The sheer size of Africa’s emerging boom — driven by a wealth of untapped natural resources and rising middle class — represents a huge opportunity for Australian investment.
In 2018, global foreign direct investment (FDI) fell by 13 per cent to $US1.3 trillion ($1.9 trillion), the third consecutive year of declines, according to PwC partner Ollie Marion.
But Africa has been the exception to the rule, with FDI flows rising by 11 per cent in 2018 to $US46 billion:
“The African opportunity is here and it is now, with competition for investment likely to only increase over time,” Marion says.
“Given its sheer landmass, young demographic, rising middle class, and imponderable resources, Africa’s potential is without doubt.”
At least 170 Australian listed companies operate in 35 countries across the African continent with the scale of exploration, extraction and processing from current and potential investment estimated to be worth more than $40 billion.
Resolute Mining’s (ASX:RSG) recently announced acquisition of Toro Gold adds to a growing list of Australian investments into Africa, and also reflects Australian investor confidence in the mining industry in Africa.
John Welborn, well-respected managing director of +400,000oz per year Resolute, compares the imminent boom to the China-led commodity super cycle in the 2000s.
The Australian economy is now very China-focused, but in the first 20 years of his lifetime we largely missed what was going on in Asia as a potential trading partner, Welborn told Africa Down Under 2019 delegates.
“Andrew Forrest – the promoter of Fortescue Metals Group (ASX:FMG), one of the great mining success stories in WA – spoke very early on about the emerging middle class in China, and what it was going to do for bulk commodities,” Welborn says.
“His identification of future demand for iron ore in China became the premise for what would become a multi-billion-dollar company.”
The explosion of middle-class wealth in China is now a key driver of the current Australian economy. We are currently facing a similar opportunity in Africa, Welborn says.
“By 2030, almost half of all of Africans are projected to join the ranks of the middle and upper classes,” he says.
“In 2035, the number of young people reaching working age in Africa will exceed the entire rest of the world combined.
“In 2050, one in every four human beings will be African. Just think about those numbers and the opportunities it creates.”