Africa could be the new land of opportunity for West Midland firms
GROWING optimism and confidence among international and African investors has led to significant inward investment into Africa making it a potentially rewarding destination for West Midlands businesses looking for growth, international trade specialists have said.
According to Ernst & Young’s second African Attractiveness Survey the continent has seen an increase in inward investment of 153% from 339 new projects in 2003 to 857 in 2011.
The report combines an annual analysis of investment into Africa since 2003, with a survey of 505 global executives on their views about how and where investment will take place in the next decade and predicts that Africa is poised to enter the premier league of investment destinations.
Investment into Africa has come from across the world, with strong growth in project numbers from rapid-growth markets and developed markets alike. Growth in investment by the UK has continued despite the current economic climate, with project numbers up 27%.
Intra-African investment has also been a key driver of this growth.
Linda Marston-Weston is leading Ernst & Young’s Growing Beyond campaign in the Midlands which is focussed on advising businesses on the best ways to make an impact into foreign markets and help local companies grow cross border.
She said: “Africa represents an increasingly attractive opportunity for businesses looking to find growth by investing in new markets. Survey respondents suggest that the continent will continue to improve as a place to do business in the next three years.
“In the Midlands JCB is already finding sales success in Africa having reached out to new markets in recent years, which has resulted in increased international sales.
“This shows there is a real opportunity for West Midlands businesses to take advantage of these rapidly growing markets and get ahead of their competitors.”
Overall this year’s survey paints a positive picture reflecting growing confidence in Africa’s prospects. Of respondents, 60% said their perception of Africa as a place to do business had improved over the past three years. Looking forward, 73% of respondents anticipated that Africa’s attractiveness would improve, while only 4% believed it would deteriorate.
The survey results do, however, also highlight that there is stark difference in perception between those who already have a business presence in Africa and those who do not.
This perception gap is reflected in the fact that, despite the positive African growth story, and Ernst & Young forecasting that growth in the region will remain at a robust rate of around four to five percent per annum in the next decade and that FDI into Africa will reach US$150bn by 2015, the continent still only attracted 5.5% of global FDI projects in 2011.
While this is up from 4.5% last year and is, in fact, the highest proportion of global FDI that Africa has ever received, reservations remain among those who have not yet invested into the continent.
“Despite high optimism, high growth and high returns, the perception gap still exists and the African continent as a whole still attracts fewer FDI projects than India and far fewer than China. There is still clearly work to be done by Africans – government and private sector alike – to better articulate and ‘sell’ the growth story and investment opportunity for foreign investors,” added Ms Marston-Weston.
Last year’s African Attractiveness Survey highlighted the growing diversification of FDI as a key trend. This has continued this year with even greater levels of investment into less capital intensive sectors, resulting in a growing number of FDI projects in manufacturing, business services and sales, marketing and support highlighting the shift away from extractive activities on which Africa has historically been dependent.
Looking ahead, the report concludes Africa remains high on the agenda of those looking to invest in foreign markets but despite the growth and progress a perception gap still remains. However, significant improvements in trade agreements, regional integration and an increased investment in infrastructure will push Africa into the top league of investment destinations.
“West Midlands businesses looking to find growth in new markets should consider the opportunities that Africa can offer. The survey shows that perceptions of the continent are beginning to shift and growth is expected to continue at a good rate in the next few years. Businesses across the region must at least consider Africa when formulating strategic plans to secure long term growth outside of their traditional markets,” said Ms Marston-Weston.
