Will having the World Cup in Africa increase investment?

Thoughtful article. You only have to look at the US airline carriers (delta and united) growth in routes this year direct to Africa. . To underscore this shift in thinking about the continent. As well as it’s historic underinvestment.

With the sporting world about to shift its attention to South Africa for the next month, it could be a good time for countries to reassess their relations with the continent as a whole.

Two reports this week, one from U.K.-based think tankChatham House and one from consultancy McKinsey & Co, do just that.

McKinsey’s forecasts says sub-Sahara Africa is well-positioned to become the developing world’s “next great success story” and an investment target for those seeking new markets. [Read the report here.]

Meanwhile, Chatham House said that many Western nations are still weighed down by perceptions of Africa as an aid recipient rather than a strategic trading partner and risk missing opportunities that China and Brazil are already tapping into. [Read the report here.]

Why does it matter?

As Chatham House points out, Africa accounts for 40% of the world’s basic mineral resources, 10% of freshwater supplies and 15% of agriculture land. It’s also about to become a larger player in the world’s oil production.

The rise in prices for minerals such as gold and copper since 2000 has helped lift the continent’s GDP. McKinsey says its collective GDP as of 2008 was $1.6 trillion, roughly equal to that of Brazil’s or Russia’s, and that real GDP growth rose by 4.9% between 2000 and 2008, more than twice its pace of the 1980s and 1990s.

While the financial crisis in the past two years seriously cut African trade and reduced foreign investment, it’s picking up again.

In the iron ore sector alone — important as iron ore is used to make steel — some of the world’s biggest mining groups have struck important investment deals in West Africa this year.

Developing nations have latched onto Africa’s economic potential and have increased their share in Africa’s total exports and imports in 2009, Standard Chartered research shows — emerging economies increased their share of Africa’s total exports in 2009 to 40% from 33% in 2008 and for imports to 47% from 46%.

Chatham House compiled data for export and import values between different countries and the African continent, showing export values to Africa grew between 2006 and 2008 by about 50% for the U.S. to $29 billion and 87% for China to $50 billion.

Africa is also becoming a good destination for goods — Africa is urbanizing and has as many cities with populations of at least one million, just as Europe does, McKinsey says.

There are risks to growth and investment, however. The individual countries in Africa face serious challenges such as poverty and disease. Political uncertainty and corruption are also still strong in many countries.

“Wars, natural disasters or poor government policies could halt or even reverse these gains in any individual country,” research from McKinsey Global Institute said. “But in the long term, internal and external trends indicate that Africa’s economic prospects are strong.”

Recent posts on the World Cup here and here.

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