• EY's new Megatrends 2020 report assesses how businesses must respond to a post-pandemic world.
• It argues that within this decade, Africa will likely hit unprecedented positive economic development for the countries in its rapidly forming regions.
• This is driven by three key factors: catch-up growth, technological developments, and intra-African trade.  

Grand predictions about Africa seem to surface every few years. 

Headlines such as 'Why Africa can thrive like Asia', 'Africa rising' or 'Africa is becoming the new China and India' seek to will-into-being the continent's tremendous potential.

So far, they've been off the mark: these headlines have not been realised in that Africa at large has not delivered lengthy consecutive periods of consistently high economic growth.

Yet we believe this time is different. This is one of the key findings from EY's Megatrends 2020 report, which assesses how business need to think about and respond to a post-pandemic world. 

Within this decade, Africa will likely hit a unique and unprecedented inflection point of positive economic development for the countries in its rapidly forming regions.

Catch-up growth

Africa's economy is evolving in an age of 'supercharged mobility', enabling the continent to escape the traditional model of linear growth.

Typically, countries experiencing linear growth have a "catch-up growth" phase where savings and investment rapidly accelerate economic growth from a low base; followed by a 'sustained growth' phase driven by technological progress. 

However, the combination of technology, globalisation and demographics has the potential to supercharge Africa's productivity, enabling its economy to leapfrog the traditional growth trajectory. For companies, this trajectory presents tremendous opportunities — and challenges.

How is 'supercharged mobility' upending Africa's economy? 

First, GSMA, the global mobile operator interest group, forecasts mobile penetration in Sub-Saharan Africa to be 50% by 2025, compared with 44% in 2018. Mobile devices help to remove market inefficiencies, for example, by allowing farmers to quickly identify pockets of demand and up-to-date prices for their crops. 

Impoverished students can access top-quality education online previously available only to those in the developed world, with the added benefit of their curricula being uninterrupted by the pandemic.

Mothers can learn to apply preventative measures to lower their newborn's exposure to diseases such as Covid-19 and Malaria. In other words, information can increasingly be disseminated in a frictionless manner using mobile devices with access to the internet. 

Technology

Second, technological advancement has led to a major uptick in the velocity of capital. The increasingly ubiquitous mobile network coverage in Africa, together with payment platforms such as M-Pesa, is facilitating the almost instantaneous transfer of wealth between people and entities, driving financial inclusion.

The capability for people to connect virtually, share information and wire funds is boosting trade: intra-Africa trade jumped to 14.8% of total trade in 2017, compared with around 10% a decade ago. While the potential intra-Africa trade remains much higher, this is a significant increase.

The enhanced reach of information also fuels the mobility of people. As the dissemination of real-time information becomes cheaper and easier, the impoverished would quickly and easily become cross-border economic migrants.

Migrants from Africa rose to 26.5 million people in 2019 compared with 15 million in 2000, according to the United Nations. This same force, however, is also driving a growing number of aspiring Africans to pursue higher education overseas, as the continent now accounts for 8.3% of all international students pursuing tertiary education at Organization of Economic Cooperation and Development (OECD) countries in 2017. 

Not unlike the experience in China, where there have been 3.13 million returnees since 1978 from a population of 1.3 billion, these young and globally educated Africans are returning in greater numbers and will have an outsized impact on Africa's development as entrepreneurs, scientists, innovators and professionals. 

Goods

Last, but not least, is the movement of goods. 

Regional economic communities such as the Economic Community of West African States (ECOWAS), Common Market for Eastern and Southern Africa (COMESA), and Southern African Development Community (SADC) have helped boost intra-Africa trade driving it to 14.8% of total trade in 2017 from the 10% a decade ago. 

Total exports, averaged at $760b during 2015-2017, will grow with further progress in to bridging Africa's annual infrastructure gap of between $68b and $108b. The most notable influencer in recent years is China, which, through its Belt and Road Initiative, has committed $614b since 2013. As policy response, the EU and Japan have also pledged $54b and $20b respectively. 

While it is likely too early to ascertain the exact impact of COVID-19 on these pledges, the secular trend of increased trade will prevail as the world learns to overcome this pandemic.

Even though this confluence of factors suggests Africa's prolonged ascension is at last imminent, challenges remain. 

First and foremost is governance and state capacity. Ethiopia and Rwanda, the poster children of successful economic development in the past decade or so, are both land-locked with few natural resources. They succeeded largely because of their focus on building business confidence by stamping out corruption, ensuring stability and enhancing the ease of doing business. 

In 2014, faced with the threat of Ebola, the containment actions undertaken by Nigeria and Senegal were exemplary. In 2020 and beyond, Covid-19 presents another daunting challenge that must be overcome by African countries if they are to recover quickly and to get back onto an accelerated growth path. 

With the tailwinds of a few primary forces, namely demographics, globalisation and technology blowing in its favour, combined with political stability, economic reform and an increasingly business-friendly environment, Africa's long-held promise of sustained high growth could finally be on the horizon. 

Roderick Wolfenden is EY Africa Markets Leader. Views expressed are his own.