Betting On Sub-Saharan African Growth Favorites In A Strong 2018

Betting On Sub-Saharan African Growth Favorites In A Strong 2018

The news last month from the International Monetary Fund (IMF) regarding sub-Saharan African growth has investors breathing a sigh of relief.

The IMF expects sub-Saharan Africa to grow by 3.4 percent in 2018, up from the 2.6 percent in 2017. Although such figures create optimism, they do not match the higher growth numbers in previous years.

Between 2004 and 2011, for example, sub-Saharan Africa grew 6.2 percent, with a peak growth of 7.6 percent in 2007 and a low of 4.1 percent in 2009 due to the 2008 global financial crisis.

The average growth between 2012 and 2015 was 4.5 percent, and growth has trended downward since then.

The rebound in 2018, according to the IMF, is not an indication of strong momentum in growth going into 2019.

One-third of the countries will grow 5 percent or more in 2018—largely in the eastern and western regions of Africa—however, combined with a decline of per capita incomes in 12 countries which house 40 percent of the region’s population (~400 million people), according to the IMF’s report.

This piece looks at the countries offering the best opportunities in 2018, with a strong consideration for the challenges in 2019. That qualification for 2019 underlines the economic and political uncertainty that will be created by a few elections in the coming 18-24 months.

Expected growth of 1.9 percent and 1.1 percent in Nigeria and South Africa respectively will bump up against elections in both countries in 2019, which has some investors skittish about the coming year.

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The election of Nana Akufo-Addo in 2016 excited many investors. Getting an administration in place and making some economic changes, however, took some time, thus 2017 receives mixed reviews. But all indicators point to a strong 2018 with growth expected at 8.9 percent.

Oil production is expected to pick up in the country to match the current $60-plus thinking on Brent prices in 2018.

Kosmos plans to resume drilling on Ghana’s TEN project in early 2018. Energy growth, including gas-to-power, will be the focus in 2018 which will further help Ghana strengthen local aspirations with consumer products and light industrialization.

Any forward movement on the “Made in Ghana” policy launched in 2016 would be helpful for a country that would love to manage its imports and build up local content.

Agri-business is also an exciting focus for this country, with many investors viewing Ghana as a key player in agriculture for the continent going forward. Education also always remains an interest in what is considered West Africa’s education hub.


Ethiopia is expected to grow 8.5 percent in 2018. To many investors, such high growth in Ethiopia is not anything necessarily new in recent times and has not always bred investment opportunity.

The positive from Ethiopia in 2018 may simply boil down to a three things: (1) the amount of consumers continues to grow (thus why Ethiopia has the largest mobile operator); (2) consumers are spending more; and (3) investments have been tried and proven (compared to pre-2012).

Investors will find a ready partner for manufacturing and light industry as the model has been tested and proven beneficial for both investors and the country.

Agri-business will also be a focus for investors as local content for packaged goods and food is big for the government’s tight management of imports in relation to the Ethiopian currency.

Non-food related goods, including pharmaceutical products and household products (i.e., toothpaste, detergent), still require more investment for similar currency reasons and to address local consumer demand.

Cote d’Ivoire

The Francophone Africa show will continue into 2018 led by Cote d’Ivoire. The country is expected to maintain its 7 percent-plus growth in 2018 and 2019.

Power generation is improving, with increasing interest from private investors and development institutions, and accompanies West Africa’s second largest port, a modern airport, and a relatively strong road network.

The growth, however, may be outpacing other vital sectors, including the real estate and financial sectors. Housing and office space is in demand for a growing middle class and to support growing international businesses in the country.

The financial sector still requires some restructuring and offers opportunity for private investors with an appetite for smaller sized investments that are capable of producing strong returns.


Senegal is the other pivotal country in the Francophone story.  The opportunity in the country is widespread and underpinned by 7 percent grow in 2018. Energy and transport infrastructure are still a vital focus for the country.

The story here is not new as Senegal knows its economic hub reputation for West Africa depends on its ability to support business in the region with basic infrastructural requirements.

Other exciting opportunities largely flow from small and medium enterprises (SMEs) which are more the story in Senegal versus some other West African giants.

The government is doing a lot to support entrepreneurship in industrialization, manufacturing and agriculture in the country to boost SMEs. The ongoing complaint, ironically (for this article), remains the same with a lack of operational and financial partners.

Those concerned about a Senegalese election in 2019 can probably find solace in the strong performance of President Macky Sall’s ruling coalition in the 2017 legislative election.

The next three – Burkina Faso, Kenya, Mozambique

Picking one of the above three to finish out a top five is hard. Burkina Faso is on the right track with 6.5 percent growth expected in 2018 to follow up what appears to be 6.4 percent growth in 2017.

Extractive industries and public investment, especially in infrastructure, have largely driven these growth numbers. But the government recognizes the challenges with a large concentration of its growth dependent on its own spending.

Thus current spending allocated for 2017 and 2018 significantly focus on entrepreneurship and boosting the business landscape for SMEs, particularly as it confronts extremism in the country.

Pulling in foreign investors has not been easy and makes the growth story a more cautious one.

Kenya remains the ‘beast of the east’ but is still settling its presidential election. Many investors expect a big 2018 for the country when the dust settles (hoping the dust settles before 2018). The business environment is familiar to investors and it is the economic and financial hub for East Africa.

The country’s airline has refinanced; the financial sector has finally digested an interest rate cap; and foreign investors had to sit still during a 2017 slow down – they will want to release the pent-up capital and energy.

The excitement is nevertheless cautious, as any political situation (as seen in 2017) can cause a complete slowdown.

Mozambique is quietly getting back on track after a debt fiasco…yes the U.S. Federal Bureau of Investigation (FBI) is still investigating the fallout. That said, President Filipe Nyusi is doing his part to clean up the country’s image.

The gas story is getting back on track for LNG. Investors are returning to the country with Kibo Capital making the latest investment in the country’s consumer goods space. Other investors are lurking around agri-business, logistics and warehousing which is great news after the last 18-24 months.

A strong turnaround would touch the Lusophone hearts in Africa (including yours truly).


Zimbabwe makes the list because there are many investors who have been excited by this country for years. The economic collapse in 2008 and subsequent economic hiccups have kept many investors away.

Playing politics is not fun for investors but you can bet that there will be investors closely watching how the political situation plays out in Zimbabwe.

Any economic opening with clear investment rules and laws, followed by an improved legal system and enforcement would excite anyone looking at the country. That said, there is a significant amount of work necessary to create a favorable environment to attract capital.

Kurt Davis Jr. is an investment banker with private equity experience in emerging economies focusing on the natural resources and energy sectors. He earned a law degree in tax and commercial law at the University of Virginia’s School of Law and a master’s of business administration in finance, entrepreneurship and operations from the University of Chicago. He can be reached at kurt.davis.jr@gmail.com.