McKinsey on Africa | Sizing Africa's business opportunities

More McKinsey Articles:

» Can Africa continue to grow?
A panel of regional business leaders discusses its prospects.

» Checking Africa’s vital signs
A familiarity with Africa’s demographics, economics, and business climate is essential to considering future trajectories of growth.

» What’s driving Africa’s growth
The rate of return on foreign investment is higher in Africa than in any other developing region. Global executives and investors must pay heed.

» Africa’s path to growth: Sector by sector
The continent’s growth story isn’t entirely about the extractive industries. Seven articles examine the future of a wide range of sectors.

» Fulfilling the promise of sub-Saharan Africa
The region has already made big strides below the radar. It now stands to become the developing world’s next great success story.

» A seismic shift in South Africa’s consumer landscape
McKinsey research underlines both the distinctiveness of black shoppers’ needs and the distance retailers must still go to serve them.

» Picking products for Africa’s growing consumer markets
The rapid expansion of Africa’s consumer class should convince companies to consider entering a region that many have avoided in the past.

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Strong prospects await global companies that invest in the continent’s consumer, agricultural, natural-resource, and infrastructure sectors.

Africa’s economic growth is creating substantial new business opportunities that multinational companies often overlook. New projections from the McKinsey Global Institute (MGI) show at least four categories that together could be worth $2.6 trillion in annual revenues by 2020 (exhibit). In Lions on the move: The progress and potential of African economies, MGI reviews the prospects of the continent’s consumer-facing sectors (retailing, telecommunications, and banking, among others), agriculture, natural resources, and infrastructure.

Consumer sectors—the largest opportunity—are already growing two to three times as fast as those in the countries belonging to the Organisation for Economic Co-operation and Development (OECD). This growth will create more consumer markets large enough to attract multinational companies.

Africa’s agriculture holds enormous potential for companies across the value chain. With 60 percent of the world’s uncultivated arable land and low crop yields, Africa is ripe for a “green revolution” like those that transformed agriculture in Asia and Brazil. The barriers to raising production in Africa are well-known and complex, but if they could be overcome, MGI estimates that the continent’s agricultural output could increase from $280 billion a year today to $500 billion by 2020 and as much as $880 billion by 2030.

Further growth in Africa’s resource sectors is likely. MGI analysis suggests that the continent’s production of oil, gas, and most minerals, measured by volumes, may continue to expand steadily by 2 to 4 percent a year. At current prices, this growth would raise the value of resources produced in Africa from $430 billion annually now to $540 billion by 2020.

Finally, MGI sees large opportunities for companies that help build Africa’s infrastructure. Currently, African governments and private sources combined are investing about $72 billion a year to do so. The continent, however, still faces huge unmet needs, which will require at least an additional $46 billion a year in spending. This goal, we calculate, could be met through a combination of higher outlays by African governments, private companies, and non-OECD investors, along with regulatory reforms to boost operational efficiency.

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