Page 16 - ITA Journal 3-2018

Market information
africon GmbH
The East African Steel Industry
A continent of opportunities ...
The public image of Africa today is still heavily biased through ste- reotypes. Africa is perceived as a continent ruined by poverty, where corruption preys on development funding, tyrannical governments and political stability undermine con dence. These images however hide a different, much more posi- tive side of the continent.
The population in Africa has shown a constant growth of 2.5% yearly for the past 5 years, stand- ing at about 1.2bn people in 2017. Despite also being a risk, this sub- stantial growth represents major opportunities and lays positive signs that can lead the continent to potential social and economic bene ts. After a period of inac- tivity, the substantial increase in economic growth and of Foreign Direct Investments over the last 15 years creates optimism for the future of Africa.
Africa has been changing and developing on different levels over the past decades. It became a valuable consumption region for different industries, especially the steel industry. Steel is the back- bone of the economic activity of any region. Direct and indirect consumption of steel is projected to increase overall on the con- tinent and particularly in East Africa. The region has increased its infrastructure and construc- tion activity, driving the growth of its steel industry. Before going into further detail, one should understand the underlying trends boosting the economy, various steel-related sectors, as well as the steel industry itself.
What is driving growth in Africa today?
... a demographic dividend
In Africa today, a growing working age population and fast-economic growth is starting to result in a demographic dividend. As more people enter the workforce, the share of the economically depend- ent in the population such as minors and elderly is declining. This dividend affects worker pro- ductivity, family size, educa- tion and health. The movement towards a smaller sized family enables families and govern- ments to provide more resources to invest in health and education per child.
The resulting demographic transi- tion creates a supply side shock to the economy, potentially raising the number of workers, human capital of the workforce and the level of domestic saving. On the other hand, the large young pop- ulation generates the required demand for many consumer goods and services markets – as well for new housing and construction.
... a rising middle class
With the general economic growth, a growing middle class provides a stable consumer base that attracts productive foreign investment. Beyond that, it is a requirement for robust innova- tion and entrepreneurship. It is a foundation of trust that promotes social interaction and reduces transition costs, a push towards bettergovernanceandapromoter of a better and equal education. Africa today is home to one of the fastest growing middle classes globally.
... a rapid urbanisation
More and more people are moving to cities in hope of securing better living conditions, higher quality education and better eco- nomic opportunities.
Similar to Europe, Africa has one of the highest urbanization rates in the world. About 40% (2017) of the population already lives in urban areas. The 20 largest African cities are expected to grow by 50% over the next 10 years. Apart from driving general growth, this trend also creates huge opportu- nities in urban infrastructure and property developments.
... a push towards manufacturing
Despite its immense natural resources, Africa’s manufacturing sector remains its weakest link to the continent’s growth and inte- gration into the global economy. To unleash Africa’s full potential, the African Development Bank has appointed Industrialization as a top priority in its “High 5 Agenda” by initiating the six- agship pro- grams to accelerate industrializa- tion in the region. Likewise, the African Union emphasized the importance of industrialization to the continent in its “Agenda 2063”. Partly as results of these programs, as well as other factors, manu- facturing sectors of many African countries are expanding quickly.
... a rise in Foreign Direct Investments.
Over the past 1-2 decades, there has been a signi cant increase in the number of FDI projects in Africa. This increase has shifted the type of FDI from the primary sector (resources) towards the sec-
ITAtube Journal No3/October 2018
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