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Brand perception Africa's biggest problem

Cape Town - The concept of "Africa rising" has reached an inflection point where some critical choices have to be made if the continent wants to continue on a track to sustain this narrative, according to Ajen Sita, CEO of EY Africa.

INFOGRAPHIC: Africa’s perception gap persists

He launched the results of the latest EY Africa attractiveness survey in Cape Town on Tuesday. Over 500 business leaders and investors from 30 countries took part in the survey.

To him the key message of the survey is that Africa suffers a brand perception problem and African governments will have to do more to attract investments as the momentum will not just continue of its own accord.

"Africa is a complex continent [to understand] and it often depends on whether one wants to see the glass as half full or half empty," explained Sita.

Under the glass half full scenario he listed, among others, that Africa receiving the second most foreign direct investment (FDI) capital in the world, registering year-on-year growth of 136%. Sub-Sahara Africa is also the second fastest growing region in the world with 22 economies growing at more than 5%.

"Investors still remain positive about Africa and more than 50% still rate the continent's prospects as positive on the short and long term," he said.

When asked about Africa's future attractiveness, 68% of respondents remain positive about the continent's investment appeal over the next three years. However, the proportion of optimists has fallen four percentage points since the previous EY Africa attractiveness survey.

The average value of each project on the continent, however, was greater than the prior year and there was also a large leap in the number of jobs created by these projects.

Another tendency the survey found was the re-emergence of North Africa, which seems to be on the rebound with investment projects mainly from the Middle East.

READ: Africa's GDP growth at pre-economic crisis levels

Glass half empty view

Under the glass half empty view, he listed the World Bank and International Monetary Fund (IMF) revising their 2015 gross domestic product (GDP) growth forecasts down to its lowest since 2009.

Ebola and terrorist insurgencies, deteriorating perceptions of Africa's investment attractiveness and a 8.4% y/y decline in FDI projects in 2014 are other factors on the negative side.

The survey, therefore, found that the perception gap about Africa still persists. On the one hand respondents who are already established in Africa, are more positive about the continent. Of these 66% believe Africa's attractiveness has improved over the past year, while 81% believe the attractiveness will improve over the next three years.

Among respondents who are not yet established in Africa 30% believe the continent's attractiveness has improved over the past year, while 50% believe the attractiveness will improve over the next three years.

READ: African growth 'based on quicksand'

Super stars

According to Michael Lalor, leader of EY's Africa Business Centre, the two emerging "super stars" on the continent are Mozambique and Ethiopia as far as investment focus goes, although South Africa is by far still the most popular destination in this regard.

The survey shows that one in five FDI projects in Africa originate from within the continent itself and that is a good sign to Lalor in terms of the "Africa rising" narrative. On top of that at least a third of these projects originate in South Africa towards north of the country's borders.

Over the past five years South Africa attracted twice as many FDI projects as any other African country. South Africa is also ranked by far the most attractive investment destination in Africa due to its diverse economy, solid infrastructure and stable political environment, according to the survey.

"We still believe in the Africa rising narrative, but growth won't take care of itself," said Lalor.

Key growth sectors

The survey shows that 19.6% of FDI projects in Africa in 2014 were in technology, media and telecommunications. This was followed by financial services at 18%, retail and consumer products at 14.1%.

FDI projects in real estate, hospitality and construction on the continent is a trend Lalor pointed to as it now accounts for 8% of all the FDI projects on the continent in 2014. This sector had 48% of the capital share of all FDI projects and also created the most jobs (33.6%), followed by the retail and consumer products sector (31.5% of jobs created).

The fifth most popular FDI sector was business services (7.5%), followed by transport and logistics (6.3%), diversified industrial products (5.3%), automotive (4.1%), coal, oil and natural gas (3.5%) and chemicals (3.3%).

Roadblocks to investment

The survey found that the top five perceived barriers to investing in Africa remained consistent. These are firstly, the unstable political environment, followed by corruption, weak security, poor basic infrastructure and a lack of highly skilled labour.

Compared to Southeast Asia and Latin America and the Caribbean African countries were found to still underperform on key competitiveness measures.

The survey proposed five priorities for action that is needed for inclusive and sustainable growth in Africa. These are the creation of shared values, entrepreneurship, regional integration, infrastructure development and partnerships.

ALSO READ: Growing concern over sustainable growth in Africa

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