Data the key to more investment in Africa

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Africa is rising but poor data availability prevents investors on knowing by exactly how much the continent continues to expand by.

“There are a few things that we can pretty much rely on: we know that the growth in Africa is real, we see that in terms of the returns available on investors, that is the key reason why we see portfolio investors as well as foreign direct investors getting more engaged in the region,” Razia Khan, head of Africa research at Standard Chartered, told CNBC Africa.

“Alongside this increase in investor activity there is a demand for better data, for more granularity, for more information and in line with that, Standard Chartered has announced that it’s going to be partnering with a few data providers [and] really looking at how it can improve the availability of data in key African economies.”

Khan added that instances of GDP re-basing are prime opportunities for data collection and utilisation for investors to get a clear picture of where to invest.

While GDP-rebasing can be an occasional occurrence, instances such as Nigeria’s recent GDP re-basing can have a significant impact on investor sentiment.

(READ MORE: Big data becomes more instrumental in business)

Nigeria re-based its GDP this year after not having done so since 1990. Similarly, Ghana found that it had been 60 per cent greater than previously after re-basing for the first time since 1993.

“We really do discover a lot that is very different. In the case of Nigeria, what is revealed? An economy worth 510 billion dollars. that was the 2013 estimate. That was way ahead of probably the most significant estimates that we had had, the highest estimates ranging around 400 billion dollars,” Khan explained.

“Investors are very unlikely to change their behaviour in a wholesale way simply because of new data that has been published by official sources. I think for most investors, they will be looking with interest at this news, they will also be monitoring a large number of other metrics to see how it can be supported by the official data.”

Important data such as how much has changed in terms of corporate profitability for existing corporates in Nigeria, and whether it is a market that is significantly greater than investors had previously thought, are also on the table.  

“The one thing that we do know about Africa, which we think we can be more or less certain about, is that there are a large number of different sectors, probably more than we’d previously thought, that are contributing to the overall GDP growth rate,” said Khan.

“If we break GDP down into its component parts, we see that the really big factor that has changed quite dramatically is this rise in private consumption. Questions have to be asked about what leads to that increase in consumption.”