A new in-depth study by McKinsey, entitled “Reimagining economic growth in Africa: turning diversity into opportunity”, takes a close look at the economic performance of each African country, including Morocco, as well as that of key economic sectors on the continent.
The McKinsey study highlights the successes achieved by some African countries, while identifying the many obstacles to growth and proposing various solutions capable of enabling Africa to fully exploit its great diversity and revive its growth.
The study reveals that five main African economies, namely Morocco, Algeria, Egypt, Nigeria and South Africa alone have generated almost three quarters of Africa’s GDP in 2019.
Africa’s five largest economies recorded slower consolidated growth than the rest of the continent.
This level of growth makes it “more difficult to improve living conditions for the 400 million people living below the poverty line in Africa,” explain the report’s authors.
Despite a start to the decade marked by a significant rise in investment and exports, expected subsequent economic growth was rapidly curbed by a number of factors.
By way of example, Morocco is one of 13 African countries that the study groups under the heading of “recent slowdowns,” relating to economies that account for more than half of the continent’s commodity exports.
This group lists Morocco among the countries that achieved economic growth above the continental average during the first decade of the new millennium, but whose growth ran out of steam between 2010 and 2019.
Algeria, for its part, is considered by the study to be a “slow-growth” country, with an economy that has grown only slightly since 2000.
The reports highlights that the slowdown trend is not representative of the continent as a whole.
Indeed, the McKinsey study emphasizes Africa’s plurality, stopping at the fact that almost half the continent’s population lives in countries that have experienced sustained economic growth over the last 20 decades.
These economies, mostly medium-sized and located in East and West Africa, have recorded average annual GDP growth of over 4%.
Another slowing factor in Africa is the rate of electrification, as Morocco is cited in this context as a success story.
“100 million inhabitants of African cities, or 18% of the urban population, have no access to electricity. While countries such as Morocco, Egypt and Tunisia have achieved almost complete urban electrification, in others such as the Central African Republic, coverage is below 40%. The gap is even wider in water and sanitation infrastructures”, point out the authors.
According to Mehdi Lahrichi, Associate Director of McKinsey’s Casablanca office: “There is no ‘one Africa’, as levels of economic progress, population growth, urbanization rates and productivity differ considerably across the continent. For example, while countries such as Morocco, Egypt and Tunisia have achieved near-total urban electrification, some 100 million African city dwellers remain without electricity.”
The structural transformation of the African economy towards services over the past two decades, with workers moving away from the fields to trade and other urban services, is one of the key trends driving optimism that, despite a disappointing performance over the past decade, Africa is singled out as a promising emerging market, set to prosper exponentially in the years ahead.
Employment in the service sector has climbed from 30% to 39% over this period, and the sector is expected to account for almost half of all new entrants to the labor market by 2030.
In 2019, services productivity in Africa was the lowest of any region in the world, and the sector saw a 0.1% decline in productivity over the 2010-2019 decade.
This is partly due to a disproportionate shift towards certain sub-sectors, such as trade, whose productivity is hampered by high levels of informality and fragmentation.
Conversely, high-productivity sectors such as financial and business services now account for less than a fifth of Africa’s gross value added.
Targeted measures to improve productivity in services include increased digitization and skills development.
The study found that by achieving the same rate of productivity growth as the major service centers in Asia, Africa could add $1.4 trillion to the continent’s economy by 2030, enabling the creation of 225 million jobs – a crucial issue in view of Africa’s rapidly growing workforce.
The study shows that by 2030, the majority of large, resilient African companies could add $550 billion to their sales by penetrating new markets and increasing productivity.
The African continent is home to approximately 345 companies with annual sales in excess of $1 billion. Almost 40% of these are currently based in South Africa, which represents a disproportionately large share of the country’s GDP.
Of the 147 major companies headquartered in South Africa, 118 are local, the rest being foreign. This suggests the possibility of expanding the presence of companies in other African countries.
Morocco has 20 large companies, around a seventh of the number in South Africa, while its GDP is a third of South Africa’s, suggesting the potential to significantly increase the number of these national champions.
In charting the way forward, the authors suggest that decision-makers and key players in each country could draw inspiration from the countries, cities and companies that have been sources of innovation, productivity and growth over the past decade.
Based on a detailed understanding of their local context, decision-makers can implement models and innovations that will revitalize their economies, the report concludes.
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