Africa is dynamic, but its dynamism has been constrained by widespread poverty, uneven economic growth and the climate emergency. It also lacks a critical mass of liquid, stable markets, and corruption remains endemic, fuelled by rising authoritarianism and violent conflict. With these real-world deterrents, Africa faces many headwinds to achieving its full potential.

Despite its abundant natural resources and young population (around 40% are 15 years old or younger) Africa needs help to utilise its advantages fully.

A new McKinsey report, “Reimagining economic growth in Africa”, challenges the view that Africa’s potential will never be fully realised. The report says that the continent’s diversity is an asset rather than a challenge. It highlights Africa’s potential to collectively increase revenue by $550 billion by the end of 2023, which could help drive inclusive growth and revitalise efforts to achieve the continent’s Sustainable Development Goals (SDGs).

“We have just passed the halfway mark since 2015 with seven years to go before 2030, and it’s no secret that the world’s fallen short of the Agenda 2030 SDG targets. Africa is no exception – however, there is time to change this outlook,” says Chinèll Bermosky, Responsible Investment Specialist and Investment Consultant at Old Mutual Corporate Consultants (pictured above).

Daniel Steenkamp, Innovative Finance Lead at the Bertha Centre for Social Innovation and Entrepreneurship and a partner at Seedwell Capital, a private equity fund investing in Southern Africa, says that while Africa has only now begun to recover from the pandemic, this is a chance for the continent to approach SDGs with greater vigour.

“It can rethink its strategies and analyse themes that emerged during the pandemic, for example: investment in healthcare; skills development; the use of technology; enhanced food security; the promotion of gender equality and good governance,” he says.

“There’s a growing call, echoed by the recent Africa Impact Summit, that Africa should stand up for itself – and that we have the resources and solutions to elevate the continent and her people.”

Africa’s advantages

A crucial insight is that there is no “one Africa,” which means – Africa is diverse with a mix of many countries, cultures, languages, and histories. According to McKinsey, almost half of its people live in countries where GDP growth between 2010 and 2019 exceeded the continent’s overall growth rate of 4.2% since 2000.

Aside from having 90% of the world’s chromium and platinum, which are used in microchips, and 65% of the world’s arable land, Africa has an increasing working-age population and the prospect of continued economic growth due to a burgeoning services sector.

“The agricultural and consumer sectors have significant growth potential, which is attractive to both local and foreign investors. Such investments could foster job creation and economic participation,” says Steenkamp.

Bermosky adds that Africa’s most underrated advantage is its resilience – an ability to build solutions through adversity. “African businesses have been able to function despite challenges, and they have been growing some leading technological advancements, such as digital and cell phone banking like MPESA in Kenya,” she says.

It is this resilience that has seen countries such as Rwanda, Botswana, Mauritius and the Seychelles overcome developmental and other challenges to emerge as success stories on the continent.

Trade also holds significant potential on the continent.

“According to McKinsey, only 10% of imports and 17% of African exports are inter-regional, while other parts of the world report about 20% of inter-regional imports and exports. Our countries have the opportunity to start more meaningful trade with one another, opening more market opportunities,” Bermosky explains.  

Responsible investment in the continent

Steenkamp suggests that responsible investment can play a crucial role on the continent, addressing developmental disparities, unlocking economic potential and fostering sustainable growth.

“By directing investments toward projects and initiatives that align with the continent's unique needs and challenges, responsible investors can contribute significantly to the achievement of SDGs and the overall betterment of African societies and ecosystems,” he notes.

Bermosky says further that different types of responsible investment could benefit the continent.

“ESG integration is working with existing companies that require improvement in achieving different SDGs,” she says. “This involves active investor ownership and is primarily driven through committed engagement to changing company strategy, culture, operations and mindset.

“Some of these changes include driving down carbon emissions, addressing workplace safety concerns, and tackling gender and racial pay gaps. The result is, more resilient institutions and the potential to deliver long-term value to stakeholders."

Bermosky adds that another type of investing that will help Africa realise its potential is impact investing, which directly supports companies driving change on the continent. This involves "backing" institutions which actively contribute to a more sustainable outcome such as clean energy initiatives or institutions that provide social services, such as education or healthcare.

The value of intent

Steenkamp points out that it’s vital to distinguish between investments that focus on preventing harm and those that intentionally do good. “We need intentional investments in Africa, focusing on real, sustainable impact,” he says. “This shouldn’t only be the mandate of impact funds, although they play an important role.

“Traditional investors, entrepreneurs and corporate players should address social and environmental challenges through creative restructuring, innovative business models and a reimagining of capitalism. This can be achieved while still generating fair, market-related financial returns.”

He notes, however, that a lot needs to be done to achieve comprehensive buy-in when it comes to impact-focused investing, both from an investor perspective and investor-friendly government policies.

Bermosky says that nothing exists in isolation. “We believe there are numerous opportunities in Africa, and recognise that some investment products and strategies are already investing in these. When we help set strategies for our clients, we encourage them to remember that sustainable and impact investment do not exist in isolation, but rather as building blocks which form part of their overall investment strategy”.”

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