Middle class will fuel Africa’s economic growth

Tanzania and Mozambique were identified as the next fast growth frontiers within the broader trends of improving economic fortunes of the African continent because of new natural gas finds and agro processing potential.

Mike Vincent, Partner at Consulting at professional services firm Deloitte said the discovery of gas in Mozambique and Tanzania will change the game. The required infrastructure investment to extract the gas, believed to be at 50 trillion cubic feet in Mozambique alone, will change the landscape for investment and energy supply in the Southern African region.

Vincent was speaking at the Africa Risk Conference held in Johannesburg recently. He noted that while commodities have played a critical role in the prevailing African growth the next phase of growth would be driven by the services sector as the continent grow an affluent middle class.

The next phase of Africa’s growth will be driven by its people, more specifically its growing middle class.

Vincent said while ‘China Inc.’ has been Africa’s dominant theme for the past decade, population development and the accompanying upsurge of the middle class, will drive growth in the years ahead as China’s economic power decelerates and Europe and the United States experience uneven recoveries.

The conference noted that China and India’s demand for raw materials that has subsequently led to an increase in commodity prices played a critical role in Africa’s economy over the past few years.  The rise in commodity prices has in turn led to greater investment in infrastructure, including telecoms, and become one of the reasons for the increase in disposable income. This coincides with the return of civil servants and other professionals, which has been sparked partly by the recession.

The conference noted that it is likely that Africa’s population will reach two billion by 2050. At that point, 60% of the population is anticipated to be under 25 and the continent is expected to supply a quarter of the global workforce: 1 in 4 workers worldwide will be from Africa. This is a source of opportunity but also likely to put pressure on food, education and health infrastructure.

The growth of Africa’s middle class has a driven demand for goods and services such as food and healthcare, telecommunication, as well as transport and travel services. Vincent believes this growth spurt will continue well into the future.

The conference also heard that Africa has a great need to invest in power infrastructure to fuel growth. While South Africa develops a 40 000 MW power grid to meet its 2030 target for additional power capacity, Nigeria, a country with a bigger population and landmass, has to get by on 5000MW of power, thus needing a generator in every second household.

 news@ujuh.co.za

 

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