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Africa’s Growth in Context

Why Africa will provide the growth going forward

With a wealth of natural resources, developing infrastructure, and improving business environment – in addition to a working population of 600 million, set to double by 2040 – Africa has emerged as an attractive investment destination and a key market for trade. The premium for investment is ripe provided an asset manager possesses the skills and experience to take advantage of this business environment, and this is exactly where Barak has positioned itself. However, post-crisis regulation and the resulting trade finance gap is halting its progress.

The African Development Bank estimates this African trade finance gap to be between US$110 – 120 billion, leaving many trade-reliant companies in Africa of all sizes in dire need. Hardest hit are the SME companies within the continent, many of whom largely contribute to the functioning of Africa’s smaller countries’ economies. Barak truly believes the rate of return on its investments in Africa, from its historic short-term activities to its looking ahead at longer-term strategies, will continue to abound and the Barak Team remains committed being the leading alternative financier in the region.

Rising GDP

Africa is the second-fastest-growing region in the world. We believe that the rate of return on investment is higher than anywhere else in the world.

Huge Appetite

Africa is now in the age of consumerism with the prediction of being the world‘s leading consumer market by 2050.

Doing business in Africa is now easier

Africa is now home to more international private firms due to the increasing adoption of seamless business policies, lowered corporate taxes, and strengthened regulatory and legal systems in some African countries.

Largest, youngest workforce

Africa is endowed with the worlds youngest population, which offers the continent a chance to reap a demographic dividend by using its young workforce to boost economic growth.

Rising technology

Africa has leapfrogged into the digital age, sustained by low internet rates, increasing mobile penetration connectivity and mobile apps, which are reshaping youth culture and creativity.

Traditional Liquidity Constraints

Even more so than ever, traditional financing from banks and finance institutions is difficult to come by. Banks are highly risk averse and thus proving difficult for borrowers to find an avenue of financing that is easy to come by. Alternative financiers in Africa are operating in a niche market.

Africa’s Growth in Context

The Importance of Portfolio Diversification: Average Bank’s Non-Performing Loans (NPLs) Ratio by African Sub-Regions

Source: AfDB

Africa Projected to Outperform Asia in GDP Growth.

The Extent to which access to Trade Finance forms an obstacle to a Company’s Exports, broken down by region

Source: CBI

The Most Problematic Factors for Exporting in Africa

Source: WEF

Large Opportunity Set

The current environment has generated multiple opportunities in Barak's sweet-spot.
  • Competition for land is likely to grow as food security becomes a priority for governments around the world.
  • Demand for agricultural products continues to grow significantly in local African markets and other emerging markets as populations grow and standards of living rise.
  • Many local commodity assets are undervalued because of the lack of pricing transparency.
  • General misconceptions regarding the level of political and economic risk for the continent as a whole.
  • Commodities are nearing price levels close to production parity, shifting focus to developing markets for future production.
  • Africa offers more than half of the world’s unused, agriculturally suitable land; by some estimates, only 45-50% of the continent’s potential arable land has been cultivated.
  • The World Bank’s projected industry size for agriculture and agribusiness in Sub Saharan African by 2030 is USD 1 trillion, compared to USD 313 billion in 2010.
  • Post-2008, large banks pulled out of the market as they viewed Africa as uniformly high-risk.
  • Fragmented markets of smaller growers and traders exist across multiple countries.
  • Many businesses are too small to access larger, traditional lenders, and if they do, they often encounter a higher cost of capital or cannot gain credit approval.
  • Agriculture
  • Manufacturing
  • Industry other than manufacturing (mining and quarrying, construction, electricity, gas and water
  • Services