S4E2 Grit & Growth | Africa’s Economic Horizon: A Conversation — Acha Leke, Chairman McKinsey Africa

01 Jun 2024 (6 months ago)

Africa's Economic Growth

Africa's growth has slowed down from 5.1% in the 2000s to 3.4% in the last 10 years.
Some countries, such as Ethiopia and Rwanda, have consistently grown above the average, while others, such as Nigeria and South Africa, have slowed dramatically.
Non-resource economies that have attracted foreign direct investment and implemented investor-friendly policies tend to be long-term growers.

Digital technology is seen as crucial for transforming productivity in Africa, but its impact on agricultural productivity and other productive sectors is still unclear.
Digital transformation has led to significant improvements in governance, financial services, agriculture, and energy.
Expanding digital services across the continent faces challenges due to regulatory requirements and cross-border complexities.
Harmonization of regulations is crucial for achieving scale and facilitating cross-border trade.

The fintech sector in Africa has experienced rapid growth, but not all companies will succeed.
Consolidation and mergers are likely as the environment becomes more competitive.
Venture capital funding for African startups decreased in 2023 due to global cooling trends and limited VC money raised from Africans.
Patient capital models and permanent capital vehicles are needed to support long-term growth and profitability of African businesses.

Large companies drive innovation and contribute significantly to tax revenues.
They help grow the supply chain of small and medium-sized enterprises (SMMEs) that feed into them.
The focus on large companies is important because they contribute a substantial portion of tax revenue and drive economic growth.

The agriculture sector is shifting away from agriculture and into services, but agricultural productivity has increased due to the substitution of capital for labor.
Africa's population is growing rapidly, and by 2050, one out of every four people in the world could be African.
Africa will have the largest working-age population in the world by 2050, and the continent will need to skill and train its workforce to provide digital services.

Rapidly improving and often free AI tools will lead to job losses, but new jobs will eventually be created.
Countries that are proactive in thinking about how technological changes will affect them and in preparing their workforce for the future will be the most successful.

Africa has the opportunity to reignite its growth through a digital revolution and increased productivity.
The growth of Africa's large economies is crucial for overall economic growth on the continent.
South Africa, the largest economy in Africa, needs to reverse its slow growth.