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Integration policies and infrastructure projects are enabling African businesses to scale up, finds new EIU report


Alwihda Info | Par Info Alwihda - 18 Novembre 2019

Regional integration policies in Africa are improving access to other markets.


© AFP / Pius Utomi Ekpei
© AFP / Pius Utomi Ekpei
Delivering economic growth in Africa requires home-grown businesses to scale up. A new report written by The Economist Intelligence Unit (EIU) “Promise and perils: Scaling up businesses in sub-Saharan Africa”, examines the factors enabling businesses in the region to scale up. It reviews the policy environment, state of technology and infrastructure, and financing options that allow businesses to access markets in other countries on
the continent and beyond.
 
Among the most ambitious integration policy is the African Continental Free Trade Agreement committed to reducing tariffs and non-tariff barriers. If the entire continent were to implement the deal, it would create a single market of over a billion consumers with a total GDP of over US$3trn.
 
Wider and better internet connectivity will drive the next wave of technological innovation, empowering companies to develop new, digital services for consumers on the continent. By 2025, 3G mobile network coverage is expected to account for 61% of the mobile phone connections. Companies from China and the GCC have identified opportunities to expand the region’s telecommunications networks.
 
Private equity and venture capital have been fuelling growth in small and medium-sized businesses in SSA. Private equity closed deals worth US$25bn between 2013 and 2018 and venture capital deals grew four-fold from 2017 to 2018.
 
The report also explores the role of foreign investors in facilitating business expansion, focusing on those based in the Gulf Co-operation Council (GCC) countries. Gulf investment is concentrated in East Africa, with the UAE leading the charge. The UAE is among the top ten source countries for foreign direct investment in SSA, investing US$649m between 2015 and early 2019.
 
Combined these allow African SMEs to expand operations presenting attractive opportunities for investors too. Melanie Noronha, editor of the report, said: “Africa’s growth recovery offers hope the continent can return to its GDP surge in the earlier part of the millennium—but only if its businesses can scale within and across borders. Setting up the environment to enable businesses to scale up in SSA is no easy feat but done right, it can create a launchpad for the world’s next global company.”
 
Link to the report: Promise and perils: Scaling up businesses in sub-Saharan Africa