While on a road show for US clients, Bryan Leith, chief operating officer of KPMG’s global Africa practice, sat down with Global Finance to discuss the continent’s economic prospects.
Global Finance: With a recession in South Africa and a slowdown in several large countries such as Nigeria, is the growth story for the Continent over?
Bryan Leith: Growth has slowed in line with the global economy, but in relative terms there is still significant growth—even Nigeria, which halved its rate of growth from the peaks of few years ago, is still expected to expand in 2016 and 2017 around 4.2%. The Continent is huge and very diverse.
GF: What factors drive that growth?
Leith: Africa is the size of China, India, the United States and most of Europe put together, and it has a fast-growing, young population. Africa also has a growing middle class with plenty of people moving from the countryside into major urban centers. Clearly, from a business perspective the opportunity is there, but it is not easy because there are lots of risks.
GF: Tell us about the risks.
Leith: Risks are sometimes more perceived than real. Everybody asks me about corruption. Corruption is not unique to Africa, although it is a significant issue. But in a number of countries, policies and governance are improving. Look at Nigeria. Only ten years ago it would have been impossible to imagine democratic elections and uncontested results.
The biggest risk, as far as I am concerned, is not being there. Every company I speak with knows they need to be in Africa; the question is when to make the move. I tell them, doing business in Africa is a long-term process, if you want to do it right. It requires time, and you had better start right away.
GF: Are there sectors that you consider most promising in the medium term?
Leith: Traditionally, Africa has been seen more as an extractive industry destination—for mining, oil, gas and agriculture. The next wave of growth will be in areas including consumer goods, telecom and clean energy. I expect there to be mergers between banks and telecoms. Most people in Africa will never go to a physical bank; all of their banking will be done over their mobile device. Energy and electricity are also major requirements, and I expect continued expansion in wind turbines and solar. There is a huge potential for all green sources of power.
GF: Which countries are most welcoming for an international company entering the market?
Leith: At present there are seven main countries to consider for a presence in Africa: South Africa, Kenya, Nigeria, Ghana, Ethiopia, Zambia and Tanzania. But increasingly, other countries are offering interesting opportunities. Watch out for Zimbabwe or Rwanda, for example.
GF: Is there any common trend shared by main states in term of policy and governance?
Leith: Different countries are competing against each other to attract foreign direct investment, and they know that the only way they can do that is to make doing business easier. For example, in Nigeria they will soon be announcing the appointment of a person who is coming from the private sector and who will mainly focus on making doing business in Nigeria easier. Countries understand how important this is to attracting investment.