They are right to focus on this region as a major potential prize of their newly found independent trading capability. There are a huge variety of complementary opportunities for UK business and investors to build operations or invest in sub-Saharan Africa, which has attractive economic growth potential and a fast-growing emerging middle class. According to the World Bank, sub-Sahara’s GDP has more than quadrupled in the last twenty years to $1.71 trillion, aided by a boom in population and life expectancy which has seen the region pass the population milestone of a billion people.
Telecommunications, infrastructure, renewable energy, agriculture, and fast-moving consumer goods are sectors with the most potential for greater involvement from UK firms. East Africa, in particular, is a region undergoing rapid expansion. The many sectors and businesses operating in the rapidly growing economies of Kenya, Uganda, Ethiopia and Mozambique are in need of capital investment and provide many opportunities, particularly supporting Mozambique’s fast-growing natural gas sector, to UK businesses looking to expand their operations.
Trade is also a massive opportunity considering that the African Continental Free-Trade Agreement (AfCFTA) will come into effect in July 2020. The new trading bloc will boost intra-African trade and also open up an opportunity to the UK – the opportunity to negotiate with the African Union (AU) as a single trading bloc is big.
Providing funding for such large initiatives plays into a major strength of the UK – its large, diverse financial services ecosystem and preeminent financial centre.
London is expected to remain a key financing hub for African corporates and projects for the foreseeable future. In 2018, we helped raise over $18.8 billion of capital for our African clients from global markets, of which UK investors accounted for roughly a third.
African businesses see London as a vital fund-raising gateway, connecting global capital with fast growing businesses. Major flotations last year from the likes of Helios Towers and Airtel on the London Stock Exchange (LSE) – representing some of the biggest London IPOs of 2019 – speak to this. We expect an acceleration of LSE listing activity from African businesses this year and beyond.
It is important not to underestimate the asset that the City of London represents. London is such a vital financial hub and has the potential to increase rapidly its relationship with African corporates. It has liquid and mature financial markets, similar time zones to Africa, trusted judicial systems, and a common language (particularly for Anglophone countries).
Further to this, we know that there is significant appetite amongst UK investors to buy into Africa, as showcased by the recent South African $5 billion Eurobond., the largest issuance out of Sub-Saharan Africa. UK investors accounted for $900 million, or 18%, of the total issuance.