by Matthew Tostevin and Stuart Grudgings
Africa offers among the world's best investment prospects as emerging markets grow ever more important, although its economies risk being destabilized by the slew of capital they stand to attract in coming years.
Energy-producing continental giant Nigeria was identified as a top pick by some of the most influential figures in emerging markets finance who spoke to the Reuters Emerging Markets Summit in Sao Paulo in July.
Africa withstood the financial crisis better than many predicted, and the region's economic growth is forecast at 4.75 percent in 2010. Next year, half of the world's 10 fastest growing economies are expected to be in Africa, and it is now attracting more than just the most intrepid investors.
"The latent interest in Africa is enormous," said Stephen Jennings, chief executive of Russian investment bank Renaissance Capital, speaking to the meeting by video link from Moscow. "Before the crisis there were probably 40 people or groups establishing Africa funds. In 3-4 years you'll have 100 Africa funds and the biggest one won't be $2 billion, it'll be $20 billion."
Fund tracker EPFR reports 43 consecutive weeks of net inflows to Africa equities funds, reaching $484 million in the first half of 2010 -- nearly double those to India over the same period.
Africa's advocates say the inflows stand to accelerate rapidly as a dearth of attractive returns in the developed world pulls investors in while a more stable political and economic environment indicates diminishing risks.
A shift of global economic power to emerging giants such as Brazil, Russia, India and China -- known collectively as the BRICs -- benefits Africa as surging economies seek its resources and push up commodity prices and investment. Brazil, Russia and India still trail China, which last year became Africa's biggest trade partner, but they have been rapidly expanding trade and putting more money into Africa.
"What's absolutely striking is how much change there's been between the BRIC countries and Africa," said Jacko Maree, chief executive of South Africa's Standard Bank, which is Africa's biggest. "We like to think that the whole story has only just begun."
Brazilian firms with a large African presence may soon issue bonds in South African rand to seize on growing interest, said Standard Bank's chief executive in the Americas, Eduardo Centola.
Nigeria's market of about 140 million people -- nearly three times bigger than South Africa's -- as well as its energy resources and bigger, more liquid markets, makes it the top choice for many eying Africa. On the Goldman Sachs' growth-environment index, which measures a mixture of economic and social development indicators, Nigeria's score has nearly doubled over the past decade.
"If it were to show the same increase in its growth-environment score over the next decade, many investors will look back and say why the hell didn't I invest in Nigeria," said Goldman Sachs' global head of economic research Jim O'Neill, who coined the term BRICs.
Ethiopia and Rwanda are among the smaller African economies seen as promising. They show how previously ignored countries scarred by war are emerging as possible investment magnets alongside those such as Ghana, a relatively stable democracy which is soon to become an oil producer.
There are risks, though, with concerns over political stability even in bigger economies such as Nigeria and Kenya.
Africa experts underline the fact that new mineral riches have rarely been shared widely, and suggest reliance on such income for national coffers could discourage establishing tax bases that would put states on a sounder footing.
"Where I think the real caution has to come in is the quality of the growth," said Patrick Smith of the Africa Confidential newsletter. "It would be pretty silly to say success is certain."
A big influx of investment funds could in itself pose a problem for African countries less prepared to cope than those in other rapidly growing regions that have felt the pain of such flows in the past.
"Africa has no experience of huge capital inflows," said Renaissance's Jennings. "Under the scenario I'm painting, the capital inflows will be way above and beyond the ability of those countries to absorb them."
Most African countries have small, illiquid markets and little financial infrastructure, raising the chances of economic distortions and asset bubbles that could lead to currency crises and long-term damage.
"People look at how certain African economies have been getting their act together and there is a risk you will get significant capital inflows," said Mohamed El-Erian, chief executive of PIMCO, the world's largest bond investor.
"That will provide quite a challenge to policy makers."
Reuters
September 30, 2010
Why Africa won't be the next BRIC
by Barney Jopson
Prompted by the recent (August 2010) application from South Africa for Bric “membership,” the man who coined the acronym - Jim O’Neill of Goldman Sachs - asks in the Financial Times (August 27 2010) whether Africa as a whole could become the next Bric.
On several measures he says the continent has a reasonably strong case, but he notes that its biggest economies would still need to raise their games on many fronts - and he misses some more profound weaknesses in the Africa-as-a-Bric idea.
O’Neill created the Bric acronym in 2001 as a neat way of grouping together four countries that shared the potential for generating rapid growth, attracting foreign investment, and reshaping the global economy.
Ngozi Okonjo-Iweala, managing director at the World Bank, latched onto the idea of Africa joining the group in a speech earlier this year in which she sold it as a “trillion dollar economy.”
It’s high time Africa saw and presented itself as the fifth Bric, an attractive destination for investment, not just aid. This is realistic and within reach. As Nelson Mandela said, “It always seems impossible until it’s done.”
But before you can decide where to squeeze an “a” into the acronym, old Africa hands will jump in to say that it’s nonsense to compare it to a single country: not only is Africa a continent, it’s arguably the most diverse on the planet in terms of economics, politics, culture and the environment.
What’s more, 20 African countries have populations of less than 5m people. O’Neill is alive to that and focuses his discussion on the biggest African economies.
If you … look at the potential of the 11 largest African economies for the next 40 years (by studying their likely demographics, the resulting changes in their working population and their productivity) their combined GDP by 2050 would reach more than $13,000bn, making them bigger than either Brazil or Russia, although not China or India.
But even those 11 are highly diverse - including two of the biggest, Egypt and Nigeria. And due to Africa’s lamentable roads and railways, as well as its internal border restrictions, many of them function as isolated economic islands.
Afro-optimists would say regional trading blocs are changing that, but the reality is that only about 10 to 12 per cent of African trade takes place with other African countries, according to a study from the UN Economic Commission for Africa and others.
For those reasons, it doesn’t make a lot of sense to suppose that Africa’s biggest economies will follow the same development trajectories over the next few years, let alone the next few decades.
Yet it’s worth remembering that the Bric grouping initially attracted flak for not having any coherence either, but its runaway popularity with western businesses and investors has given the four countries more in common than they had before.
Funnily enough, one thing they share is a growing hunger for mineral resources from Africa (notably Nigeria, Angola, the Democratic Republic of Congo, and Sudan).
But it’s doubtful whether any country other than South Africa has the right mix of factors to make it an attractive destination for serious western investment, across a broader range of sectors, which could rival that going to the Brics.
Earlier this year Shanta Devarajan, the World Bank’s chief economist for Africa, responded with a dose of scepticism to Okonjo-Iweala’s call:
The distinguishing feature of the Brics is that they are both middle-income and large. So it’s not clear how any individual African country can aspire to being a Bric. Countries such as Malaysia or Chile may be more appropriate models for most African countries.
To achieve their “2050 potential,” O’Neill says African countries need more macroeconomic stability, less external debt, a stronger rule of law, better education, (even) more mobile telephones, and a purge of corruption.
But it’s worth paying more attention to the parallel trends of population growth (seen as a good thing by many investors in India and Brazil) and job creation (a difficult task that most African governments are failing to manage).
Each of the Bric countries have their own pockets of poverty, and in some parts of Africa poverty is actually falling. But too many countries are producing more people than they can employ. And not only does that limit their potential as new consumer markets. It has ugly consequences in terms of crime, conflict and social unrest that can strangle economic growth.
Financial Times
Prompted by the recent (August 2010) application from South Africa for Bric “membership,” the man who coined the acronym - Jim O’Neill of Goldman Sachs - asks in the Financial Times (August 27 2010) whether Africa as a whole could become the next Bric.
On several measures he says the continent has a reasonably strong case, but he notes that its biggest economies would still need to raise their games on many fronts - and he misses some more profound weaknesses in the Africa-as-a-Bric idea.
O’Neill created the Bric acronym in 2001 as a neat way of grouping together four countries that shared the potential for generating rapid growth, attracting foreign investment, and reshaping the global economy.
Ngozi Okonjo-Iweala, managing director at the World Bank, latched onto the idea of Africa joining the group in a speech earlier this year in which she sold it as a “trillion dollar economy.”
It’s high time Africa saw and presented itself as the fifth Bric, an attractive destination for investment, not just aid. This is realistic and within reach. As Nelson Mandela said, “It always seems impossible until it’s done.”
But before you can decide where to squeeze an “a” into the acronym, old Africa hands will jump in to say that it’s nonsense to compare it to a single country: not only is Africa a continent, it’s arguably the most diverse on the planet in terms of economics, politics, culture and the environment.
What’s more, 20 African countries have populations of less than 5m people. O’Neill is alive to that and focuses his discussion on the biggest African economies.
If you … look at the potential of the 11 largest African economies for the next 40 years (by studying their likely demographics, the resulting changes in their working population and their productivity) their combined GDP by 2050 would reach more than $13,000bn, making them bigger than either Brazil or Russia, although not China or India.
But even those 11 are highly diverse - including two of the biggest, Egypt and Nigeria. And due to Africa’s lamentable roads and railways, as well as its internal border restrictions, many of them function as isolated economic islands.
Afro-optimists would say regional trading blocs are changing that, but the reality is that only about 10 to 12 per cent of African trade takes place with other African countries, according to a study from the UN Economic Commission for Africa and others.
For those reasons, it doesn’t make a lot of sense to suppose that Africa’s biggest economies will follow the same development trajectories over the next few years, let alone the next few decades.
Yet it’s worth remembering that the Bric grouping initially attracted flak for not having any coherence either, but its runaway popularity with western businesses and investors has given the four countries more in common than they had before.
Funnily enough, one thing they share is a growing hunger for mineral resources from Africa (notably Nigeria, Angola, the Democratic Republic of Congo, and Sudan).
But it’s doubtful whether any country other than South Africa has the right mix of factors to make it an attractive destination for serious western investment, across a broader range of sectors, which could rival that going to the Brics.
Earlier this year Shanta Devarajan, the World Bank’s chief economist for Africa, responded with a dose of scepticism to Okonjo-Iweala’s call:
The distinguishing feature of the Brics is that they are both middle-income and large. So it’s not clear how any individual African country can aspire to being a Bric. Countries such as Malaysia or Chile may be more appropriate models for most African countries.
To achieve their “2050 potential,” O’Neill says African countries need more macroeconomic stability, less external debt, a stronger rule of law, better education, (even) more mobile telephones, and a purge of corruption.
But it’s worth paying more attention to the parallel trends of population growth (seen as a good thing by many investors in India and Brazil) and job creation (a difficult task that most African governments are failing to manage).
Each of the Bric countries have their own pockets of poverty, and in some parts of Africa poverty is actually falling. But too many countries are producing more people than they can employ. And not only does that limit their potential as new consumer markets. It has ugly consequences in terms of crime, conflict and social unrest that can strangle economic growth.
Financial Times
BRIC trade with Africa overtakes Japan's
by Adam Lewis
Brazil, Russia, India and China (Bric) have overtaken Japan in terms of their trade with Africa, according to a report issued from the Standard Bank.
The report says that while Japan-Africa trade relations have displayed growth momentum, they have been unable to keep pace with the huge rise in Africa’s trade relations with the emerging world.
As such, while Japan-Africa trade roughly doubled between 2001 and 2009, China-Africa trade expanded by almost 1,000%, India-Africa trade rose by 525%, Brazil-Africa trade by 224% and Russia-Africa trade by 262%. Indeed by 2009 China’s trade with Africa was five times that of Japan and Africa.
“Japan is lagging the Brics in Africa for two key reasons,” says the report. “Firstly, the Brics have a deeper understanding of operating within challenging emerging market environments. Secondly, Bric enterprises are, more often than not, provided superior support from their respective governments in securing deeper access to African markets.
“This advantage is most clear in the Chinese context, where Chinese state capital chanelled to Africa to support development strategies, largely in the infrastructure space, abundantly enhances the ability of Chinese companies to engage more wholesomely in high-growth African economies. As such, and in contrast to Japan, Chinese aid to Africa has a more direct impact on the ability of its domestic corporations to profitably engage Africa.
To address this the report says the Japanese authorities and private institutions need to re-engage with Africa.
“Africa offers much of what Japan and its key advanced economy partners lack: a large and growing population, rising prosperity which is fuelling the swelling of urban nodes and an increasingly affluent middle class, and abundant natural resources to fuel industrial expansion,” the report says.
“Conversely, Africa lacks much of what Japan is able to offer: capital and expertise to upgrade the continent’s infrastructure stock, and manufactured goods, particularly in the automotive sector, to provide immediate nourishment for the demands of Africa’s consumer class. While perhaps some way off, raising consumer markets will eventually reflect in demand for Japanese manufactured goods.
“The marriage seems neat, but Japan is finding the commercial terrain in Africa far more competitive with the inspired engagement of the Bric economies across the continent.”
Fund Strategy
Brazil, Russia, India and China (Bric) have overtaken Japan in terms of their trade with Africa, according to a report issued from the Standard Bank.
The report says that while Japan-Africa trade relations have displayed growth momentum, they have been unable to keep pace with the huge rise in Africa’s trade relations with the emerging world.
As such, while Japan-Africa trade roughly doubled between 2001 and 2009, China-Africa trade expanded by almost 1,000%, India-Africa trade rose by 525%, Brazil-Africa trade by 224% and Russia-Africa trade by 262%. Indeed by 2009 China’s trade with Africa was five times that of Japan and Africa.
“Japan is lagging the Brics in Africa for two key reasons,” says the report. “Firstly, the Brics have a deeper understanding of operating within challenging emerging market environments. Secondly, Bric enterprises are, more often than not, provided superior support from their respective governments in securing deeper access to African markets.
“This advantage is most clear in the Chinese context, where Chinese state capital chanelled to Africa to support development strategies, largely in the infrastructure space, abundantly enhances the ability of Chinese companies to engage more wholesomely in high-growth African economies. As such, and in contrast to Japan, Chinese aid to Africa has a more direct impact on the ability of its domestic corporations to profitably engage Africa.
To address this the report says the Japanese authorities and private institutions need to re-engage with Africa.
“Africa offers much of what Japan and its key advanced economy partners lack: a large and growing population, rising prosperity which is fuelling the swelling of urban nodes and an increasingly affluent middle class, and abundant natural resources to fuel industrial expansion,” the report says.
“Conversely, Africa lacks much of what Japan is able to offer: capital and expertise to upgrade the continent’s infrastructure stock, and manufactured goods, particularly in the automotive sector, to provide immediate nourishment for the demands of Africa’s consumer class. While perhaps some way off, raising consumer markets will eventually reflect in demand for Japanese manufactured goods.
“The marriage seems neat, but Japan is finding the commercial terrain in Africa far more competitive with the inspired engagement of the Bric economies across the continent.”
Fund Strategy
African air travel nightmare blocks trade
by Fran Blandy
Flying in Africa -- then fasten your seatbelt, grit your teeth and hope for the best.
That could well be the advice of seasoned travellers familiar with the nightmare of making connecting flights, surprise stopovers and poor scheduling that is strangling trade and tourism on the continent.
Glenna Gordon, a freelance photographer based in Liberia, is well-versed in flights-gone-wrong. A return trip to Monrovia from Cameroon once included a "surprise stop" in Libreville and then another in Mombasa, Kenya in east Africa, crossing the continent "from one ocean to another."
The trip took about 30 hours.
"It would have been faster to take a pirogue (boat) across the Gulf of Guinea," Gordon said.
While major international carriers are flocking to Africa for a slice of a vibrant and fast-growing market, local airlines are still hamstrung by complex restrictions between states and government interference 20 years after the 'Yamoussoukro Agreement' was supposed to open up the skies.
"Its purpose was to liberalise air services in the continent. It was a great idea but little progress has been made," said Anthony Concil, communications director for the International Air Transport Association. "Without the political will to support the industry?s growth, and the economic benefits that it will bring, the potential for improving connectivity is limited."
Dubai's Emirates is one of those expanding fast into Africa and in September launches the first direct flight from west Africa to Asia, from Dakar.
"It is not easy to travel around Africa, that's for sure," said Tim Clark, Emirates Airlines president. "The European legacy has tended to dominate Africa and if you wanted to go from Accra in Ghana to Douala in Cameroon, about a 600-mile ((960 kilometres) flight, you have to go over Paris and we see that time and time again."
Emirates is helping Senegal's national carrier to relaunch after its collapse in 2009, which cut many key direct flights within west Africa from the regional hub.
"A good airline with more options of flying has an impact on trade and also on tourism and people moving freely," said Ibrahima Cheikh Diong, chairman of Senegal Airlines.
According to Concil of IATA, 35 percent of goods traded internationally travel by air. But with no clear vision by governments to develop aviation as a critical component of Africa?s infrastructure, "the continent pays the price in lost economic activity and higher costs to do business."
Most African airlines are still state-owned and in cases where foreign investment is allowed, it is limited up to 49 percent with no management control.
"Often times, governments are not helping. The industry cannot operate like a normal business due to government intervention. And corruption is a problem in many parts of the continent," said Concil.
The African airline industry ran up losses of 100 million dollars in 2008 and 2009 but was expected to make 100 million dollars this year due to strong traffic growth on the back of expanding commodities trade, according to IATA.
While demand in Africa grew 4.5 percent and 5.1 percent in 2007 and 2008, it fell 5.4 percent in 2009.
"It is expected to grow 13.5 percent this year, which is an exaggeration due to the comparison with an extremely weak 2009," Concil said.
While better organised highways in the sky are sorely needed, the main priority is still safety in the world's most dangerous region for air travel which has an accident rate 14 times worse than the global average.
AFP
Flying in Africa -- then fasten your seatbelt, grit your teeth and hope for the best.
That could well be the advice of seasoned travellers familiar with the nightmare of making connecting flights, surprise stopovers and poor scheduling that is strangling trade and tourism on the continent.
Glenna Gordon, a freelance photographer based in Liberia, is well-versed in flights-gone-wrong. A return trip to Monrovia from Cameroon once included a "surprise stop" in Libreville and then another in Mombasa, Kenya in east Africa, crossing the continent "from one ocean to another."
The trip took about 30 hours.
"It would have been faster to take a pirogue (boat) across the Gulf of Guinea," Gordon said.
While major international carriers are flocking to Africa for a slice of a vibrant and fast-growing market, local airlines are still hamstrung by complex restrictions between states and government interference 20 years after the 'Yamoussoukro Agreement' was supposed to open up the skies.
"Its purpose was to liberalise air services in the continent. It was a great idea but little progress has been made," said Anthony Concil, communications director for the International Air Transport Association. "Without the political will to support the industry?s growth, and the economic benefits that it will bring, the potential for improving connectivity is limited."
Dubai's Emirates is one of those expanding fast into Africa and in September launches the first direct flight from west Africa to Asia, from Dakar.
"It is not easy to travel around Africa, that's for sure," said Tim Clark, Emirates Airlines president. "The European legacy has tended to dominate Africa and if you wanted to go from Accra in Ghana to Douala in Cameroon, about a 600-mile ((960 kilometres) flight, you have to go over Paris and we see that time and time again."
Emirates is helping Senegal's national carrier to relaunch after its collapse in 2009, which cut many key direct flights within west Africa from the regional hub.
"A good airline with more options of flying has an impact on trade and also on tourism and people moving freely," said Ibrahima Cheikh Diong, chairman of Senegal Airlines.
According to Concil of IATA, 35 percent of goods traded internationally travel by air. But with no clear vision by governments to develop aviation as a critical component of Africa?s infrastructure, "the continent pays the price in lost economic activity and higher costs to do business."
Most African airlines are still state-owned and in cases where foreign investment is allowed, it is limited up to 49 percent with no management control.
"Often times, governments are not helping. The industry cannot operate like a normal business due to government intervention. And corruption is a problem in many parts of the continent," said Concil.
The African airline industry ran up losses of 100 million dollars in 2008 and 2009 but was expected to make 100 million dollars this year due to strong traffic growth on the back of expanding commodities trade, according to IATA.
While demand in Africa grew 4.5 percent and 5.1 percent in 2007 and 2008, it fell 5.4 percent in 2009.
"It is expected to grow 13.5 percent this year, which is an exaggeration due to the comparison with an extremely weak 2009," Concil said.
While better organised highways in the sky are sorely needed, the main priority is still safety in the world's most dangerous region for air travel which has an accident rate 14 times worse than the global average.
AFP
Booming Africa, an opportunity for Europe
by Charles Roxburgh* and Susan Lund*
With the 2010 FIFA World Cup well over, the international sports spotlight has moved on, from South Africa to other tournaments in other lands. Still, European companies and investors should keep their eyes on Africa because competition in commerce is heating up across the continent.
A new report from the McKinsey Global Institute shows that Africa is now among the fastest-growing economic regions in the world, creating significant business opportunities in a wide range of industries. Early entrants onto the field can seize the advantage.
Africa's collective gross domestic product rose at a 4.9 percent annual rate from 2000 through 2008, twice the pace of the preceding two decades. In our report, Lions on the Move: The Progress and Potential of African Economies, we show that this growth surge was broadly based, with roots extending far beyond the global commodities boom.
Looking ahead, we project that at least four groups of industries on the continent could together generate as much as $2.6 trillion in annual revenue by 2020, or $1 trillion more than today, measured in 2010 dollars. The biggest business opportunity of the four lies in consumer goods and services, followed by natural resources, agriculture, and infrastructure.
These projections reflect Africa's recent economic advances and strong long-term prospects. The continent's combined economic output, valued at $1.6 trillion in 2008, is now roughly equal to Brazil's or Russia's. Several factors suggest that this economic momentum can be sustained.
To start, Africa's growth acceleration was widespread, with GDP rising more rapidly in 27 of its 30 largest economies—both in countries with significant resource exports and those without. Rising revenues from oil, minerals, and other natural resources accounted for just 24 percent of growth from 2000 through 2008. All the other sectors contributed as well, including finance, retail, agriculture, and telecommunications.
Key to the growth surge were government reforms that created greater political stability, improved the macroeconomic environment, and energized the business environment. For example, several countries halted their deadly conflicts. Policymakers also reduced inflation, cut budget deficits, lowered trade barriers, cut taxes, privatized companies, and liberalized many sectors, such as banking.
As a result, a dynamic African business sector is emerging. The continent now has more than 1,400 publicly listed companies. It boasts more than 100 companies with revenue greater than $1 billion. Telecom firms have signed up more than 316 million new mobile-phone subscribers in Africa since 2000—more than the total U.S. population. Banking and retail are flourishing as household incomes climb. Construction is booming as new cities rise.
Africa's future economic growth likely will be supported by several long-term trends. Among these is the rising global demand for oil, gold, diamonds, and other commodities. This demand is growing fastest in the world's emerging economies, particularly in Asia and the Middle East. Despite historic ties with Europe, Africa now conducts half its total trade with developing economic regions—so-called south-south exchanges. Asia's economies altogether accounted for 28 percent of Africa's total trade in 2008, more than double their share in 1990. Western Europe's share shrank during the same period, from 51 percent to 28 percent.
There is great potential for Europe to revitalize its old links to Africa and forge new ones. One place to start is by looking beyond Africa's raw materials to a bigger source of future economic growth: the rise of the urban African consumer. Today, 40 percent of Africans live in cities, a proportion that is close to China's and continuing to expand. The continent already has 52 cities with populations greater than 1 million—equal to Western Europe—and is projected to add 32 by 2030. As in other developing economies, urbanization in Africa is creating jobs, boosting productivity, and lifting incomes. The number of households with discretionary income is projected to grow by 50 percent over the next 10 years, reaching 128 million.
Africa's household spending totaled $860 billion in 2008, more than that of India or Russia. The continent's consumer markets are already growing two to three times faster than those in OECD countries and could be worth $1.4 trillion in annual revenue by 2020. With their eyes on this prize, many European companies are already expanding in Africa: Unilever (UL), Standard Chartered (SCBFF), and SABMiller (SBMRY) each operate in a dozen or more of the continent's 50-plus countries.
Urbanization also is increasing demand for investment in new roads, rail systems, clean water, power generation, and other infrastructure in Africa. Some companies see additional opportunities for Africa to become an exporter of clean energy. Consider the Desertec Industrial Initiative, launched by a consortium of European companies including Siemens (SI), which aims to transmit power to Europe from a network of solar plants and wind farms to be built across the deserts of North Africa and the Middle East. The project still faces technical hurdles and will take years to realize, but the effort could yield an estimated $400 billion in local investment.
Many companies also are finding opportunities to serve European customers from Africa. In North Africa, several countries are using their proximity and linguistic ties to Europe to attract more foreign investment in tourism, offshore business services, and low-cost manufacturing for export.
Africa's new commercial vibrancy also holds many other possibilities. With 60 percent of the world's uncultivated arable land and low crop yields, Africa is ripe for a "green revolution" like those that have increased agricultural production in Asia and Brazil. We estimate that the total value of Africa's resource sectors' production could grow steadily, at from 2 percent to 4 percent a year, over the next decade.
To be sure, there remain serious challenges and risks to growth in any individual country. But if recent trends continue, Africa will play an increasingly important role in the global economy. By 2040, the continent will be home to one in five of the planet's young people and will have the world's largest working-age population. If Africa can give its young people sufficient education and skills, they could be a substantial source of consumption and production in years ahead.
European executives and investors cannot afford to ignore Africa's immense economic potential. Nor can they assume that traditional ties will guarantee them an advantage in the competition. There are many new players, but also many new chances to get in the game and gain some ground.
*Charles Roxburgh is the London-based director of the McKinsey Global Institute (MGI), McKinsey & Co.'s business and economics research arm. Susan Lund is MGI's director of research, based in Washington.
With the 2010 FIFA World Cup well over, the international sports spotlight has moved on, from South Africa to other tournaments in other lands. Still, European companies and investors should keep their eyes on Africa because competition in commerce is heating up across the continent.
A new report from the McKinsey Global Institute shows that Africa is now among the fastest-growing economic regions in the world, creating significant business opportunities in a wide range of industries. Early entrants onto the field can seize the advantage.
Africa's collective gross domestic product rose at a 4.9 percent annual rate from 2000 through 2008, twice the pace of the preceding two decades. In our report, Lions on the Move: The Progress and Potential of African Economies, we show that this growth surge was broadly based, with roots extending far beyond the global commodities boom.
Looking ahead, we project that at least four groups of industries on the continent could together generate as much as $2.6 trillion in annual revenue by 2020, or $1 trillion more than today, measured in 2010 dollars. The biggest business opportunity of the four lies in consumer goods and services, followed by natural resources, agriculture, and infrastructure.
These projections reflect Africa's recent economic advances and strong long-term prospects. The continent's combined economic output, valued at $1.6 trillion in 2008, is now roughly equal to Brazil's or Russia's. Several factors suggest that this economic momentum can be sustained.
To start, Africa's growth acceleration was widespread, with GDP rising more rapidly in 27 of its 30 largest economies—both in countries with significant resource exports and those without. Rising revenues from oil, minerals, and other natural resources accounted for just 24 percent of growth from 2000 through 2008. All the other sectors contributed as well, including finance, retail, agriculture, and telecommunications.
Key to the growth surge were government reforms that created greater political stability, improved the macroeconomic environment, and energized the business environment. For example, several countries halted their deadly conflicts. Policymakers also reduced inflation, cut budget deficits, lowered trade barriers, cut taxes, privatized companies, and liberalized many sectors, such as banking.
As a result, a dynamic African business sector is emerging. The continent now has more than 1,400 publicly listed companies. It boasts more than 100 companies with revenue greater than $1 billion. Telecom firms have signed up more than 316 million new mobile-phone subscribers in Africa since 2000—more than the total U.S. population. Banking and retail are flourishing as household incomes climb. Construction is booming as new cities rise.
Africa's future economic growth likely will be supported by several long-term trends. Among these is the rising global demand for oil, gold, diamonds, and other commodities. This demand is growing fastest in the world's emerging economies, particularly in Asia and the Middle East. Despite historic ties with Europe, Africa now conducts half its total trade with developing economic regions—so-called south-south exchanges. Asia's economies altogether accounted for 28 percent of Africa's total trade in 2008, more than double their share in 1990. Western Europe's share shrank during the same period, from 51 percent to 28 percent.
There is great potential for Europe to revitalize its old links to Africa and forge new ones. One place to start is by looking beyond Africa's raw materials to a bigger source of future economic growth: the rise of the urban African consumer. Today, 40 percent of Africans live in cities, a proportion that is close to China's and continuing to expand. The continent already has 52 cities with populations greater than 1 million—equal to Western Europe—and is projected to add 32 by 2030. As in other developing economies, urbanization in Africa is creating jobs, boosting productivity, and lifting incomes. The number of households with discretionary income is projected to grow by 50 percent over the next 10 years, reaching 128 million.
Africa's household spending totaled $860 billion in 2008, more than that of India or Russia. The continent's consumer markets are already growing two to three times faster than those in OECD countries and could be worth $1.4 trillion in annual revenue by 2020. With their eyes on this prize, many European companies are already expanding in Africa: Unilever (UL), Standard Chartered (SCBFF), and SABMiller (SBMRY) each operate in a dozen or more of the continent's 50-plus countries.
Urbanization also is increasing demand for investment in new roads, rail systems, clean water, power generation, and other infrastructure in Africa. Some companies see additional opportunities for Africa to become an exporter of clean energy. Consider the Desertec Industrial Initiative, launched by a consortium of European companies including Siemens (SI), which aims to transmit power to Europe from a network of solar plants and wind farms to be built across the deserts of North Africa and the Middle East. The project still faces technical hurdles and will take years to realize, but the effort could yield an estimated $400 billion in local investment.
Many companies also are finding opportunities to serve European customers from Africa. In North Africa, several countries are using their proximity and linguistic ties to Europe to attract more foreign investment in tourism, offshore business services, and low-cost manufacturing for export.
Africa's new commercial vibrancy also holds many other possibilities. With 60 percent of the world's uncultivated arable land and low crop yields, Africa is ripe for a "green revolution" like those that have increased agricultural production in Asia and Brazil. We estimate that the total value of Africa's resource sectors' production could grow steadily, at from 2 percent to 4 percent a year, over the next decade.
To be sure, there remain serious challenges and risks to growth in any individual country. But if recent trends continue, Africa will play an increasingly important role in the global economy. By 2040, the continent will be home to one in five of the planet's young people and will have the world's largest working-age population. If Africa can give its young people sufficient education and skills, they could be a substantial source of consumption and production in years ahead.
European executives and investors cannot afford to ignore Africa's immense economic potential. Nor can they assume that traditional ties will guarantee them an advantage in the competition. There are many new players, but also many new chances to get in the game and gain some ground.
*Charles Roxburgh is the London-based director of the McKinsey Global Institute (MGI), McKinsey & Co.'s business and economics research arm. Susan Lund is MGI's director of research, based in Washington.
'Africa needs to drive a harder bargain with China'
by Tolu Ogunlesi*
In 2006, Hafsat Abiola-Costello, a Nigerian democracy and women's rights activist, relocated to China to study for a Masters degree in International Development at Tsinghua University. A few months into her program, heads of Government from more than 40 African countries gathered in Beijing, at the invitation of the Chinese Government, to attend the third ministerial conference of the Forum on China Africa Cooperation (FOCAC).
"I'd never seen that kind of celebration of Africa at any time in any part of the world," Abiola-Costello told me in Lagos, Nigeria. The Chinese, in preparing for the African delegation and for this meeting, wallpapered Beijing with billboards celebrating Africa, celebrating Chinese friendship with Africa, and showing Africa's achievements, like the pyramids in Egypt. The way that Africa was received moved me," she said.
She was moved enough to set up China Africa Bridge, a consultancy to facilitate relationships between Chinese and African businesses.
"At the level of government to government the relationship between China and Africa is already very rich," she said. "What we're trying to do is create a relationship at the level of people to people, business to business, students to students, scholars to scholars, doctors to doctors."
"I think that what Africa will gain from the Chinese will depend on how many bridges we build between China and Africa that would allow different sectors of our society to get transfer of technology, transfer of skills, transfer of resources, in both directions," she said.
China Africa Bridge is not alone in the quest to build linkages at a level beneath the grand, billion-dollar narratives that have dominated the news about China-Africa economic relations in recent years.
There is also Afrobridge, headquartered in Shanghai, China, founded in 2007 by Nigerian Kayode Jegede "to be a facilitator of the growing trade and business relationship between Africa and Asia."
Between 2000, when FOCAC was launched, and 2008, the volume of trade between China and Africa rose ten-fold, taking China past Italy, Britain, and France to become the continent's second-largest trading partner, after the U.S.
That surge was fueled by China's insatiable hunger for natural resources that abound in Africa -- oil, natural gas, minerals, and timber. The hunger itself is the fallout of an economy that has grown at an average rate of almost 10 percent annually, over the past two decades.
Much of China's spending in Africa to date (investments in excess of $20 billion) has been premised on a "swap" model: offers of loans and financial aid and infrastructure projects in exchange for access to desperately needed resources.
One of the most prominent examples is the $6 billion-worth of investments in the Congo's mining industry, and in much needed infrastructure -- hospitals, schools, roads and railways -- in exchange for $3 billion-worth of mining concessions.
In May the China State Construction Engineering Company signed an agreement with the Nigerian National Petroleum Corporation to invest $23 billion in building oil refineries and a petrochemical plant in Nigeria.
Against this backdrop of feverish activity, one question looms: What's in it for Africa?
A lot, it seems. During the third FOCAC the China-Africa Joint Chamber of Commerce was established, and China announced an abolition of tariffs on a significant number of African exports to China, as well as pledges to commit $5 billion in loans and export credits, and to establish a $5 billion China Africa Development Fund.
At the end of the gathering a declaration emerged announcing the commencement of "a new type of strategic partnership" between China and Africa.
The presence of China has also improved the continent's bargaining powers with its traditional trade and development partners in the West.
"It is widely acknowledged that China's very significant intervention in Africa over the last few years has completely altered the continent's traditional dependency on the U.S. and other developed nation donors. Africa now has an alternative source of aid, trade and investment," argue the authors of a 2009 Chatham House report.
Europe and America seem to have realized this, and are redefining the way they deal with Africa. Jose Manuel Barroso, President of the European Commission noted before the second EU-Africa Summit in 2007, "the time for lessons, moralizing and paternalism is past."
The next crucial question is this: What does Africa stand to lose? It is arguably the most important question of all, taking into consideration the fact that Africa's dealings with foreign partners have almost always left it worse off.
David Shinn, retired U.S. diplomat, and currently adjunct professor at The George Washington University's Elliott School of International Affairs said that there are worries that "African countries may not be driving a hard enough bargain with China."
Sino-skepticism, consisting of allegations that China is nonchalant about transparency and human rights records in countries with which it does business, is partly inspired by the Chinese government's policy of not interfering with the internal politics of its partner nations, as well as its no-strings-attached generosity.
Both policies are documented in the 1964 'Eight Principles for China's Aid to Foreign Countries' declaration: "In providing aid to other countries, the Chinese Government strictly respects the sovereignty of the recipient countries, and never attaches any conditions or asks for any privileges."
The skepticism about China's involvement in Africa also extends to its alleged penchant for engaging in employment practices that discriminate against locals, and for flooding African markets with substandard goods.
In 2006, the "Chinatown" in Lagos, Nigeria, was shut down for three months by customs authorities who alleged that the Chinese merchants were smuggling banned textiles into Nigeria.
Trade imbalances are also a problem. Chinese exports to Nigeria in 2009 amounted to $5.5 billion, while its imports were a paltry $0.9 billion.
*Tolu Ogunlesi is a Features Editor with Next, a daily newspaper in Nigeria. He was awarded the Arts and Culture prize in the 2009 CNN MultiChoice African Journalist Awards and he writes a weekly column, Ongoing Concerns, for Next. He writes for Africa 50, CNN's special coverage looking at 17 African nations marking 50 years of independence this year.
In 2006, Hafsat Abiola-Costello, a Nigerian democracy and women's rights activist, relocated to China to study for a Masters degree in International Development at Tsinghua University. A few months into her program, heads of Government from more than 40 African countries gathered in Beijing, at the invitation of the Chinese Government, to attend the third ministerial conference of the Forum on China Africa Cooperation (FOCAC).
"I'd never seen that kind of celebration of Africa at any time in any part of the world," Abiola-Costello told me in Lagos, Nigeria. The Chinese, in preparing for the African delegation and for this meeting, wallpapered Beijing with billboards celebrating Africa, celebrating Chinese friendship with Africa, and showing Africa's achievements, like the pyramids in Egypt. The way that Africa was received moved me," she said.
She was moved enough to set up China Africa Bridge, a consultancy to facilitate relationships between Chinese and African businesses.
"At the level of government to government the relationship between China and Africa is already very rich," she said. "What we're trying to do is create a relationship at the level of people to people, business to business, students to students, scholars to scholars, doctors to doctors."
"I think that what Africa will gain from the Chinese will depend on how many bridges we build between China and Africa that would allow different sectors of our society to get transfer of technology, transfer of skills, transfer of resources, in both directions," she said.
China Africa Bridge is not alone in the quest to build linkages at a level beneath the grand, billion-dollar narratives that have dominated the news about China-Africa economic relations in recent years.
There is also Afrobridge, headquartered in Shanghai, China, founded in 2007 by Nigerian Kayode Jegede "to be a facilitator of the growing trade and business relationship between Africa and Asia."
Between 2000, when FOCAC was launched, and 2008, the volume of trade between China and Africa rose ten-fold, taking China past Italy, Britain, and France to become the continent's second-largest trading partner, after the U.S.
That surge was fueled by China's insatiable hunger for natural resources that abound in Africa -- oil, natural gas, minerals, and timber. The hunger itself is the fallout of an economy that has grown at an average rate of almost 10 percent annually, over the past two decades.
Much of China's spending in Africa to date (investments in excess of $20 billion) has been premised on a "swap" model: offers of loans and financial aid and infrastructure projects in exchange for access to desperately needed resources.
One of the most prominent examples is the $6 billion-worth of investments in the Congo's mining industry, and in much needed infrastructure -- hospitals, schools, roads and railways -- in exchange for $3 billion-worth of mining concessions.
In May the China State Construction Engineering Company signed an agreement with the Nigerian National Petroleum Corporation to invest $23 billion in building oil refineries and a petrochemical plant in Nigeria.
Against this backdrop of feverish activity, one question looms: What's in it for Africa?
A lot, it seems. During the third FOCAC the China-Africa Joint Chamber of Commerce was established, and China announced an abolition of tariffs on a significant number of African exports to China, as well as pledges to commit $5 billion in loans and export credits, and to establish a $5 billion China Africa Development Fund.
At the end of the gathering a declaration emerged announcing the commencement of "a new type of strategic partnership" between China and Africa.
The presence of China has also improved the continent's bargaining powers with its traditional trade and development partners in the West.
"It is widely acknowledged that China's very significant intervention in Africa over the last few years has completely altered the continent's traditional dependency on the U.S. and other developed nation donors. Africa now has an alternative source of aid, trade and investment," argue the authors of a 2009 Chatham House report.
Europe and America seem to have realized this, and are redefining the way they deal with Africa. Jose Manuel Barroso, President of the European Commission noted before the second EU-Africa Summit in 2007, "the time for lessons, moralizing and paternalism is past."
The next crucial question is this: What does Africa stand to lose? It is arguably the most important question of all, taking into consideration the fact that Africa's dealings with foreign partners have almost always left it worse off.
David Shinn, retired U.S. diplomat, and currently adjunct professor at The George Washington University's Elliott School of International Affairs said that there are worries that "African countries may not be driving a hard enough bargain with China."
Sino-skepticism, consisting of allegations that China is nonchalant about transparency and human rights records in countries with which it does business, is partly inspired by the Chinese government's policy of not interfering with the internal politics of its partner nations, as well as its no-strings-attached generosity.
Both policies are documented in the 1964 'Eight Principles for China's Aid to Foreign Countries' declaration: "In providing aid to other countries, the Chinese Government strictly respects the sovereignty of the recipient countries, and never attaches any conditions or asks for any privileges."
The skepticism about China's involvement in Africa also extends to its alleged penchant for engaging in employment practices that discriminate against locals, and for flooding African markets with substandard goods.
In 2006, the "Chinatown" in Lagos, Nigeria, was shut down for three months by customs authorities who alleged that the Chinese merchants were smuggling banned textiles into Nigeria.
Trade imbalances are also a problem. Chinese exports to Nigeria in 2009 amounted to $5.5 billion, while its imports were a paltry $0.9 billion.
*Tolu Ogunlesi is a Features Editor with Next, a daily newspaper in Nigeria. He was awarded the Arts and Culture prize in the 2009 CNN MultiChoice African Journalist Awards and he writes a weekly column, Ongoing Concerns, for Next. He writes for Africa 50, CNN's special coverage looking at 17 African nations marking 50 years of independence this year.
India's trade with Africa grows
South Africa’s trade and investment relationship with China has been in the spotlight for some time and this is now linked to an increasingly important trade relationship between Africa and Asia as a whole.
Total exports to Asia from SA have lifted 11.6% in the year to June 2010 to R90.9-billion and as the trend continues and more Asian countries join the queue, SA growth is likely to benefit.
Asia is now SA's biggest export market, with the gap having opened up further between SA exports to Europe, the previous biggest export partner and Asia in 2010.
However, the story has an interesting twist as India only makes up 5.91% of the percentage share of total trade with Africa, according to Indian economic data to February 2010. Southern Africa, though, gets a fair slice of it at 1.94% of their total share, according to their Ministry of Commerce.
Yet it now appears signs are emerging that trade with India is about to surge as it competes more strongly with China for a slice of Africa's resources base in order to expand infrastructure development.
A leading investment house in Africa, Imara Africa Securities, says that while India's percentage share of trade remains relatively small, as India's economy continues to grow, so too will its requirements for Africa's resources, providing further impetus to the African growth story.
China has become the number one importer of South African products and the latest data spells out the extent of the rise in Asian trade and the consequent strong export performance. While exports to Africa have dropped 6.8% and those to Europe rose 5.3% in the six months to June this year, SA exports to Asia rose 11.6%.
SA also repays the compliment, as imports from Asia have risen 5%, and remain the highest at R120-billion. The next highest import market is Europe at R99-billion.
Trade in South Africa has picked up markedly over the past decade. In 1998 exports only added up to R144.9-billion and they ended 2008 at a very healthy R663.099-billion by comparison, although an overall deficit of R64.5-billion was seen.
With India’s economy likely to grow by 6.8% in 2010, its value as a trade partner will certainly add muscle to Africa's own growth trajectory.
After all, India is the eleventh largest economy in the world and its pace of growth has been picking up since it has adopted economic reforms and started to shake off extensive regulation, protectionism and public ownership.
Business Report
Total exports to Asia from SA have lifted 11.6% in the year to June 2010 to R90.9-billion and as the trend continues and more Asian countries join the queue, SA growth is likely to benefit.
Asia is now SA's biggest export market, with the gap having opened up further between SA exports to Europe, the previous biggest export partner and Asia in 2010.
However, the story has an interesting twist as India only makes up 5.91% of the percentage share of total trade with Africa, according to Indian economic data to February 2010. Southern Africa, though, gets a fair slice of it at 1.94% of their total share, according to their Ministry of Commerce.
Yet it now appears signs are emerging that trade with India is about to surge as it competes more strongly with China for a slice of Africa's resources base in order to expand infrastructure development.
A leading investment house in Africa, Imara Africa Securities, says that while India's percentage share of trade remains relatively small, as India's economy continues to grow, so too will its requirements for Africa's resources, providing further impetus to the African growth story.
China has become the number one importer of South African products and the latest data spells out the extent of the rise in Asian trade and the consequent strong export performance. While exports to Africa have dropped 6.8% and those to Europe rose 5.3% in the six months to June this year, SA exports to Asia rose 11.6%.
SA also repays the compliment, as imports from Asia have risen 5%, and remain the highest at R120-billion. The next highest import market is Europe at R99-billion.
Trade in South Africa has picked up markedly over the past decade. In 1998 exports only added up to R144.9-billion and they ended 2008 at a very healthy R663.099-billion by comparison, although an overall deficit of R64.5-billion was seen.
With India’s economy likely to grow by 6.8% in 2010, its value as a trade partner will certainly add muscle to Africa's own growth trajectory.
After all, India is the eleventh largest economy in the world and its pace of growth has been picking up since it has adopted economic reforms and started to shake off extensive regulation, protectionism and public ownership.
Business Report
Angola stock exchange to rank 3rd in Sub-Saharan Africa market value
by Colin McClelland
A proposed stock market in Angola, which vies with Nigeria to be Africa’s top oil producer, will rank “at least third” in sub-Saharan African market capitalization, Imara Asset Managementsaid.
Angola’s stock exchange will trade shares in companies worth a total of $40.7 billion, a similar size to Nigeria’s stock market, Anthony Lopes Pinto, an analyst for Botswana-based Imara, said yesterday in an interview from Angola’s capital, Luanda.
“Based on the country’s GDP, we estimate that Angola has the potential to support a stock market ranking of at least third in sub-Saharan Africa,” Pinto said.
Angola postponed opening an exchange in 2009 because of the global financial crisis and is expected to start one in 2011. The southern Africa country is rebuilding after a 27-year civil war that ended in 2002 and is beginning to open up its economy. The country received its first credit rating in May to pave the way for the sale of an international bond.
Pinto said Nigeria’s market capitalization of about $39.6 billion is about half of its peak because of a banking crisis and is expected to rebound past Angola’s anticipated debut. South Africa’s top 165 stocks have a market capitalization of more than $600 billion.
Up to 50 companies, including about 20 banks, may list on the Angola exchange, he said. Pinto said a building in Luanda has been renovated to house the planned stock exchange and employees are being trained. 'They’ve got everything in place and it’s a political decision from the highest office that will approve it, you know, and we’re waiting for that to happen,” he said.
Imara is one of 12 companies that have applied to Angola’s Capital Markets Commission for brokerage licenses.
Pinto said the delay had been due to concerns about pressure on the kwanza, lower oil prices and volatility in international financial markets. Markets are now more stable, the price of crude has increased to around $75 a barrel from around $50 in February 2009 and the kwanza has settled at around 93 to the dollar, he said.
The government devalued the currency in October 2009 to 85 to the dollar from 78 and it then weakened gradually until May this year.
Pinto said the proposed bourse’s largest local company will be Unitel, Angola’s leading mobile phone provider that is 25 percent owned by Portugal Telecom SGPS SA and valued at $2.9 billion.
Banco de Fomento, Angola’s biggest non-state bank, may have the largest market capitalization of the listed banks at about $2 billion, he said.
Bloomberg
A proposed stock market in Angola, which vies with Nigeria to be Africa’s top oil producer, will rank “at least third” in sub-Saharan African market capitalization, Imara Asset Managementsaid.
Angola’s stock exchange will trade shares in companies worth a total of $40.7 billion, a similar size to Nigeria’s stock market, Anthony Lopes Pinto, an analyst for Botswana-based Imara, said yesterday in an interview from Angola’s capital, Luanda.
“Based on the country’s GDP, we estimate that Angola has the potential to support a stock market ranking of at least third in sub-Saharan Africa,” Pinto said.
Angola postponed opening an exchange in 2009 because of the global financial crisis and is expected to start one in 2011. The southern Africa country is rebuilding after a 27-year civil war that ended in 2002 and is beginning to open up its economy. The country received its first credit rating in May to pave the way for the sale of an international bond.
Pinto said Nigeria’s market capitalization of about $39.6 billion is about half of its peak because of a banking crisis and is expected to rebound past Angola’s anticipated debut. South Africa’s top 165 stocks have a market capitalization of more than $600 billion.
Up to 50 companies, including about 20 banks, may list on the Angola exchange, he said. Pinto said a building in Luanda has been renovated to house the planned stock exchange and employees are being trained. 'They’ve got everything in place and it’s a political decision from the highest office that will approve it, you know, and we’re waiting for that to happen,” he said.
Imara is one of 12 companies that have applied to Angola’s Capital Markets Commission for brokerage licenses.
Pinto said the delay had been due to concerns about pressure on the kwanza, lower oil prices and volatility in international financial markets. Markets are now more stable, the price of crude has increased to around $75 a barrel from around $50 in February 2009 and the kwanza has settled at around 93 to the dollar, he said.
The government devalued the currency in October 2009 to 85 to the dollar from 78 and it then weakened gradually until May this year.
Pinto said the proposed bourse’s largest local company will be Unitel, Angola’s leading mobile phone provider that is 25 percent owned by Portugal Telecom SGPS SA and valued at $2.9 billion.
Banco de Fomento, Angola’s biggest non-state bank, may have the largest market capitalization of the listed banks at about $2 billion, he said.
Bloomberg
African shipping market's prospects attract global players
The interest of large global players in maritime shipping along the African coast is one of the indicators of their confidence regarding the African growth prospects. Relatively untouched by the current crisis, sea freight sector mobilizes investors.
Large operators remain alert to opportunities while new commercial lines and stopovers are being created. This traffic represents more than 80% of the total trade in Africa.
Despite their outdated and under-sized facilities, 2009 wasn’t disastrous for African ports. Since 2010, there have been some positive developments: opening of two new high-capacity ports together with Ngure terminal in Port Elizabeth in South Africa and the port of Doraleh in Djibuti. Alone, these two sites received 1.5 billion dollars of investment.
Other building or modernization projects that have maintained support from their financial backers include: Kenya, Tunisia, Algeria, Sao Tome, Abidjan, Pointe Noire, Dakar, Luanda ... In West Africa, between Dakar and Luanda, ports were protected from opposing currents. As a result of maintaining a good export level from sub-regions and their imports, the port of Abidjan has seen its growth go up by 8.8% compare to the previous year. Other ports have also registered growth.
Conversely, Southern Africa, more severely affected by the crisis, has seen a fall in exports due to declining orders from Western countries and imports due to falling domestic purchasing power.
Beyond the economic difficulties, African maritime transport is experiencing profound changes. The growing economy in Nigeria is attracting a lot of infrastructure investment through its domestic market and its economic dynamism. Ethiopia is another major economic centre destined for a strong development.
The reduced activity of Suez Canal, where traffic fell by 20% in 2009, was due to the fear of rampant piracy on the Somali coast and the relatively low incremental cost of the bypass from the south. The savings on the canal toll and huge insurance surcharges, as well as lower oil prices and freight rates provided the extra wages paid to crews.
Moreover, the proliferation of investment programmes in Southern Africa (Nigeria, Mauritius, Mozambique, Namibia and Pointe Noire), will reinforce the loss of interest in the Suez Canal.
The considerable trade growth between Africa and Asia is giving birth to direct shipping routes between the two continents through the southern part of Africa.
The appearance of an axis Africa-South America is extremely positive for the port of Dakar. The opening of the port in 2012 will give a strategic position in the face of the United States and Brazil.
Sub-Saharan Africa attracts those who are able to associate land and sea logistic. Such a strategy seems indispensable for large investments on the African coast.
Afriqueavenir
Large operators remain alert to opportunities while new commercial lines and stopovers are being created. This traffic represents more than 80% of the total trade in Africa.
Despite their outdated and under-sized facilities, 2009 wasn’t disastrous for African ports. Since 2010, there have been some positive developments: opening of two new high-capacity ports together with Ngure terminal in Port Elizabeth in South Africa and the port of Doraleh in Djibuti. Alone, these two sites received 1.5 billion dollars of investment.
Other building or modernization projects that have maintained support from their financial backers include: Kenya, Tunisia, Algeria, Sao Tome, Abidjan, Pointe Noire, Dakar, Luanda ... In West Africa, between Dakar and Luanda, ports were protected from opposing currents. As a result of maintaining a good export level from sub-regions and their imports, the port of Abidjan has seen its growth go up by 8.8% compare to the previous year. Other ports have also registered growth.
Conversely, Southern Africa, more severely affected by the crisis, has seen a fall in exports due to declining orders from Western countries and imports due to falling domestic purchasing power.
Beyond the economic difficulties, African maritime transport is experiencing profound changes. The growing economy in Nigeria is attracting a lot of infrastructure investment through its domestic market and its economic dynamism. Ethiopia is another major economic centre destined for a strong development.
The reduced activity of Suez Canal, where traffic fell by 20% in 2009, was due to the fear of rampant piracy on the Somali coast and the relatively low incremental cost of the bypass from the south. The savings on the canal toll and huge insurance surcharges, as well as lower oil prices and freight rates provided the extra wages paid to crews.
Moreover, the proliferation of investment programmes in Southern Africa (Nigeria, Mauritius, Mozambique, Namibia and Pointe Noire), will reinforce the loss of interest in the Suez Canal.
The considerable trade growth between Africa and Asia is giving birth to direct shipping routes between the two continents through the southern part of Africa.
The appearance of an axis Africa-South America is extremely positive for the port of Dakar. The opening of the port in 2012 will give a strategic position in the face of the United States and Brazil.
Sub-Saharan Africa attracts those who are able to associate land and sea logistic. Such a strategy seems indispensable for large investments on the African coast.
Afriqueavenir
Iranian car manufacturer to open plant in Senegal
A senior official of Iran's largest auto-manufacturing company, Iran-Khodro (IKCO), said that Iran-Khodro Industrial Group is ready to inaugurate a car production plant in Senegal.
"The Iranian car-manufacturing plant will be inaugurated in Senegal in a ceremony to be attended by the Iranian president," Iran-Khodro CEO Javad Najmeddin said in a ceremony held in the northern province of Mazandaran to mark inauguration of an IKCO plant.
Najmeddin reiterated that the plan for the establishment of a car-manufacturing plant in Senegal will pave the way for the production of the company's products in all African countries.
Iran's state-owned Iran-Khodro is the largest carmaker in the Middle East, Central Asia and North Africa, with an annual production of more than one million vehicles of various models, including cars, trucks, minibuses and buses.
IKCO is also ramping up exports as it builds a global presence outside Iran. Company officials have said they want to boost annual production to more than a million vehicles and hike exports to more than 600,000 by 2016.
IKCO has also begun kit assemblies in Azerbaijan, Belarus, Venezuela and Argentina, with plans to add assembly in Egypt, Vietnam and China in the next year or two.
The vehicle of choice for most of these local assembly operations is the Samand, a compact sedan based heavily on the Peugeot 405 platform and with the price starting at about $9,000. "Samand" is the Persian name for a local breed of horse. Market observers believe that Samand could challenge future Chinese and Indian imports at the low end of the market.
Iran-Khodro group, the Iranian car manufacturer and owner of Samand, is the first Iranian company whose product is registered at the World Intellectual Property Organization (WIPO).
Algeria, Egypt, Mauritania and Senegal are the African countries that have witnessed Samand march on their streets so far.
Fars News Agency
"The Iranian car-manufacturing plant will be inaugurated in Senegal in a ceremony to be attended by the Iranian president," Iran-Khodro CEO Javad Najmeddin said in a ceremony held in the northern province of Mazandaran to mark inauguration of an IKCO plant.
Najmeddin reiterated that the plan for the establishment of a car-manufacturing plant in Senegal will pave the way for the production of the company's products in all African countries.
Iran's state-owned Iran-Khodro is the largest carmaker in the Middle East, Central Asia and North Africa, with an annual production of more than one million vehicles of various models, including cars, trucks, minibuses and buses.
IKCO is also ramping up exports as it builds a global presence outside Iran. Company officials have said they want to boost annual production to more than a million vehicles and hike exports to more than 600,000 by 2016.
IKCO has also begun kit assemblies in Azerbaijan, Belarus, Venezuela and Argentina, with plans to add assembly in Egypt, Vietnam and China in the next year or two.
The vehicle of choice for most of these local assembly operations is the Samand, a compact sedan based heavily on the Peugeot 405 platform and with the price starting at about $9,000. "Samand" is the Persian name for a local breed of horse. Market observers believe that Samand could challenge future Chinese and Indian imports at the low end of the market.
Iran-Khodro group, the Iranian car manufacturer and owner of Samand, is the first Iranian company whose product is registered at the World Intellectual Property Organization (WIPO).
Algeria, Egypt, Mauritania and Senegal are the African countries that have witnessed Samand march on their streets so far.
Fars News Agency
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