarpong, Nick Williams, Paul Links, Sandra, Tarek
- Africa is projected to become the world's most populous continent by 2050, with urbanization expected to rise from 33% currently to 64% by 2030, driving significant demand for low-cost housing and services.
- The infrastructure gap is estimated at $2 trillion annually, creating a high-demand environment for power, roads, and rail where efficiency gains and private sector participation are critical to lowering costs.
- Investors seeking 10 to 15-year horizons are expected to achieve annualized returns exceeding 25% in sectors like power, agribusiness, and infrastructure, whereas the current market lacks sufficient patient capital, causing a persistent mismatch with short-term investor expectations of 5-year exits.
- Governance reforms in nations like Kenya, including judicial separation and federalization, are anticipated to be irreversible, establishing more stable business environments despite ongoing challenges with credit risk and non-payment.
- The East African Community plans to harmonize VAT, customs duties, and standards within 12 months and expand single visa and work permit arrangements to facilitate regional labor and goods movement.
- Technological innovation, particularly in mobile money and pay-as-you-go models, is expected to enable leapfrogging in sectors such as power distribution and financial inclusion, which currently stands at only 12% in sub-Saharan Africa.
- SMEs face significant hurdles in securing long-term financing (5, 10, or 20 years) due to the absence of instruments like mortgages, positioning peer-to-peer lending and development finance institutions as key solutions to the "missing middle."
- Global capital flows are projected to increase as risk perceptions shift from being overly conservative to recognizing Africa as an "emerged" market, though capital formation remains the primary bottleneck for executing mega-projects.
- Manufacturing and the middle class are expected to drive economic growth through advanced technology adoption and increased consumption, although high labor costs and a 60% share of unused arable land present specific challenges requiring strategic action.
- Local businesses are expected to hold a competitive advantage over multinationals regarding response times and security management, while success will increasingly depend on adhering to international norms and building relationships to navigate complex regulatory landscapes.
- Political risks are deemed coverable through insurance mechanisms like MIGA and ATI, yet investors often fail to utilize them, while actual business risks remain centered on credit defaults and the high cost of doing business.
- The financial sector is evolving with improved liquidity and larger transaction sizes, as local institutions increasingly issue large cheques ($300-$400 million) and diversify portfolios across countries to mitigate individual market difficulties.