UK-Africa trade corridor to be fuelled by Sub-Saharan ‘sleeping giants’
South Africa tops the inaugural Barclays Africa Trade Index: Openness and opportunity, followed by Nigeria and Kenya.
Nigeria offers the greatest trade opportunity for UK businesses, largely due to its population of close to 180 million, but Nigeria’s relative level of openness need to be addressed in order to challenge South Africa’s position.
The Index, which measures the opportunity and openness of 31 of sub-Saharan Africa’s leading economies, also identifies a group of ‘sleeping giants’ which, after experiencing significant economic upheaval, are playing catch up and growing at a rapid pace.
The ‘sleeping giants’; Ethiopia, DR Congo, Mozambique, Ghana and Tanzania, are expected to provide UK businesses with the opportunity to increase exports three-fold, from $1.2 billion to $3.6bn, over the next five years as economic development continues and consumer spending increases.
With a combined population of around 270m and average annual GDP growth of 7.3 per cent over the past five years, these five countries represent a significant opportunity for UK exporters in the coming years.
The growth potential for the UK and other international producers across sub-Saharan Africa is considerable, with total consumer spending in the Sub-Saharan Africa economies reaching around $1trn (£630bn) in 2014. It is expected to grow by a Compound Annual Growth Rate of around 4-5 per cent over the next five-10 years.
The Index reveals that 80 per cent of UK exports to sub-Saharan Africa are currently going to South Africa together with Nigeria, Botswana, Angola, Kenya, Ghana and Senegal.
Over the past decade, sub-Saharan Africa has experienced a marked shift in trade flows from traditional partners in Europe, North America and the Middle East to faster growing Asian countries.
The region received 19 per cent of its imported goods from Asia in 2004 but this rose to 32 per cent by 2013, largely driven by increased trade with China.
Jane Galvin (pictured), managing director, corporate banking for Barclays Eastern Region said: “Major African economies, such as South Africa, Nigeria and Kenya have been the primary focus of UK companies to date but with increased competition, especially from Asia, businesses need to diversify their trade and investment markets to broaden their horizons and compete more effectively.
“By 2020, the five ‘sleeping giants’ that we have highlighted in our report, will represent a population of circa 325m, comparable with the US and experiencing rates of economic growth that were once the preserve of India and China.
“Based on recent growth rates, household spending for these countries is set to nearly double, reaching over $1,000 a year by 2020. Brands that start to establish themselves today will be well positioned for rapid growth by 2020.”