Sub-Saharan Africa’s (SSA’s) growth will accelerate moderately in 2019 compared to 2018 (at 3.5% YOY GDP growth versus 3.0% expected for 2018). Individual country performance will diverge greatly, however, with South Africa potentially being a major drag on growth and facing high risks, mainly because of global forces, but weak internal fundamentals also play a crucial role.
Other large economies, like Nigeria and Angola, will see moderately better performance driven by reform-minded governments and elevated investor appetite, while smaller markets in the region (Kenya, Ghana, Côte d’Ivoire, and Ethiopia in particular) continue to perform strongly because of solid economic activity and high investment levels.
However, in 2019, maybe more so than in previous years, the actual economic performance of SSA will mainly be defined by global uncertainties such as ongoing global trade disruptions and rising developed-market interest rates. These factors are likely to drive an uptick in competition from Chinese companies as these firms, facing higher tariffs in the US, look for new export markets. Currency volatility is also very likely to increase as financial investors take their capital out of emerging markets to chase higher returns in developed markets as interest rates rise there.
The drivers of the 2019 outlook, and the potential downside disruptors, are more closely aligned than ever before, highlighting that this year faces significant downside risks. For example, if trade tensions between major global economies accelerate, they could cause oil prices to collapse, with negative spillover effects across many large SSA markets. Local woes exacerbate these global dynamics and could see crises akin to Turkey and Argentina occur in SSA. In light of this, South Africa faces and poses a significant risk.
As a result, it is more important than ever for MNCs to balance their SSA market portfolio across large, difficult to ignore, but slow growing markets and smaller, stronger growing outperformers. Competition will pick up in both of these groups of markets, making it even more important to have the right value proposition and strategies in place to win in each individual country, keeping in mind that all customer segments are price conscious and discerning, and have more choice.
To achieve profitable growth, companies need to ensure their products and services provide value for money, ensure their route-to-market operates in an optimal way, and, most importantly, remain agile to respond to market changes. On top of that, MNCs need to prepare their business for downside risks.
If you are a client, read our 2019 SSA Regional Outlook or reach out to your Client Relationship Director to discuss strategy implications for your business.
If you are not a client, but would like advice on your SSA strategy, please contact us to learn more.