May 19, 2020

EY: Will economic slowdown negatively impact investment in Africa?

Ernst Young South Africa
Africa economic slowdown
Ernst Young Africa attractiveness
EY South Africa
Michael Lalor
5 min
EY: Will economic slowdown negatively impact investment in Africa?

Some recent reports suggest that investors have lost confidence in Africa as an investment destination. This appears to be largely as a result of the recent economic slowdown in some of the key African economies.  

Indeed, the International Monetary Fund (IMF) recently revised its projected growth rate for sub-Saharan Africa (SSA) for 2016 down again to 3 percent - a year ago they were projecting 6.1 percent growth for 2016. This means that the region will experience its lowest growth rate in 15 years.

The reality is that economic growth across the region is likely to remain slower over the next few years. The main reasons for a relative slowdown are not unique to Africa and are the same as those weighing down the global economy:

  • A general slowdown in emerging market economies (in particular the rebalancing of China’s economy)
  • Ongoing stagnation in most developed economies
  • Lower commodity prices
  • Higher borrowing costs.

The key word, however, is relative. Although growth in the region has slowed, SSA will remain the second fastest growing region in the world for the foreseeable future, after emerging Asia. In other words, slower growth does not mean no growth, and certainly does not signal a cyclical decline in most African economies.

We still maintain that Africa’s rise over the past 15 years is real; what we have witnessed has been a structural evolution rather than cyclical change that has marked previous boom and bust periods in Africa’s post-colonial history. Despite exports from many African economies remaining commodity-orientated, private consumption has become a key growth driver, as has investment in infrastructure. The services sector constitutes an increasingly significant proportion of most African economies, and while still small, the role of (and investment into) manufacturing is increasing.

This process of structural evolution (as with anywhere else in history) will likely take decades. However, most African economies are in a fundamentally better place today than they were 15 to 20 years ago, and overall growth is likely to remain robust relative to most other regions over the next decade. Structural evolution will continue, and, when conditions improve globally, much of Africa will be well positioned to accelerate the growth momentum once again.

But will the relative slowdown in many African economies negatively impact investment? Some recent reports suggest that investors have lost confidence in Africa as an investment destination. This view does not align with our own research and experience.

Despite greater levels of uncertainty, we do not anticipate that this will have a fundamental impact on the number, value or quality of FDI projects in Africa. There are two key factors supporting our view:

  • A consistent theme of our Africa Attractiveness surveys since 2010 has been the wide perception gap between investors who already have operations in Africa and those who do not. Investors already doing business in Africa, who understand the real risks and opportunities, remain overwhelmingly positive about Africa’s prospects and potential. Conversely, those not doing business in Africa have remained consistently and overwhelmingly negative. If anything, we would expect this perception gap to widen over the next few years (and to feed the misguided view that investors are losing confidence in Africa).
  • Our analysis of FDI focuses specifically on greenfield and significant brownfield projects, which are, by their nature, focused on the long term. These are not investors chasing a quick profit; investments are generally initiated by people already doing business in Africa and who understand the business environment; they are generally investing in the longer-term potential of many African markets, and will not be swayed by shorter-term economic vagaries.

Supporting our view on Africa’s longer-term investment outlook, FDI flows to Africa remained robust in 2015:

  • FDI project numbers increased by 7 percent year-on-year;
  • The capital value of those projects was down year-on-year - from $88.5 billion in 2014 to $71.3 billion in 2015 – but this was still higher than the 2010 to 2014 average of $68 billion.
  • Similarly, jobs created as a result of these FDI projects were down year-on-year, but were also ahead of the average for 2010 to 2014.

Significantly, the year-on-year increase of 2015 FDI project numbers in Africa occurred in a context where the total number of FDI projects dropped by 5 percent globally. In fact, Africa was one of only two regions in the world where there was growth in the number of FDI projects over the past year.

However, from an investment perspective, the next few years may be challenging. Not because the opportunities are no longer there, but rather, because these opportunities are likely to be more uneven than they have been over the past five years. Given the scale, complexity and fragmented nature of the African continent, making well informed choices about which markets to enter when, and via which mode, will be more critical than ever.

At the same time, the emphasis of most organisations with a growth strategy in Africa is likely to shift from rapid expansion to the consolidation and optimisation of African operations. This should not, however, be read as a signal that investors are losing confidence in African markets. It is instead the next logical phase of growth for the many investors that are committed to, and continue to believe in, Africa’s longer term prospects.

By Michael Lalor, EY’s Lead Partner Africa Business Centre

African Business Review’s June issue is now live.

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Jun 14, 2021

5 minutes with... Janthana Kaenprakhamroy, CEO, Tapoly

Kate Birch
3 min
Heading up Europe’s first on-demand insurance platform for the gig economy, Janthana Kaenprakhamroy is winning awards and leading with diversity

Founder and CEO of award-winning insurtech firm Tapoly, Janthana Kaenprakhamroy heads up Europe’s first on-demand insurance platform for the gig economy, winning industry awards, innovating in the digital insurance space, and leading with inclusivity.

Here, Business Chief talks to Janthana about her leadership style and skills. 

What do you do, in a nutshell?

I’m founder and CEO of Tapoly, a digital MGA providing a full stack of commercial lines insurance specifically for SMEs and freelancers, as well as a SaaS solution to connect insurers with their distribution partners. We build bespoke, end-to-end platforms encompassing the whole customer journey, but can also integrate our APIs within existing systems. We were proud to win Insurance Provider of the Year at the British Small Business Awards 2018 and receive silver in the Insurtech category at the Efma & Accenture Innovation in Insurance Awards 2019.

How would you describe your leadership style?

I try to be as inclusive a leader as possible. I’m committed to creating space for everyone to shine. Many of the roles at Tapoly are performed by women and I speak at industry events to encourage more people to get involved in insurance/insurtech. Similarly, I always try to maintain a growth mindset. I think it’s important to retain values to support learning and development, like reliability, working hard and punctuality.

What’s the best leadership advice you’ve received?

Build your network and seek advice. As a leader, you need smart people around you to help you grow your business. It’s not about personally being the best, but being able to find resources and get help where needed.

How do you see leadership changing in a COVID world?

I think the pandemic has proven the importance of inclusive leadership so that everyone feels supported and valued. It’s also shown the importance of being flexible as a leader. We’ve had to remain adaptable to continue delivering high levels of customer service. This flexibility has also been important when supporting employees as everyone has had individual pressures to deal with during this time. Leaders should continue to embed this flexibility within their organisations moving forward.

They say ‘from every crisis comes opportunity’, what opportunities do you see?

The past year has been challenging, but it has also proven the importance of digital transformation in insurance. When working from home was required, it was much harder for insurers to adjust who had not embedded technology within their operating processes because they did not have data stored in the cloud and it caused communication delays with concerned customers at a time when this communication should have been a priority, which ultimately impacts the level of customer satisfaction. This demonstrates the importance of what we are trying to achieve at Tapoly in driving digitalisation in insurance and making communication between insurers and distribution partners seamless. 

What advice would you give to your younger self just starting out in the industry?

Start sooner, don’t be afraid to take (calculated) risks and make sure you raise enough money to get you through the initial seed stage.


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