Africa from the Inside - Spotlight on Opportunities in Francophone Africa - Deloitte
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Africa from the Inside
March 2017
Spotlight on Opportunities in
Francophone Africa
Africa’s growth narrative has increasingly become one
of ‘multi-speed growth’. As sub-Saharan Africa’s (SSA)
biggest economies – South Africa and Nigeria – struggle
to find a growth gear, a number of Francophone West
African countries are increasingly expected to deliver
on higher than average growth rates.
The Francophone African Several urban agglomerations
region is beginning to present in the Franc Zone are
prospects worth investigating, emerging as consumption
especially for investors and hubs, with strong urbanisation
businesses that traditionally and growing purchasing power
have not considered these in cities like Kinshasa (the
markets as viable. DRC), Abidjan (Côte d’Ivoire),
Doula (Cameroon), and Dakar
The Franc Zone’s1 strong
(Senegal) becoming
performance has been largely
increasingly attractive for
driven by increased
companies looking to invest in
investment in infrastructure,
high-growth economies.
improving business
environments and some
progress in diversification
initiatives of countries.
1
The Franc Zone consists of all (WAEMU) and Central African and countries, and the Democratic
Francophone West African Monetary Community (CEMAC) Republic of the Congo (DRC).
Economic and Monetary Union
1
Africa from the insideA strong regional growth outlook
Despite falling oil and other commodity prices,
Francophone Africa has upheld its growth
performance, with real GDP growth averaging
4.5% per annum over the 2015-16 period.
This robust economic Cameroon and the DRC. These over the past year.
performance is set to continue three economies – also the Nevertheless, these countries
going forward, with real GDP largest in the Franc Zone – are still expected to see
growth in the Franc Zone accounted for just over 40% medium-term improvements
forecast to rise to an average of total GDP in 2015 of in economic activity given
of 5% per annum over the French-speaking countries in improving oil prices.
2017-18 period. SSA. Some relatively smaller
economies that are committed With a positive growth
Impressively, the Franc Zone to implementing reforms, like outlook, a good mix of
has substantially outperformed Senegal, are also expected to macroeconomic and political
economic expansion in both reap the benefits of structural stability, an improving
Southern Africa and non- reforms by posting strong business environment as
Francophone West Africa since growth. portrayed by investment in
2014. On a regional basis only infrastructure and key
East Africa eclipsed growth in However, countries that were business reforms, and
the Franc Zone. previously dependent on oil- favourable medium- to long-
driven booms, such as Gabon, term demographics, key
At the forefront of this Chad and the Republic of markets for investors to watch
performance have been three Congo, have been undergoing include Côte d’Ivoire,
economies – Côte d’Ivoire, sharp economic corrections Senegal, and Cameroon.
Regional Economic Growth Rate Comparison (%), 2014-18 forecast
8
6.6 6.5
5.8 5.6 5.8 6.0
GDP Growth (%)
6 4.7 4.3 4.9 5.1 5.0 2014
3.6 -1.1
4 2.9 2.9 2015
2.5 2.4
1.9
2 1.5 2016f
0.9
2017f
0
Franc Zone Southern Africa East Africa Non-Francophone 2018f
-2 West Africa
Source: The Economist Intelligence Unit N.A. Incorporation, IMF, 2017
Country vs Franc Zone GDP Growth Outlook (%), 2014-18 forecast
10 8.5
7.9 8.08.07.8
GDP Growth (%)
8 7.0 2014
6.56.66.8
5.95.8 5.8 4.3
6 4.8 4.7 4.7 4.95.1 2015
4.3 4.2
4 2016f
2 2017f
2018f
0
Côte d'Ivoire Senegal Cameroon Franc Zone
Source: The Economist Intelligence Unit N.A. Incorporation, IMF, 2017
Africa from the inside 2Côte d’Ivoire
Growing at an average of 8% per year for the
past three years, and forecast to average 7.9%
per annum over 2017-18, Côte d’Ivoire is projected
to be the fastest-growing economy in SSA according
to International Monetary Fund (IMF) forecasts.
This has been underpinned by Investment, both foreign and of its headquarters in the
strong investment and export domestic, has been on the country – could see
growth as a result of rise, fuelled by various tax investments reach 23.4% of
continued political stability, incentives, benefits and GDP by 2020 from 20% in
and driven by agriculture, exemptions available for up to 2015.
infrastructure investment, the 15 years.
For its 2016-20 National
services sector and an
According to Côte d’Ivoire’s Development Plan (NDP), Côte
improved business climate.
Centre of Investment d’Ivoire currently has a
Infrastructure projects, Promotion, planned private US$60bn investment
especially transport, energy, sector investments under programme planned over the
and commercial and industrial government’s tax and customs next five years with half of this
construction projects have relief programme rose 25% to already pledged at a donor
been key to the growth spurt. US$370.9m in the first half of conference in Paris last year.
2016, compared to US$296m The 2016-20 NDP specifically
This includes recent ongoing
in the same period in 2015. aims to boost agricultural
projects such as the
output, promote the
US$558m, 372MW Songon gas Adding on to an increasingly
manufacturing sector, and
power plant that is being conducive environment by
improve national living
developed near Abidjan. creating new investment
standards.
US$1bn has been earmarked opportunities for investors,
to renovate Abidjan’s city authorities have also been In addition to new yet to be
centre, which includes the pursuing a privatisation exploited major hard
construction of an urban rail programme since 2013. Most commodity discoveries,
line and the Henri Konan Bédié recently in October 2016, Côte including iron ore and gold,
bridge, as well as a marina d’Ivoire sold a 23% stake in governments focus on
and an urban park. sugar producer Sucrivoire. The diversification sets the right
company is now listed on the tone for a sustainable growth
Besides improving the
Abidjan-based regional stock outlook. Supported by
country’s business hub, the
exchange (BRVM). The pro-business reforms, strong
port of San Pedro, the most
government plans to privatise private investments in areas
important harbour for cocoa
eight more companies this such as agriculture,
exports, is also being
year. agribusiness, mining, real-
upgraded due to be completed
estate, light manufacturing,
by 2019. Government is also Confidence in Côte d’Ivoire’s
water and power supply are
planning about US$1bn in economy by foreign investors,
set to underpin continued
investment for a fuel storage donors and multilateral
growth.
facility and the extension of an organisations – notably by the
oil pipeline in the country’s African Development Bank
northern region. (AfDB) with the reinstatement
Africa from the inside 3Senegal
For the last few years, Senegal has been the
darling of international donors, with the country’s
economic growth driven by infrastructure spending
and rising industrial and agricultural output. As a
result, GDP growth is expected to average a very
robust 6.9% per year over the 2017-18 period.
Senegal has been posting projects include a US$500m planning to develop a state of
above 6% growth since highway and construction of the art Dakar Integrated
unveiling its ten-year US$21bn the express railway between Special Economic Zone
plan in 2014, the “Emerging Dakar and the planned (DISEZ). Development of the
Senegal Plan,” to strengthen Diamniadio industrial hub. SEZ will be via a private-public
and diversify the economy. In partnership (PPP) with Dubai-
2016, the AfDB lent the The country is also making based Economic Zones World.
country US$1.4bn for this progress in curbing its power The SEZ aims to provide
development strategy over the deficit. In 2014, government investors the best conditions
2016-20 period, while the launched an initiative to boost and appropriate infrastructure
revised 2016 budget added Senegal’s generation capacity and services required to set up
another US$300m to public by over 70% within three and operate in Senegal.
spending, mostly to years, from roughly 587MW in Businesses established in the
infrastructure and agriculture 2014 to 1 018MW by end DISEZ will benefit from an
projects. 2017, through a mix of solar, incentive-driven tax
wind, coal and gas-fired power framework.
In 2015, Senegal secured the plants. By government
IMF’s backing for its reform embracing the independent With continued efforts to
programme under a three- power producer (IPP) model, improve the country’s
year policy support instrument rapid development is now business environment, higher
(PSI 2015-17). The IMF’s underway, with installed public and private investment,
backing has given Senegal capacity increased to 800MW particularly into energy,
much-needed policy by the end of 2016. infrastructure, agriculture,
credibility, allowing it to fisheries, tourism, textiles,
secure infrastructure funding Two landmark IPP projects information technology, and
more easily. The development include the 70MW Tobène expanded air and sea logistics
strategy provides a platform thermal plant at Taiba Ndiaye capacity, are anticipated to
for strengthening public opened in 2016 and the continue supporting steady
finances and building up key 152MW wind turbine project economic expansion.
infrastructure to support currently being developed at
Taiba Ndiaye by France's Economic activity could
private sector growth and
Sarreole. As a result, receive a further boost to
attract foreign direct
authorities are making beyond annual growth rates of
investment (FDI).
commendable progress toward 7% should commercial
The government continues to the 1 018MW target. exploitation of new oil and gas
secure investment and funding reserves commence on the
from countries, such as the On the back of expectations of back of continued economic
US, EU, and China, for various an expanding power supply, prudence from policymakers.
transport infrastructure and the Senegalese government is
energy projects. These
Africa from the inside 4Cameroon
Cameroon is often seen as a gateway to the
CEMAC (Central African Monetary Union) economic
area. CEMAC represents a market of over 50 million
people and annual GDP of about US$100bn.
Amongst the few African oil- The latter is a US$1.5bn plan The first of the SEZs under the
exporting countries that initiated in 2014 to revive key 2013 law is currently being
maintained a stable growth sectors including logistics, constructed by the China
rate after the 2014 oil-price agriculture, water and health Harbour Engineering Company
collapse, Cameroon increased by 2017. Various projects are near the Kribi deep-water
its national budget in 2016 by also in progress under the harbour and will be key to raw
more than 13% – at a time President’s ‘Grandes and transformed mineral
when oil-producing peers were Réalisations’ plan to help exports. Other planned
cutting budget spending. propel economic activity. economic zones are based
mainly on sectors such as
Although spending towards The state issued its third bond
tourism, agro-processing, light
the Boko Haram crisis and on the Douala Stock Exchange
manufacturing and
managing the refugee influx at in October 2016, generating
technology.
its border with the Central US$256m to maintain
African Republic is investment spend. While economic growth has
constraining public been stable over the past five
Infrastructure projects are
investment, the budget years this is expected to
also being funded by
increase was mostly allocated moderate to an average of
multilateral loans and donors.
to maintaining ongoing major 4.5% in 2017-18 from 5.3% in
The AfDB approved two loans
infrastructure projects. 2015-16, given slower growth
amounting to about US$300m
of key trade and investment
This is supported by the in December 2016 to fund
partners such as China and
government’s large-scale projects in the transport
the US.
infrastructure investment sector. Cameroon’s well-
drive, stressed in its ‘Vision developed PPP framework also Revenues from exports are
2035’ plan, which provides a continues to attract FDI from a expected to start rising in
road map to become an range of international firms. 2017, as a gradual uptick in
emerging economy by 2035. global oil prices magnify the
Some impediments are
benefits of higher oil
Key infrastructure projects are however deterring investment,
production from new
in the power and transport including a challenging
discoveries. Oil exports
sectors, although ongoing business environment
account for about one third of
investments also include sport compared to its peers. Though
total receipts.
infrastructure for the 2019 progress has been slow,
African Cup of Nations incentives to boost the
(AFCON) soccer tournament, creation of economic zones
as well as projects prioritised and subsequently greater
as part of government's three- private investment were
year emergency plan. enacted in 2013.
Africa from the inside 5Sector opportunities
While opportunities aligned to infrastructure
construction have attracted investors, so too the
renewed growth potential of the region, the pursuit of
natural resources and untapped markets is also attractive
to investors.
The main sectors attracting remains a young market, with sector has traditionally been
foreign investment include room for enhanced dominated by French and
financial services, energy, competition across various Moroccan banks, but SSA
manufacturing, agriculture and industries. banks such as BGFI from
resources. Gabon, Ecobank, and Orabank
Financial Sector from Togo have more recently
Of note too is the diversity of The financial and real estate also made significant inroads
international and African industries have been the sub- with presence in all the Franc
companies expanding across region’s main growth drivers Zone countries as regional
the Franc Zone in various in the services sector. stability and growth improves.
sectors, yet the region Francophone Africa’s financial
FDI Inflows by Country (US$m), 2010-15
800 739
620
FDI Flow (US$m)
567 554
600
407 439403 430
339 355 345
400 266 302338 330
276 311
200
-1
0
2010 2011 2012 2013 2014 2015
-200
Cameroon Côte d'Ivoire Senegal
Source: UNCTAD, 2016
Towards the end of 2013, these remain limited and the considerable interest in the
South Africa’s Standard Bank cities endure acute shortages sector, with analysts
announced the opening of its of both commercial and forecasting high short- to
Abidjan office as a launch pad residential real estate. medium-term returns from
into the Franc Zone, and property investments.
similarly in pursuit of new Formalised retail space (i.e.
growth prospects other banks shopping centres) in capital or Retail, Manufacturing
including Standard Chartered commercial cities remains
and FMCG
and Citigroup are following limited. The most notable
Though the landscape is
suit. shopping centre development
largely informal, Senegal, Côte
underway and potentially the
d’Ivoire and Cameroon’s retail
largest in SSA outside South
Real Estate Sector Africa is the 100 000 sqm
and fast-moving consumer
Like other African economies, goods (FMCG) industries are
West Africa Shopping Mall
Senegal, Cameroon and Côte set to realise gains from rising
project being developed in
d’Ivoire are going through a income levels of their young
Dakar by Hong Kong-based
period of rapid urbanisation and sizeable populations, with
Hermes-Sojitz.
and growing middle-class the highest growth ever
populations in their major With high economic growth reported compared to previous
cities. As a result, property attracting many international period in these sectors
demand is surging. While companies, some prospecting expected in the next five
some property development investors are likely to face years.
projects are underway in cities challenges in finding premium
such as Abidjan and Dakar, French retailers like Carrefour,
office space. However, strong
Auchan and Casino are
demand is starting to attract
Africa from the inside 6showing heightened interest in growth in its exports to map as a potential oil and gas
these key markets. Carrefour neighbouring countries, mainly producer. With positive
recently opened its first Nigeria. economic externalities in the
hypermarket in West Africa at coming years, the reserves are
the Playce Marcory mall in Resources (Metals, Oil expected to yield favourable
Abidjan. and Gas) final investment decisions
Most investments in Senegal’s (FIDs), with production and
Rising disposable incomes are exports likely to start in 2025.
mining sector are in
expected to increase demand
phosphates and industrial
for value added food products. Despite potential in Côte
limestone mines. Though
To capitalise on this trend, d’Ivoire’s offshore oil, more
Senegal has considerable iron,
Nestlé announced in 2014 a exploration and development
titanium and gold deposits,
US$40.2m investment into efforts will be needed for the
the mining industry has been
Cameroon’s first coffee country to maintain its current
quite dormant over the years,
processing plant. Similarly, crude oil output levels past
but with strong growth
Tiger Brand’s Cameroonian 2017. Nonetheless, Côte
performance and economic
subsidiary, Chococam, a d’Ivoire’s refinery is one of the
stability, interest is rising in
dominant confectionary best functioning in the region,
the country’s metal resources.
manufacturer in the CEMAC producing enough products for
Recent activity from Randgold
region, is also expected to both domestic consumption
Resources, which started a
post strong growth. Danone’s and exports to the region.
feasibility study for its
acquisition of Fan Milk Côte d’Ivoire will remain a key
Massawa gold project, reflects
International, gave the MNC refined fuels net exporter to
this interest.
extensive presence in both its African neighbours.
Senegal and Côte d’Ivoire. Although development in 2017
Despite Cameroon’s falling oil
is likely to be slow due to low
Agriculture exports over the medium
commodity prices, new high
Induced by derived demand term, its gas production is set
grade reserve discoveries will
from strong demographics, the for an increase from 2017
position Cameroon as an
agricultural sector (particularly onwards mainly due to a FID
important player in Africa’s
in Cameroon and Côte at the Golar FLNG (floating
iron ore landscape over the
d’Ivoire) is poised for future liquefied natural gas) project,
medium term. Côte d’Ivoire’s
growth. For Cameroon, maize which will see production rise
vast gold reserves will
is an important staple crop, by another 1.6bcm to feed the
continue to attract investment,
and maize consumption is set Golar terminal. The project will
supporting the sector’s long-
to outstrip domestic supply in result in peak production of
term growth outlook. With
2017, creating new about 2.60bcm onwards in
gradually improving
opportunities for domestic 2019.
commodity prices, the
maize producers. medium-term outlook is As the oil price recovers, all
positive for miners in all three three of these economies are
Besides cocoa beans, another key markets, with
crop that’s attracting FDI in likely to see considerable
opportunities for new entrants derived economic benefits
Côte d’Ivoire is palm oil. as metal reserves remain
Growing Asian demand has over the medium term.
largely unexploited. Furthermore, if authorities
seen Asian firms moving to
West Africa, with companies maintain policy discipline and
The main sector expected to
such as Singapore-based should political stability
see a rise in investment in the
Wilmar international and prevail, backed by the oil and
Franc Zone is oil and gas.
SIFCA acquiring the largest gas sector, these markets are
After recent major offshore oil
palm oil estate in the region. set to see one of the best
and gas discoveries by UK-
Palm producers in Côte growth cycles on the continent
based Cairn Energy and US-
d’Ivoire will also benefit from a beyond the next five years.
based Kosmos Energy
rising regional deficit and see respectively, Senegal is on the
Key takeaways
Three broad themes appear in all three Francophone African markets on our watch list. These
include efforts to create a conducive business environment, rising infrastructure spending and
deliberate progress in diversification. With a continuous focus on privatisation and various PPP
projects underway, key sectors coupled with favourable demographics will sustain this growth
momentum over the medium term.
Africa from the inside 7Contacts Dr Martyn Davies Hannah Edinger Managing Director: Emerging Associate Director, Africa Markets & Africa Services Group Deloitte Africa Deloitte Africa mdavies@deloitte.com hedinger@deloitte.com Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (DTTL), its network of member firms and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Please see www.deloitte.com/about for a more detailed description of DTTL and its member firms. Deloitte provides audit, consulting, financial advisory, risk management, tax and related services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries and territories, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte’s more than 225 000 professionals are committed to making an impact that matters. This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms or their related entities (collectively, the “Deloitte Network”) is, by means of this communication, rendering professional advice or services. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser. No entity in the Deloitte network shall be responsible for any loss whatsoever sustained by any person who relies on this communication. © 2017. For information, contact Deloitte Touche Tohmatsu Limited
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