Ten African lions set to outrun Asia’s tigers

Rapidly growing African economies are the next frontier of booming growth and ripe for investment. Here are the ten most promising ‘African Lions’.

When covering Africa, reports of poverty, violence, and disease still dominate the headlines of Western media. This outdated narrative obscures what global consulting companies and economic publications have reported for the past few years: Africa’s overall growth rate has “quietly approached” that of Asia and at least ten African Lions are set to outpace the Asian Tigers in the next five years.

More Risky

  1. Democratic Republic of Congo

The eastern region of the Democratic Republic of Congo has long been plagued by rebellion and appalling violence, but the country has still managed to achieve surprising growth. GDP growth is expected to climb steadily from 7.2 percent in 2012, to 8.2 percent by the end of this year, and to 9.4 percent in 2014. Endowed with significant natural resources, the country has begun to realize its vast potential by implementing macroeconomic policy to reduce inflation and stabilize the exchange rate. However, the DRC remains near the very bottom of the World Bank’s rankings on the ease of doing business and its political instability could derail its economic progress.

  1. Chad

Driven by government-implemented industrial, energy, and agro-livestock projects, Chad’s already impressive 7.2 percent real GDP growth in 2012 is expected to rise to a considerable 11.5 percent in 2014. However, the country’s macroeconomic stability and government spending is heavily reliant on agriculture, and thus vulnerable to unfavorable weather and poor harvests. With financial reform, the completion of the Heavily Indebted Poor Country’s Initiative, and diversification of the economy, Chad might become a safer bet.

  1. Angola

A traditionally energy-based economy, Angola has recovered from the global financial crisis to achieve consistent GDP growth rates around 8 percent. The country is still heavily reliant on oil revenues, but the creation of a Sovereign Wealth Fund will attempt to diversify the economy and insulate it from volatile oil prices. Close collaboration with the IMF has helped the country regain macroeconomic stability and settle its arrears, but further reforms and infrastructure investment are necessary before Angola can expand its investment opportunities beyond energy and natural resources.

  1. Mozambique

The Mozambican economy has maintained its robust growth and is expected to record a real GDP growth of 8.5 percent at the end of the year. The extraction of coal, gas, and aluminum has been the main driver of growth, although the government is harnessing these gains into infrastructure investment. The recent discovery of one of the planet’s largest known gas reserves could help propel Mozambique’s economic growth, if production can begin relatively soon. However, Mozambique’s investment climate is hindered by the problems typical of developing economies, including weak human capital and infrastructure, the high cost of credit and burdensome regulations.

  1. Nigeria

The most populous country in Africa and the second most oil-rich, Nigeria continues to realize strong economic growth. Clocking 6.6 percent real GDP growth in 2012, Nigeria is projected to grow by 7.3 percent in 2014, bolstered by the continued global demand for oil. Nigeria’s high degree of corruption and conflict in the northern provinces has not dampened enthusiasm for the country’s investment opportunities. Recognized by the Atlantic as among the next 5 emerging economies that will change the world, Nigeria has been dubbed the “world’s best-kept secret” by Africa’s richest entrepreneur, Aliko Dangote, who proclaims “there’s nowhere you can make money like in Nigeria.”

Less Risky

  1. Côte d’Ivoire

Since the conclusion of the 2011 Ivorian civil war, Côte d’Ivoire has experienced robust growth, recorded at 8.6 percent in 2012 and projected to reach 9.8 percent in 2014. The economy is relatively diversified, though reliant on agriculture. The country’s financial position has improved as it has returned to a low inflation rate and substantially reduced its external debt through the completion of the Highly Indebted Poor Country initiative. Significant progress in human rights and security normalization indicates that Côte d’Ivoire is likely to continue on its path of strong economic growth, uninterrupted by political instability.

  1. Sierra Leone

Propelled by its mining sector, Sierra Leone saw its growth rate spike at 16.7 percent in 2012, but is expected to stabilize at a still-impressive 12.1 percent in 2014. Tight monetary policy has cut inflation and the government has implemented aggressive reforms to combat corruption, the continent’s most pernicious drain on economic growth. Since the conclusion of the last of the country’s decades-long civil wars in 2005, political stability has persisted and the World Bank has recognized Sierra Leone as one of the top performers in improving the ease of doing business since 2005.

  1. Ghana

Ghana’s strong growth – expected to reach 8 percent at the end of 2013 and close to 9 percent in 2014 – is driven by exports of cocoa and gold, oil revenues, and the service sector. Ghana’s program of hedging oil imports and exports has so far maintained macroeconomic stability even as increasing oil revenues put upward pressure on the exchange rate. Ghana’s recent free and fair elections, and its settlement of an election dispute through legal channels, suggest that the risk of political destabilization is minimal.

  1. Ethiopia

Lacking the natural resources of many of its neighbors, Ethiopia has relied on industrialization to drive its nine consecutive years of growth. The Ethiopian government has put in place tough monetary policies to combat inflation and consulted with investors to determine the reforms required to make Ethiopian industry friendlier to investment. Ethiopia’s potential has not gone unrecognized by the Chinese, who recently opened an industry zone in eastern Ethiopia and have begun investing in much-needed infrastructure. Once Ethiopia smoothes out the logistical snags that increase manufacturers’ cost of production, the country may in fact realize its aspirations to follow in the footsteps of Asian centers of industry.

  1. Rwanda

Unlike the resource-rich countries that make up the majority of Africa’s fastest growing economies, Rwanda’s growth has been driven mainly by the service and industry sectors. Rwandan President Paul Kagame has backed up his intention to make Rwanda the “Singapore of Africa” with extensive structural, institutional, and regulatory reforms. Rwanda’s commitment to transforming its investment climate has been recognized and profiled in the World Bank’s 2013 Doing Business report. Its stable democratic institutions, coupled with its commitment to promoting equitable growth and human development, make Rwanda one of the most promising emerging African economies.

Due to the outmoded perception that the continent is risky for investment, African countries have encountered difficulty in attracting investment outside of their natural resources sectors. However, the rest of the world is not looking so ripe for investment: the U.S. has flirted with default and its Congress remains in political gridlock; Europe is growing painfully slowly; and even the growth of much-hyped BRIC countries appears to be stagnating. As Stephen Jennings, head of Renaissance Capital, points out, “[Africa] is the only region in the world where growth is accelerating.” Global investors and companies might do well to heed Accenture’s advice to “act now” and take advantage of this “rising star with untapped growth potential.”

About Author

Marina Mellis

Marina currently works for an informations discovery company and was previously working as a research assistant at the Economics Department of Columbia University. She graduated with a BA First Class Honours in International Development Studies from McGill University.