- The biggest trends that will drive growth on the continent include its population, technology and urbanisation.
- With the projected population growth, consumer demand will then grow in tandem with urbanisation.
- Mobile phone subscription is expected to benefit 167 million more people from the sub-Saharan Africa (SSA) region.
The African Continental Free Trade Area (AfCFTA) presents Africa with a rare opportunity to discard its colonial economic system through tremendous industrial development.
This development can only take place if there is free movement of people and goods across boundaries and which should be accompanied by non-tariff barriers.
AfCFTA Secretary-General, Wamkele Mene, has often said that the continent has been a source of raw materials for other regions of the world which in turn export the finished goods to Africa at premium prices.
The continent has for decades failed to provide improved trade mechanisms between African countries which has led to the current situation. The AfCFTA is intended to remedy this.
To be in good shape for trade under AfCFTA, countries have to ensure that they are willing to create value chains that will free the continent from the colonial trading system which has been in place for over 60 years and which has left the continent vulnerable.
With the potential benefits that the AfCFTA has to offer Africa, the biggest trends that will drive growth on the continent include its population, technology, and urbanization among other factors.
1. Population growth and rapid urbanization
By 2050, Africa’s population growth is projected to hit 2.5 billion people which then will comprise 26 percent of the world’s projected working-age population. With these numbers, the continent’s economy is estimated to grow twice as rapidly as that of the developed world.
At the end of this decade, Africa will have over 1.7 billion consumers whose total consumer expenditure will be $2.5 trillion.
With the advancement, there will be more rural-urban migration which will see Africa’s cities become home to millions more with projections showing that this will lead to an increase in the number of cities from the current 68 to 85 by 2025. In the next four years, 190 million more people will be added to Africa’s urban population which will see 45 percent of all Africans living in a city by 2025.
This multi-pronged growth means that population and urbanization are among the key trends to watch and plan for as Africa approaches its next growth phase, consumption.
2. Consumer demand
Countries like Nigeria, Angola, and Ghana will see their city dwellers increase to more than 80 percent of their current population by 2050.
The more than 800 million Africans who will have moved to urban areas will drive another aspect by creating demand for consumables.
There are currently more than 350 million people classified as middle-class in Africa and they are spending more than $400 million per day. With the projected population growth, the consumer demand will then grow in tandem with urbanization. Those who are set to tap into this market have to start working now if they are to reap from this growth.
3. Internet access, mobile devices, and tech growth
Mobile phones and internet access have brought enormous transformation to the continent which has seen Africa leapfrog some development stages. Mobile devices and tech growth have enabled more than 60 percent of the population to access more services than would have been possible otherwise.
Mobile phone subscription is expected to benefit 167 million more people from the sub-Saharan Africa (SSA) region. This will see the cumulative mobile services user number hit 623 million subscribers. By 2025, smartphone connections will more than double in the SSA region. In tandem, African internet users will grow by 11 percent in the next decade. Globally, the continent will represent 16 percent of the total global connections.
On the tech front, the continent’s technology ecosystem is evolving which is growing its talent pool in the different innovations. The continent is registering an increase in local developer talent which is a trend that will also drive Africa’s economic growth.
4. Economic activity in the informal sector
Africa’s informal sector is the biggest employer and this can only get bigger especially with the AfCFTA.
In this sector, however, there are several limitations including access to credit and other financial services that would help propel their growth.
In the next five years, service providers who will be able to offer solutions to the needs in the sector will be best placed to make handsome returns.
Adopting a model that addresses these challenges in the best way possible will see the sector become even much better to address the economic challenges the continent faces.
An unparalleled opportunity to realize the Africa rising sentiment is provided by the AfCFTA and its coverage of the 1.2 billion people market whose GDP is US$2.5 trillion across all 55 African Union member nations.
Africa’s population by 2050 will make the continent one of the most dynamic markets in the world. This will make up 26 percent of the world’s working-age population in the future, according to projections. Consequently, the economy is expected to grow at a rate twice that of the industrialized world economy.
Looking at the key trends, intra-African trade has been hindered largely by small businesses paying higher tariffs when exporting within Africa than they do when exporting outside of the continent. Exploiting opportunities offered by the trends will see Africa address this challenge.
Because of the AfCFTA, African enterprises will have an easier time doing business within the continent and tapping into the continent’s expanding market. By developing a single trading area across Africa, firms and consumers across the continent have the opportunity to support sustainable growth in the world’s least developed region.
Businesses can expand their reach to new markets thanks to mobile phone-based digital trading. Mobile phone penetration in Africa has grown at the quickest rate in the world; therefore it is a matter of taking advantage of existing technology advancements for trading.
Even informal traders use mobile phones to conduct business, which makes the AfCFTA’s mobile phone commerce an essential component. The AfCFTA has a significant impact on Africa’s economic sectors and it will determine the outcome of many ventures. By embracing friendlier trade policies, the AfCFTA could finally be the light at the end of the tunnel for the impoverished continent.