Africa’s contribution to global economy is growing, says Old Mutual
African informal economy figures suggest that the continent’s formal $1.3trn GDP is set to grow faster, according to Old Mutual Investment Group.
In 2012, total GDP of Africa was $1.3trn, equating to 2.5% of world’s $54trn.
The economic performance across the continent has seen disconnections in the last three years, particularly around the Sahara.
According to a report presented by Cavan Osborne and Keonethebe Bosigo, respectively portfolio manager and African equity analyst at Old Mutual, North African countries, especially Egypt and Morocco, have seen a slowdown induced by European austerity and the Arab Spring’s effects.
Other African countries have performed well and are expected to continue to deliver strong performance, led by Nigeria. South Africa has been ticking along and in the last 12 months has been challenged by macroeconomic events such as the eurozone weakness, a slowdown in China and talk of the US Federal Reserve tapering, Osborne said.
“However, Sub-Saharan Africa has been maintaining a growth level of around 5% annually and South Africa’s growth rate has waned to 3% per annum,” Osborne said.
As Osborne also highlighted, official numbers do not always give an accurate picture of Africa’s real situation as in most countries there is a large informal economy.
“For instance, the Namibian economy is boosted by sales of goods across the border into Angola. Currently, the slowdown in the north of Nigeria is due to the safety issues making it more difficult to service its neighbours, Niger and Chad,” he added.
The size of the informal economy is not certain, but many economists estimate that the Nigerian and Egyptian economies could be more than twice the size of their respective official figures.
Despite a slowdown in northern Africa, especially in Egypt due to its political instability, Africa’s population is growing at high speed and will drive the continent’s economic growth going forward.
“This means more working people who are able to contribute to an economy, and fewer older people being a drag on growth,” said Osborne. “Nigeria’s population is the largest at around 15% of the continent’s population.”
According to Old Mutual’s figures, the African population is expected to grow by 23% by 2020. However, Osborne explains, investing in Africa still has its significant challenges, especially in terms of liquidity, administration and moving money between countries.
“From a fund management perspective, it is very helpful to have our own company drivers and teams in-country to assist where necessary, as well as access on the ground financial services professionals to get an additional view and to bounce ideas off,” Osborne concluded.