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African economies to face USD11.4 trillion investment shortfall by 2040, says report

Africa has the opportunity to quadruple living standards by 2040, but to do so it will need to find USD11.4 trillion in extra investment over that period. That’s according to a Capital Economics report commissioned by Jersey Finance.

While Africa has fifteen per cent of the world’s population, it generates just four per cent of global output. But the Capital Economics report argues that Africa is on the verge of a demographic dividend. While other continents face ageing populations, Africa’s working age population is expected to double to 1.2 billion over the next 30 years.
 
To support this and quadruple gross domestic product by 2040, Capital Economics calculate that Africa will need to invest USD85 trillion, about 100 per cent of current annual global gross domestic product. At current levels of investment, it will fall USD11.4 trillion short of that. Capital Economics estimate that, combined, aid, domestic profits and local governments will only be able to plug 48 per cent of this gap. The remainder – USD6.1 trillion – will have to come from foreign direct investment.
 
This is where Jersey comes in. Capital Economics find that, contrary to claims made by non-governmental organisations, Jersey’s exposure to Africa is small. But by providing protection for investors, protection for African wealth, access to capital markets, expertise and experience, efficient cross-border investment pooling, efficient and robust regulation and tax neutrality, Jersey is well placed to make an important contribution to the economic growth Africa needs.
 
Mark Pragnell of Capital Economics and principal author of the report, says: “The continent must address its lack of infrastructure, buildings, machinery and other physical capital. Its capital stock will need to increase six fold by 2040 if it’s to realise its potential. It will require a cumulative investment of USUSD85 trillion – equivalent to one year’s gross domestic product for the entire world – by then.”
 
Geoff Cook, CEO of Jersey Finance, says: “IFCs have a fundamental part to play in facilitating foreign direct investment, of which a substantial amount is needed if Africa is to fulfil its economic potential. As such Jersey is in a prime position to offer the continent the assistance it needs – from access to a greater amount of investment funds to establishing environments conducive to entrepreneurship – Jersey can offer a safe business environment while ultimately helping Africa fulfil its economic potential.”

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