Africa’s economy: Looking beyond stereotypes

From August 4 to 6, 52 African Heads of State will join President Obama in Washington, D.C. to participate in the first-of-its-kind U.S.-Africa Leaders Summit. CEOs from Africa’s and America’s largest corporations will also be on hand to discuss investment in one of the world’s most promising frontier markets.

When Americans think of Africa, South Africa usually comes to mind, because of the iconic figure of Nelson Mandela and his historic struggle against apartheid.  Or Nigeria because it is the largest country on the continent.  Or the game preserves of Kenya and Tanzania.  It is time go beyond stereotypes and to recognize that this continent is a colossus and a rapidly developing economic powerhouse.

 {mosads}With a land mass the larger than all of North America, six of the world’s ten fastest growing economies of the past decade are in Africa. The IMF estimates that Africa will account for seven of the world’s fastest growing economies over the next five years.  FDI inflows to sub-Saharan Africa are projected to reach $54 billion by 2015. By 2030, Africa’s 18 largest cities will have a spending power of $1.3 trillion. 

One of Africa’s smallest states is emblematic of the wealth of opportunities that this continent offers. The World Bank rates the island nation of Mauritius as the #1 one country in Africa for ease of doing business. The Global Competitiveness Index places Mauritius first in Africa.  The 2014 Index of Economic Freedom also ranks Mauritius #1, as do the World Bank’s 2012 Knowledge Economy Index, 2013 Democracy Index, 2014 Social Progress Index, 2014 Environmental Performance Index, the 2014 Global Enabling Trade Report, Mercer’s 2012 Quality of Living Survey and the 2014 Forbes Survey of Best Countries for Business.

Situated in the “golden triangle” connecting Africa, Asia and Australia, Mauritius boasts a network of Investment Promotion and Protection Agreement that provide preferential market access to 26% of the world’s population. Mauritius is rightly known as Africa’s leading financial hub. It is a signatory member of international standard-setting bodies that include the IAIS, IOSCO, MMOU, FATF and the IFSB. It is recognized by the OECD as a “white listed” jurisdiction, has world-class anti-money laundering legislation and hosts an accredited International Arbitration Center.

Where Mauritius truly distinguishes itself, however, is in the area of the ocean economy. Mauritius manages a maritime zone of 2.3 million km2. The potential for economic advancement and prosperity that this resource can generate if developed in a sustainable way is staggering. Business opportunities in the marine leisure activities could quadruple the segment’s GDP contribution by 2025. Seafood-related activities should also expand in the fisheries and aquaculture sectors.

However, the real prosperity from the ocean is expected from the utilisation of pure, nutrient-rich and cold deep sea water to develop Deep Ocean Water Application (DOWA) projects that will provide sea-water air conditioning to industrial and commercial users, thus reducing dependence on fossil fuels, as well as creating a plethora of downstream business activities for high-end aquaculture, seaweed and algal culture, cosmetics and pharmaceuticals, agrochemicals, water bottling and thalassotherapy, among others.

In the energy sector, the granitic nature of the Seychelles Islands and the discovery of a thick sedimentary sequence in the Seychelles plateau have attracted oil companies to prospect in the region. The discovery in 2009 of inactive hydrothermal fields indicates the likelihood of mineral deposits. In fact, prospecting nations have recently requested and been allocated deep sea mining blocks by the International Seabed Authority in areas contiguous to the Mauritian Exclusive Economic Zone.

These innovative projects lead the way to the creation of an ocean knowledge economy that allows local and international researchers to carry out applied ocean research. The ocean economy can also open up new business opportunities for existing services sectors such as marine ICT and marine finance. For example, existing local ICT capabilities could be extended to develop new applications for ecosystem and wave modelling tools, fish habitat monitoring and sustainable fisheries resource management systems, trade and maritime-transport related data, amongst others. Equally, marine finance would focus on delivery of niche services such as ship management, yacht leasing, marine insurance and trading on carbon exchange platforms. Ship registration activities would also be significantly developed as part of the marine services sector, with a ripple effect on ship leasing, ship insurance, ship management and ship repairs.

Mauritius represents an exciting example of the possibilities that Africa presents for the forward-looking investor who is capable of seeing beyond stereotypes.

Ereli is former U.S. ambassador to the Kingdom of Bahrain and State Department deputy spokesman.