Agriculture is among four sectors expected to generate $2.6-trillion by 2020.

For investors looking for a place to roost, Africa currently offers some of the highest rates of return in the developing world, according to consultants McKinsey & Co.

Consulting firm McKinsey & Co’s new report on Africa’s economy presents a bullish message to businesses, arguing that the continent currently offers the highest rates of return in the developing world. The report titled ‘Lions on the Move’ says Africa’s growth in recent times is more widespread than is generally recognised.

McKinsey attributes Africa’s economic expansion to rising commodity prices, greater political stability aided by a reduction in violent conflicts, improved macroeconomic performance and market-friendly economic reforms.

The report predicts that by 2040, Africa will be home to some 1.1-billion working-age people, more than either China or India. The continent is poised to become a serious engine of consumption and production, but only if serious investments into its infrastructure and education are made.

Since 2000, 316-million people have signed up for mobile phone services, more than the entire population of the United States; Africa’s billion people spent $860-billion in 2008, more than India’s population of 1.2-billion.

From 2000 to 2008, African economies grew at twice the pace that they did in the 1980s and 1990s. Moreover, Africa was one of only two regions - Asia was the other - where the collective economy rose through the global recession of 2009, by 1.4%.

The report says recent growth has occurred across sectors, particularly in retail, finance and telecommunications. Natural resources directly accounted for less than a quarter of the continent's Gross Domestic Produce (GDP) growth. The continents collective GDP, at $1.6-trillion in 2008, is now roughly equal to Brazil's or Russia's.

Africa’s $2.6-trillion business opportunity.

Africa’s economic growth is creating substantial new business opportunities that are often overlooked by global companies. If the continent maintains its political and macro-economic stability, and continue to create an attractive investment environment, four groups of industries together could generate $2.6-trillion in revenue annually by 2020, or 1$-trillion more than today. The four are: consumer-facing industries, agriculture, resources, and infrastructure.

McKinsey indicates that the continent's long-term growth will also increasingly reflect interrelated social and demographics trends that are creating new engines of domestic growth. Chief among them are urbanisation and the rise of the middle-class consumer.

The report at a glance:

• Future economic growth will be supported by Africa's increasing ties to the global economy.
Rising demand for commodities is driving buyers around the world to pay dearly for Africa's natural riches and to forge new types of partnerships with producers. Africa is also gaining greater access to international capital - total foreign capital flows into Africa rose from $15-billion in 2000 to a peak of $87-billion in 2007.

• Today the rate of return on foreign investment in Africa is higher than in any other developing regions. Early entry into African economies provides opportunities to create markets, establish brands, shape industry structure, influence customer preferences, and establish long-term relationships. Business can help build the Africa of the future.

• The rise of the African urban consumer will fuel long-term growth. Today, 40% of Africans live in urban areas, a portion close to China's and continuing to expand. The number of households with discretionary income is projected to rise by 50% over the next 10 years, reaching 128-million. By 2030, the continents' top 18 cities could have a combined spending power of $1.3-trillion.

Source: McKinsey Global Institute