Turkish Exporters Target Africa

At a time when struggling Turkish exporters are looking for ways to diversify their target markets, Africa is poised to become the new frontier market for Turkish firms as they position themselves to become major stakeholders in the region’s rapidly growing industries.
Africa has recorded an annual growth rate of 5 percent over the last decade and is expected to continue this trend in the coming years. Six out of ten fastest growing economies in the world are now in Africa. Economic predictions indicate that Africa will be a $29 trillion economy in 2050, larger than the 2012 combined GDP of the US and Eurozone.
Turkey’s exports to Africa in the last five years have tripled compared to its worldwide export volume, signalling a clear shift in the export focus towards Africa. Exports to African nations increased by 20.5 percent between 2011 and 2015, soaring to $12.5 billion in 2015 from $10.33 billion in 2011. At the end of 2014, Turkish direct investment in the continent stood at over $6 billion.
The record decline in exports to the EU, conflicts in Syria and Iraq; two main regional export markets for Turkey, the Russian boycott and the slowdown in the Middle East economy along with increased competition in the region, have been the biggest catalysts to search for new markets. This has lead to many Turkish companies including small and medium-sized enterprises, or SMEs, choosing to head towards Africa, tying their hopes to this new market as the continent presents a lot of opportunities for those seeking new investment options.
One of the main reasons why Africa, which has a 2.4% share in the world’s trade, is deemed quite important is the fact that there is major scope for industrialization on the continent. Africa imports nearly 95% of industry materials. Annual imports of the continent surpass $250 billion, which ensures a great investment and export potential in the market.
Some of the leading sectors with great potential are textiles, food, agriculture, energy, farm implements, construction and infrastructure services. Automotive supplier industries and agriculture-based industries are also good options for investors. The closed economic structure of Africa has helped lessen the impact of the economic crisis on the continent, generating a great advantage for investors seeking to enter the market.
The Turkish government is also forging ties with its African counterparts to negotiate tax agreements and boost trade by establishing links between Turkish firms and promising African markets that include more than 300 million people and a gross domestic product of $350 billion. African infrastructure needs also represent important opportunities for Turkish firms that are ranked among the best global performers and offer regional markets, higher quality options than their Chinese counterparts.
Africa offers Turkish investors a predominantly virgin market overflowing with investment and trade opportunities, along with pro-business governments to protect their rights as investors. The continent still craves more investments in various sectors of the economy such as energy, infrastructure, large-scale farming, agro-processing and general manufacturing; sectors in which Turkish firms hold significant experience and technical expertise which could make them critical players as long-term investors, creating a win-win situation for both parties.

AFRICA – THE NEXT GROWTH MARKET

Africa is currently home to five of the fastest growing economies in the world. According to a global study, the continent’s economy is forecast to grow to $2.6 trillion in 2020 from $1.6 trillion in 2008, fuelled by booms in mining, agriculture and development of ports, roads and other infrastructure. This rapid economic growth is what is creating substantial new business opportunities in the region.
Over the past decade, Africa’s real GDP grew by 4.7% a year, on average—twice the pace of its growth in the 1980s and 1990s. This growth was observed across all nations and sectors. By 2009, Africa’s collective GDP of $1.6 trillion was roughly equal to Brazil’s or Russia’s, making the continent among the fastest-expanding economic regions in the world today.
While the Chinese economy has slowed down, along with a slump in the Middle East economy due to low oil prices, the African economy has been steadily on the rise. In fact, Africa was the only continent that grew during the recent global recession. Though Africa’s growth rate slowed to 2% in 2009, it bounced back to nearly 5% in 2010 and has continued to grow ever since.
As Africa’s economies progress, opportunities are opening in sectors such as retailing, energy, banking, infrastructure-related industries, resource-related businesses, and all along the agricultural value chain. Consider that telecom companies in Africa have added 316 million subscribers—more than the entire U.S. population—since 2000.
According to a UN survey, Africa offers a higher return on investment than any other emerging market. The main reasons highlighted for this are competition being less intense, the presence of fewer foreign companies and a huge pent-up consumer demand. Companies that desire revenues and profits can no longer ignore Africa.
Getting in early to a developing market allows companies to build up strong brands and sales channels that can reap big profits in the long run. This has been China’s strategy in Africa over the past two decades. It has aggressively promoted trade and investment, courting countries by offering aid in exchange for favourable trade terms. Good local partners are also key to success in the African market.
Africa’s long-term prospects are strong, because both internal and external trends are propelling its growth. Africa will continue to profit from the global demand for oil, natural gas, minerals, food, and other natural resources. The continent has an abundance of riches; including 10% of the world’s oil reserves, 40% of its gold ore, and 80% to 90% of its deposits of chromium and platinum group metals. To exploit them, African governments are forging new types of partnerships in which buyers from countries such as China and India provide up-front payments, invest in infrastructure, and share management skills and technology.
Since 2000, African countries have cut their combined foreign debt from 82% of GDP to 59% and reduced budget deficits from 4.6% of GDP to 1.8%, which sent inflation rates tumbling from 22% to 8%.
Many people picture Africans as subsistence farmers, but there’s a sizable middle class on the continent. By 2008, 16 million African households had incomes above $20,000 a year—a level that enabled them to buy houses, cars, appliances, and branded products. Africans spent $860 billion on goods and services in 2008—35% more than the $635 billion that Indians spent, and slightly more than the $821 billion of consumer expenditures in Russia.
If Africa maintains its current growth trajectory, consumers will buy $1.4 trillion worth of goods and services in 2020, which will be a little less than India’s projected $1.7 trillion but more than Russia’s $960 billion, which should make Africa one of the fastest-growing consumer markets of this decade.