Adam Fayed, CEO of adamfayed.com.
We should be careful about predicting the future; in the 1980s, almost everybody seemed to think that Japan would overtake the U.S. in terms of GDP. And this thinking continued as recently as 1995.
More recently, Goldman Sachs economist Jim O’Neill coined the term BRICS for the emerging economies of Brazil, Russia, India, China and South Africa.
Given how three out of five of those economies have struggled, he has admitted that he should have reconsidered the acronym. With China growing much more slowly than expected, some people are predicting that China may never overtake the U.S.
This is ironic given all the recent news about BRICS and their alleged currency. Time will tell about all of these trends, and we should expect the unexpected.
Nevertheless, if you forced me to pick one part of the world that will outperform in the next half century, I would predict Africa. There are numerous reasons for this.
The Promising Factors Of Africa’s Economy
The first is basic math. The birth rate in most of the world is below the replacement rate. However, in most African countries—including Nigeria—the birth rate is excellent. This means that even if per capita GDP doesn’t increase as much as expected, total GDP will likely be higher.
With speculation that Nigeria could overtake China as the second most populous country in the world, it isn’t unrealistic that they could become an economic superpower.
This basic demographic math also brings up another point: With a higher number of young people working in the continent compared to other regions, I see the population there as more eager for change with a hunger for progress.
Traditionally, many societies in Africa are communal and focus on face-to-face communication. While this remains the case in many places there, I have noticed changing attitudes.
When I went toward a completely remote, global and online business in 2018, I didn’t expect African countries to become the second biggest region for my business in 2021. This was despite the fact that many people claimed that face-to-face communication was more important in that part of the world.
As the number of younger people further increases, and wealth is passed down over the generations, I believe there will be an even bigger opportunity for firms to target consumers remotely and not just on the ground.
Opportunity In Neutrality
Then there are the politics. While it is true that political risks are high in many African countries, we are also arguably in a second partial cold war between the U.S. and China.
While trade is still increasing, many countries and companies want to reduce their risks, especially after the Covid-19 shock to supply chains.
Some countries are moving more toward the U.S. sphere of influence, and others are moving more toward China. In that environment, I believe that countries that remain neutral or at least want to deal with both sides can benefit.
In much the same way that Switzerland historically received business due to its neutrality, we are seeing places like Mexico, the United Arab Emirates and Thailand receive business for the simple reason that they aren’t picking sides in an overt way.
As Bridgewater founder and billionaire Ray Dalio said, “History shows us, and logic makes clear why, the neutral countries and their markets do best during wars until the ‘winner’ is known.”
If countries in Africa remain open to doing business with all sides, this could open up huge economic opportunities. Having said all of the above, my belief in the African opportunity has caveats.
Difficulties To Overcome
There are over fifty countries within the continent. Not all will do well. The unstable politics of some countries also does not help, and various wars and conflicts are still raging on the continent.
We have also recently witnessed the weakness of the Nigerian Naira, Egyptian Pound and Ghanian Cedis, as well as Ghana’s default on external debt, which is why most sensible investors based in Africa should want to invest internationally for diversification.
We have also seen how the United States stock market has outperformed emerging markets for decades, and especially China’s Shanghai Composite, despite the alleged high growth in the latter.
One reason for this trend is the high number of Asian firms that did IPOs on the U.S. stock market along with the international nature of U.S. firms.
Therefore, nobody should be surprised if some of the biggest winners from high African growth are larger firms with headquarters based internationally. But for average businesses as well, the African market could be a huge engine for growth—even if you don’t have boots on the ground.
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