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StartUps Flourish Across the Middle East

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middle-east-startup

The Middle East is overcoming cultural barriers, and political and financial challenges, to become a paradise for potential investors. Emerging local technology companies are flourishing and giants from the US, Europe and Asia are taking notice. From the arrival of business angels, to the sale of Souq.com to Amazon, the region is showing greater creditability for investment projects and successful business ventures.

Growing Markets

Although there are huge obstacles facing the business markets of some countries across the region, the six Gulf Cooperation Council countries (UAE, Qatar, Oman, Saudi Arabia, Bahrain and Kuwait) plus Egypt, Lebanon and Jordan are emerging as an economic hub. According to venture capital site Beco Capital, there are over 160 million people in the region, 85 million who are online, and 50 million who are adult digital consumers with disposable income. These countries have the highest value consumers, enterprises and entrepreneurs, as well as, the youngest populations and high smartphone and broadband usage. This largely untapped market, is becoming the breeding ground for local technology startups, and big players from abroad, who wish to tap into it.

So far, only 8% of businesses in the Middle East and North Africa (MENA) have digital presence (as opposed to 80% in the United States) and only 1.5% of the region’s retail sales are digitally transacted, meaning there is still plenty of growth to come. According to Beco Capital, each digital job is estimated to create two to three more jobs in the economy, meaning the digital market could add up to $95 billion in annual gross domestic product by 2020. The business landscape of the region therefore, shows a lot of promise to foreign investment.

Emerging Startups

According to research house MAGNiTT, there are now over 3,000 startups across the region, with $870 million spent in startup investment last year. The top 100 startups raised over $1.42 billion in funding and each startup has raised over $500,000 individually. Some 68% of startup founders come from the Middle East, although many hold dual citizenship, 12% of successful startup founders are female, and the UAE hosts 50% of the most funded startups in the region. These figures have attracted foreign investment from abroad.  

According to Bloomberg, Amazon’s recent acquisition of Dubai based, online market retailer Souq.com, shows that e-commerce in the Middle East is set to take off. Out-bidding Emaar Malls PJSC, which owns the world’s largest shopping center, at $800 million, Amazon is actively looking for new areas of growth, and seems to have found it in the Middle East. According to Bloomberg, Souq.com has 23 million online visits a month, employs over 3,000 people and sells more than 400,000 products, from electronic goods to household products and clothes.    

Business Angels

An angel investor is usually an affluent individual or professional investor who provides startup capital for a new venture in return for shares in the business. In a report drafted by Harvard Business School experts, angels increase creditability to projects and increase possibilities for success. The report found possibilities for success increased by 10 to 17% when initial investment was done outside the US. According to the National back in 2012, enthusiasm for angel investment was growing across the Middle East. High speed internet connections enable the regions businesses to reach a global audience, meaning companies can grow without need for crippling overheads previously associated with foreign investment.

Executive chairman of Oasis500, a Jordan based investment program, Usama Fayyad said the Middle East was a unique opportunity for investors to participate in companies who could easily grow in value two to ten times over in a matter of months. Business angels may also have valuable knowledge and experience to help struggling startups. Serial entrepreneurs, who have started their own business can mentor local companies to ensure successful management strategies.

Startup Ecosystem

Despite the war and poverty stories emanating from across the region on the nightly news, the Middle East is well on its way to becoming a global hub for investment. Even with numerous challenges, this has not stopped the region, as a whole, from overcoming the first phases of business development to build a promising startup ecosystem.  

Sources: (1), (2), (3), (4).

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South Africa’s rand clings on to gains despite downgrade fallout

Comments (0) Economy, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South Africa’s rand edged firmer on Wednesday, clinging on to recent gains despite continued fallout triggered by a Moody’s ratings downgrade last week and an anticipated interest rate hike by the U.S. Federal Reserve.

At 0640 GMT, the rand traded 0.2 percent firmer at 12.7350 per dollar compared to close of 12.7600 overnight in New York, bringing weekly gains to around 1.3 percent.

Following a one notch downgrade to its lowest sovereign investment grade on Friday, Moody’s cut the ratings of a dozen banks and companies including embattled power utility Eskom, further shaking confidence in Africa’s most advanced economy.

Quarterly business confidence and April retail sales due in the session are expected to shed more light on ailing economy. Growth shrunk 0.7 percent in Q1 2017 after a 0.3 percent contraction in Q4 of 2016.

Traders expect the U.S. central bank to increase interest rates by a notch when it concludes a policy meeting on Thursday, a move that could dampen demand for high-yielding emerging market assets.

South African bonds were flat, with the yield on benchmark 2026 government bond inching up 0.5 basis points to at 8.445 percent.

Stocks set to open higher at 0700 GMT, with the JSE securities exchange’s Top-40 futures index up 0.3 percent.

 

(Reporting by Mfuneko Toyana; Editing by Ed Cropley)

 

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The IMF predicts considerably growth in the Ivory Coast’s economy

Comments (0) Economy, Featured

The Ivory Coast is West Africa’s largest, French-speaking economy, and its growth looks set to continue, as the IMF predicts a 7.4% increase in the nation’s GDP over the next 3 years. The nation’s government is even more confident, predicting greater growth over the next two years than IMF figures, but either way it shows the increase in stability within the nation since President Alassane Ouattara came to power in 2011.

Greater stability, greater growth

Since Alassane Ouattara officially took office in 2011, the Ivory Coast has been in a period of sustained political stability that has led to marked economic growth. Ouattara has invested heavily in Ivorian infrastructure, and targeted outside investment to help the country continue its economic development. A reduction in red tape has allowed businesses to flourish, and staple crops such as cocoa have yielded even greater returns, with the Ivory Coast now responsible for around 45% of the world’s cocoa supply.

The IMF said that the West African nation’s GDP expanded by 8.6% in 2015, and 8.5% this year. The continued growth in 2016 comes in spite of poor weather that limited the nation’s cocoa crops, after a record haul of 1.8 million tons in the 2014-2015 season.

With this continued economic expansion, the IMF has predicted that between 2017 and 2020, the Ivory Coast will average 7.4% growth. However, Ouattara’s government is even more optimistic as they state that growth for 2016 will actually be 9%, and not the 8.5% predicted as an end of year figure by the IMF. Similarly, the Ivorian government claim that there will be 9% expansion in GDP in 2017; a figure that is 1% higher than IMF projections.

The construction of new roads and dams has also helped bolster the economy, and a new constitution aims to ensure that the armed conflicts of the past do not return to unsettle this new political and economic stability.

Investment for the future

While investment in infrastructure has been a key part to increasing crops and the ability of domestic businesses to flourish, attracting outside investment is also integral to prolonged growth. The Ivory Coast is looking to maintain its traditionally strong areas of production, such as its cocoa exports, while creating new sources of revenue and development.

As such, President Ouattara has targeted foreign investors to help fund his 5 year plan for growth within the country. In May of this year, the Ivory Coast’s government secured more than $15 billion in support from external investors and donors. With the new constitution passed into law, the government hopes that foreign direct investment (FDI) flows will increase, as concerns of security will continue to diminish.

The amount of pledges announced in May will offer great encouragement to both the government and the people of the Ivory Coast. When targets were set for a Paris meeting that aimed to attract FDI’s, the government said it hoped to raise $8.8 billion, so with over $15 billion actually achieved, it indicates a huge step forward for the economy. Ouattara’s plan was to put around $60 billion, in total, into projects that would run from 2016 to 2020. After receiving almost double its target from foreign investors, Ivory Coast’s government said that this success showed the “full support of the international community”.

In September of this year, Ouattara went to New York to make a speech at the U.S. Africa Business Forum, as he looked to continue his drive for foreign finances. During the speech, the President stated that the Ivory Coast has no preference over whether investment comes from public or private sources.

In addition, he made it clear that all areas of the world were valued equally in terms of how attractive their investment was to the Ivorian government, and added that, “We just want the maximum amount of investment possible.”

As foreign investors continue to show interest, Ouattara’s government will hope that they can maintain the growth that the country has shown, since the post 2010 election conflicts ended. Moreover, if the government’s figures are accurate, then the Ivory Coast will look to outperform the, already positive, predictions of growth that the IMF has announced. Potential investors will be watching with interest as the 2016-2020 plans develop.

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Africa looks set to for a revolution in technological innovation

Comments (0) Africa, Economy, Featured, Technology

Africa is changing, and technology is the catalyst for the unprecedented changes that are occurring continent wide. Although there are still large areas of the continent that lag behind, the levels of tech access found in, Europe and the USA, change is happening at an incredible rate. These changes are fueled by Africa’s innovators, who are helping alter how the rest of the world sees the globe’s second largest continent.

The rapid growth of technology

The growth of cellphones and the internet in Africa has happened so rapidly that access to personally owned technology has often happened before nations have built more routine infrastructure. Before many nations have even constructed reliable, national electricity supplies, individuals have access to cellphones that are fueling innovation, and changing people’s outlooks.

The cellphone company Ericsson, says that by 2019 there will be 930 million cellphones in Africa. The majority of Africa’s population is under 30, and the lack of infrastructure in many countries has proved to be a spur for creative solutions to everyday problems. Cellphone money transfer systems are one of Africa’s most popular technological services, in part fueled by the lack of access to banks that many people experience. This technology has now moved to the west, showing an intriguing reversal of the flow of new inventions. The developed world is now importing some of the developing world’s ideas and creations.

As broadband penetration expands, the opportunity for further innovation will become even greater. Access to regular cellphones is gradually moving towards access to smartphones. Around 20% of the continent currently has access to the internet, but this is expected to treble over the next 5 years. According to The Guardian, cellphone technology will account for 8% of Africa’s GDP by 2020, a figure that is more than double what it is anywhere else in the world.

African created apps now cover a broad range of areas, from providing question and answer services with registered doctors, to allowing farmers market figures to ensure they maximize their profits. A young generation of Africans across the continent have bypassed traditional technologies, such as landline phones and branch banking, and simply moved straight into a world of conducting everything via their cellphone.

Confronting the obstacles

Despite the swift growth in personal technology in Africa, there are still clearly issues around more routine forms of modernity that need to be overcome. For instance, in sub-Saharan Africa only around a third of people have access to grid electricity.

Cellphones are one thing, but for technology to become a genuine driving force – against poverty – there does need to be a minimum level of infrastructure.

Akinwumi Adesina, President of the African Development Bank, said, “If you can’t have electricity you can’t drive any industrial development… electricity drives everything, so until we fix that problem Africa faces huge challenges.”

This is an issue that organizations like the African Development Bank are addressing, with the ADB investing $150 billion over the next 10 years in order to try and provide connectivity to a further 130 million people.

Several nations have invested heavily in technology, in order to draw investment from major, foreign corporations, and also to provide openings for domestic talent to shine. Kenya in particular has looked to announce itself as a global leader in nurturing tech innovation, including the construction of an entire tech city (Konza) to create jobs, support start-ups and attract foreign investment.

Continuing to adapt

There are areas in which Africa has incorporated new technology very quickly, with e-commerce being one of the most notable success stories. Nigeria’s Jumia Group is Africa’s first tech “unicorn”, meaning that the company is valued at $1 billion.

For other companies to have such success, and for Africa’s tech entrepreneurs to feel empowered, there needs to be cross continental support from governments. There are signs that several governments intend to help support tech innovation, and the hope has to be that as this brings increased prosperity to individual nations, so their neighbors will follow suit.

Mteto Nyati, chief executive of MTN (South Africa’s second largest telecommunications company), says that the continent needs “partnerships between governments and mobile operators” in order to ensure that future technology, such as 5G, is widely available.

Aside from the money that Kenya’s government has invested in technological infrastructure; there are other governments showing determined efforts to embrace the opportunities that technology offers. Rwanda aims to become Africa’s first “cashless society” in terms of the public sector, and it has spent 15 years working to digitize much of society.

What is most exciting in such a fast changing continent is that this leap forward in tech innovation can help solve long term difficulties faced by normal people. Technology commentator, Ory Okolloh, states that many African startups now are “thinking about innovative ways to solve real problems in the market.” The next generation of African entrepreneurs looks set to benefit from a continent that has truly embraced technology.

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U.S. and Africa: From aid to trade

Comments (0) Africa, Economy, Featured

U.S companies are just “scratching the surface” of business opportunity in Africa, effectively leaving an expanding market wide open for China, according to advocates for boosting trade, including President Barack Obama. Dismissing the economic slowdown of some African nations as temporary, experts at the second U.S.-Africa Business Forum pointed to the potential offered by an expanding middle class, untapped mineral wealth and expanses of uncultivated farmable land on the continent. Among those urging more trade between the United States and Africa was President Obama, who spoke to the forum in New York on Sept. 21. “We are making progress but we are just scratching the surface,” Obama said. “There is still so much untapped potential.”

Share of trade remains small

Obama and others pointed to significant growth in trade between the United States and Africa. But experts noted that economic activity is tiny as a share of total trade on either side. Sub-Saharan Africa accounted for only one percent of all U.S. trade in 2015. While 5.6 percent of Africa’s trade was with the United States, that amount is much smaller than the more than 19 percent of the continent’s trade with China, which has stepped up economic ties with Africa in recent years. According to the Obama administration, American and African countries have made deals worth $15 billion since the first U.S.-Africa Business Forum two years ago. Another $9 billion in deals were announced at the forum.

U.S. investment grows

American investment in Africa grew by 70 percent with major companies including Google and FedEx increasing their presence on the continent. African nations, meanwhile, have encouraged increased trade and business development by cutting red tape and promoting political stability. The Obama administration has pushed initiatives to double access to power and offer preferential trade terms in order to help the continent develop its manufacturing and agricultural sectors.

Obama said infrastructure will power the economies of African in the future, especially increasing access to electrical power for two-thirds of sub-Saharan Africans who lack access today. Besides the extension of trade accords with Africa and its Power Africa program to boost electricity supplies, the U.S. increased support from the U.S. Export-Import Bank, the U.S. Trade and Development Agency, the Overseas Private Investment Corp. and the Millennium Challenge Corp.

Red tape, political instability slow growth

For its part, Africa is working hard to ease barriers to trade and investment through development of regional free-trade accords and political stability, according to Nkosazana Dlamini-Zuma, chairwoman of the African Union Commission. Still, there is more to be done as Africa seeks to recover from an economic slowdown prompted by falling oil and commodity prices as well as a drop in demand from China, which has its own economic struggles. The International Monetary fund recently forecast that sub-Saharan Africa’s economy would expand by only 1.6 percent this year, about half the growth rate of 3.3 percent in 2015 and well below the annual average of 5.7 percent in the 10 years before that.

Meanwhile, foreign direct investment in Africa dropped as the commodities boom ended. Foreign direct investment fell to about $71 billion last year, down nearly 20 percent from more than $88 billion in 2014, according to accounting firm EY.

Some African economies thrive

However, the averages for the continent do not tell the whole story. While South Africa and Nigeria, the two largest economies in the sub-Sahara, are struggling, several nations, including Kenya, Rwanda, Tanzania, Ivory Coast and Senegal, are expected to experience economic growth well over 5 percent this year. At the same time, a growing population and increased consumption pose opportunity for businesses that gain a foothold on the continent. Household consumption in Africa is expected to grow 3.8 percent annually until 2025 when it will reach $2.1 trillion, according to McKinsey & Co. It projected that the continent will have a bigger workforce than India or China by 2034.

Amadou Sy, director of the Brookings Institution’s Africa Growth Initiative, said U.S. companies have been slow to shift from seeing the continent as an aid recipient to seeing it as a potential business partner. While aid has long been the primary focus of dealings with Africa, that is changing Sy said. ‘’The other side of the coin is that we have fast-growing economies. We have business opportunities,” he said. “The first accomplishment is getting U.S. businesses and U.S. stakeholders to look at Africa as a business partner.”

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Small economies drive growth in Africa

Comments (0) Africa, Economy, Featured

While sub-Saharan Africa’s two largest economies are struggling, experts say a cluster of smaller nations are driving growth on the continent this year. In East Africa, Kenya, Rwanda, Tanzania and Uganda will see growth of more than 5 percent this year, according to the International Monetary Fund (IMF). In West Africa, Senegal and Ivory Coast are also expected to see significant growth.

Meanwhile, two traditional economic powerhouses will see little or no growth. South Africa faces political turmoil, labor unrest and a drop in demand for minerals, while Nigeria has been hit by sagging crude oil prices. The economic forces that challenge Nigeria and South Africa – particularly the oil slump – have helped the East African economies because they benefit from lower energy costs but do not rely on oil exports.

Economic diversity is a factor

“East Africa has been chugging along nicely,” Peter A. Montalto, economist with at Nomura International, told Bloomberg, predicting healthy growth would continue at least until the end of 2017. He said those economies are likely to continue to grow if they take advantage of low oil prices and take steps to attract investment. Economic reform and diversification play a role in the strength of the East African nations, Stuart Culverhouse, chief economist at Exotix Partners LLP in London, said.

Unable to fall back on “behemoth industries,’’ these countries made economic reforms that are benefitting them now. Tanzania’s gross domestic product is expected to grow by 6.9 while Rwanda and Kenya also could top 6 percent. The IMF predicts the economy of Uganda will increase by 5.3 percent. In West Africa, Ivory Coast and Senegal will also grow by, 7.4 and 6 percent respectively, the agency said.

Average growth stalls in 2016 

Since Nigeria and South Africa account for half of the economic output of the continent, growth in other countries is not expected to entirely offset their stagnation. South Africa’s economy will be flat while Nigeria’s is expected to contract by 1.8 percent. The IMF recently predicted average growth of only 1.6 percent on the continent this year, less than half the growth rate in 2015 and well below the average of more than 5 percent annually in the last decade.

Direct foreign investment also dropped last year to $71 billion compared to $88 billion a year earlier. Razia Khan, head of Africa research at Standard Chartered Plc in London, said many investors believe the problems of Nigeria and South Africa reflect on the continent as a whole, which dampens enthusiasm for the smaller economies even though they are doing well.

IMF recommends policy reforms

Nevertheless, the IMF says sub-Saharan Africa has bright prospects for growth in spite a challenging global economic environment. Natalia Koliadina, the IMF’s representative in Ghana, which has seen an economic slowdown, said many countries in the region need to diversify their economies in order to minimize hits from slumps in commodities prices.

Policy reforms, improvements in infrastructure and high workforce skills will all be required, Koliadina said. The IMF also encouraged putting in place policies and infrastructure to create an environment that supports businesses, especially small businesses. John Ashbourne, an analyst with Capital Economics Ltd. in London, predicted annual growth of 4 percent for the next five or 10 years.

“At the end of the day Africa is still huge, and it has a growing population and massive natural resources,’’ Ashbourne said. ‘’There will always be opportunities.”

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Zimbabwe’s optimistic growth forecasts as economy stumbles

Comments (0) Africa, Agriculture, Economy, Featured

Despite an unstable economic context , the embattled government of Zimbabwe is putting on display ambitious growth targets for the next two years. The government recently projected an annual growth rate of 6.5 percent between 2016 and 2018.

That forecast contrasts with small economic growth rates in recent years jeopardising  President Robert Mugabe’s legitimacy. Mugabe, the world’s oldest state representative aged 92, has been in office for 36 years now. Finance minister Patrick Chinamasa had originally forecast an economic expansion of 2.7 percent in 2016. But Chinamasa was forced to cut the target by nearly half, to 1.4 percent, in the face of the negative impact of the drought and falling commodity prices worldwide.

Cash shortages plague nation

Zimbabwe’s economic challenges include cash shortages, its worst drought in decades, heavy reliance on imports, crippled agricultural and manufacturing sectors, a drop in tourism, and worker strikes that have paralyzed key sectors. “What you have are highly incendiary conditions in Zimbabwe,” said Charles Laurie of the political risk firm Verisk Maplecroft. The nation is “ripe for a power grab.” Mugabe has cracked down on opponents and the government in August increased its surveillance of social media and cellphone channels while the military went on high alert in the face of what it said were potential cyber-terrorist attempts to destabilize the government. But the government cash shortage is evident prompting a government decision to start issuing bond notes that some see as a shadow currency. For the past two months‚ the government has been late in paying the military‚ police and other public workers. Zimbabwean banks have restricted the amount of cash that can be withdrawn, sometimes allowing only $20 per day.

Financial crisis recalled

Some experts say the country may be headed into its worst financial crisis since 2008-2009, when Zimbabwe dropped its national currency in the face of hyperinflation that reached 500 billion percent. The United States dollar, South African Rand and recently the Chinese Yuan, have been introducedd by the government as acceptable currencies in Zimbabwe. However, the government plans to introduce bond notes has sparked fears that large government issues of the notes will effectivelynamount to printing more money – a move that could drive inflation.

Weak signs of recovery

Zimbabwe was on the road to recovery in 2010-12 after a disastrous land reform initiative, and annual economic growth topped 10 percent in 2012. However, since then, growth has trended downward – 4.5 percent in 2013, 3.1 percent in 2015 and only 1.5 percent in 2015. The government said agriculture, fishing, manufacturing, and construction, would help drive growth in the next two years. At the same time, the government forecast targeted annual inflation of less than 1 percent and a budget deficit of 1.2 percent of gross domestic product in 2017 and 2018. But a number of key Zimbabwean economic sectors are highly challenged. Agriculture, the backbone of Zimbabwe’s economy, lacks funding and farmers are straddled with strict loan requirements driven by banks’ concerns about security for 99-year leases of many farms. The government is counting on receiving $5 billion from China to revive the agricultural sector. The nation hopes that China will provide funds for farmers to grow tobacco, flowers, cotton, and soya beans and to breed beef cattle.

Food imports increase

In the aftermath of dramatic drought the government was forced to import more than 700,000 tons of maize adding to the country’s trade imbalance, which hit $3.3 billion in 2015. The manufacturing sector is currently hampered by obsolete equipment and power shortages as well as intensifying competition from cheaper imports. Currently, the sector has reduced production and is operating at about one-third of its capacity. A requirement that foreign investors sell controlling equity stakes in their companies to local residents has further dampened enthusiasm for investment. Direct foreign investment dropped by nearly a quarter in 2015 to $421 million. The decline was attributed to assessments showing high levels of corruption as well as bureaucratic red tape.

Tax costs tourism dollars

Tourism has also declined because of a ban on ivory imports and a 15 percent tax on accommodations and tourist services. A report by the Zimbabwe Council for Tourism report said the nation lost more than $100 million in tourism revenue last year because of the tax. Experts dispute the nation’s ability to meet the new economic growth targets. John Robertson, an independent Zimbabwean economist, said it was unlikely that funding from abroad would revive the economy. Oswell Binha, an economist and chairman of Buy Zimbabwe chairman said the economy, which is at risk of recession, simply does not have the capacity to grow at a rate of more than 6 percent. “Zimbabwe under its current circumstances will never achieve any growth beyond 4 percent,” Binha said, as a result of the country’s inability to maximize key drivers of its economy.

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U.S. and Africa: From aid to trade

Comments (0) Africa, Economy

U.S companies are just “scratching the surface” of business opportunity in Africa, effectively leaving an expanding market wide open for China, according to advocates for boosting trade, including President Barack Obama.

Dismissing the economic slowdown of some African nations as temporary, experts at the second U.S.-Africa Business Forum highlighted the potential offered by an expanding middle class, untapped mineral wealth and expanses of uncultivated farmable land on the continent.

President Obama spoke at the forum on September 21 to urging American businesses to increase trade between the United States and the African continent. “We are making progress but we are just scratching the surface,” Obama said. “There is still so much untapped potential.”

Trade exchanges rates remain low

Sub-Saharan Africa accounted for only one percent of all U.S. trade in 2015. While 5.6 percent of Africa’s trade was with the United States, that amount is much smaller than the more than 19 percent of the continent’s trade with China, which has stepped up economic ties with Africa in recent years.

According to the Obama administration, American and African countries have made deals worth $15 billion since the first U.S.-Africa Business Forum two years ago. Another $9 billion in deals were announced at the forum.

U.S. investments increased

American investments in Africa grew by 70 percent with major companies including Google and FedEx increasing their presence on the continent. African nations, meanwhile, have encouraged increased trade and business development by cutting red tape and promoting political stability.

Besides the extension of trade accords with Africa and its Power Africa program to boost electricity supplies, the U.S. increased support from the U.S. Export-Import Bank, the U.S. Trade and Development Agency, the Overseas Private Investment Corp. and the Millennium Challenge Corp.

Political instability slow growth

Africa is working hard to ease barriers to trade and investment through development of regional free-trade accords and political stability, according to Nkosazana Dlamini-Zuma, chairwoman of the African Union Commission.

Still, there is more to be done as Africa seeks to recover from an economic slowdown prompted by falling oil and commodity prices as well as a drop in demand from China, which has its own economic struggles.

The International Monetary fund recently forecast that sub-Saharan Africa’s economy would expand by only 1.6 percent this year, about half the growth rate of 3.3 percent in 2015 and well below the annual average of 5.7 percent in the 10 years before that.

Besdies, foreign direct investment in Africa dropped as the commodities boom ended. Foreign direct investment fell to about $71 billion last year, down nearly 20 percent from more than $88 billion in 2014, according to accounting firm EY.

Some African economies thrive

While South Africa and Nigeria, the two largest economies in the sub-Sahara, are struggling, other countries including Kenya, Rwanda, Tanzania, Ivory Coast and Senegal, are expected to display economic growth well over 5 percent this year.

Household consumption in Africa is expected to grow 3.8 percent annually until 2025 when it will reach $2.1 trillion, according to McKinsey & Co. It projected that the continent will have a bigger workforce than India or China by 2034.

Amadou Sy, director of the Brookings Institution’s Africa Growth Initiative, said U.S. companies have been slow to shift from seeing the continent as an aid recipient to seeing it as a potential business partner.

While aid has long been the primary focus of dealings with Africa, that is changing Sy said.

‘’The other side of the coin is that we have fast-growing economies. We have business opportunities,” he said. “The first accomplishment is getting U.S. businesses and U.S. stakeholders to look at Africa as a business partner.”

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China’s gifts to Africa: Governmental buildings and stadiums

Comments (0) Africa, Economy

While much of the aid China provides to Africa comes in the form of investment and loans in infrastructure and economic development, Beijing has also given the continent dozens of government structures and sports stadiums. China promised in last August to the government of Zimbabwe a $46 million gift to build a new Parliament. The building will be located in Mount Hampden, about 10 miles to Harare, the capital. Zimbabwe’s Senate and House have grown to host a total of 300 representatives exceeding  the current Parliament’s building capacities.
The agreement between China and Zimbabwe was made official after the Forum on China-Africa Cooperation in Johannesburg in last December. The Chinese government also agreed to wipe out Zimbabwe’s debt to the country accounting for $40 million. Meanwhile, China has promessed to invest more than $1 billion in development of a thermal power plant in Zimbabwe. In return, Zimbabwe agreed to make the Chinese Yuan legal tender. Zimbabwe also abandoned its own dollar currency seven years ago after a period of hyperinflation and currently uses multiple currencies, including the United States dollar and the South African Rand.

China’s economic support has focused on governments’ facilities

Financial support to public services and government infrastructures have emerged as strategy from China to strengthen its ties to the continent by becoming Africa’s major investor and supplier in infrastructure projects. In 2012, China funded the Africa Union’s $200 million headquarters in Addis Ababa a strategic shift displayed as “China’s Gift to Africa.” The building, 100 meters tall, now dominates the skyline of the Ethiopian city. Most of the materials and furnishings were imported from China and more than 1,000 construction workers both Chinese and Ethiopian have worked on the project.

China also built an opulent presidential office complex for Mozambique’s government decorated with crystal chandeliers and with marble interiors. The structure that was opened in 2014 today overlooks Maputo Bay. However China’s financial input has never been disclosed. China has also donated $25 million for a new building to house the offices of the president and vice president in Uganda and provided furnishings from China. The building standing next to Uganda’s Parliament building was opened in 2011. In Sierra Leone, China has built a new foreign ministry, offices for its Parliament and a 100-bed friendship hospital outside the capital Freetown. China has also renovated government’s offices in Zambia.

The benefits of a “stadium diplomacy”

China has been devising a “stadium diplomacy” building more than a dozen sports venues on the african continent. Among them are the construction of Mozambique National Stadium which was built to Olympic standards at a cost of $80 million and offers seats to 42,000 spectators. I the same vein China evenly contributed to Tanzania and Malawi’s National Stadium. China also provided an estimated $600 million financial support to Angola to enable the construction of four stadiums to host the 2010 African Cup of Nations competition. For the 2012 African Cup, Equatorial Guinea built two stadiums with Chinese assistance while 2012 co-host Gabon enjoyed a gift from China of a $60 million stadium.

China invests its trade increases

China has become by far Africa’s biggest trading partner, and more than one million Chinese laborers and traders have moved to the continent in the last decade. Trade value between Africa and China was estimated to $220 billion in 2014 and was expected to increase to $300 billion in 2015.  In 2014, trade exchanges with China accounted for 15 percent of total imports to Africa and 6.5 percent of its exports. As a matter of comparison that same year imports from the United States represented 5.5 percent and exports nearly 5 percent when India’s imports accounted for 6 percent and exports for  more than 8 percent.

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Africa’s growth story : Positive changes and a bright future

Comments (0) Africa, Economy

Africa is one of the fastest growing economic regions on the planet. Some say that the continent is spurring toward modernization and prosperity. Other commentators have pointed out that Africa has experienced strong periods of growth in the past that haven’t sustained long enough to affect major change on the continent.

Can Africa keep on growing?

In the 1970s, Africa saw a period of intense growth. At the time optimists were enthusiastic that Africa was emerging from the shadows, and that a future of accelerating prosperity awaited. This was not to be the case. Africa’s 70s boom was largely driven by peaking global commodity prices; when the bubble burst, Africa’s prospects deflated.

Pessimists suggested that a similar fate loomed ahead when global commodity prices inevitably declined. This dreary prediction would likely have become reality if Africa’s economic landscape was the same as in the past. Fortunately, it is not. New factors are at play and there are promising indicators that the region’s growth potential is more robust than in times gone by.

Africa’s changing relationship with resources

It would be disingenuous to suggest that natural resources aren’t still an important component to Africa’s growth. Oil exporting nations such as Nigeria and Angola have suffered in the wake of the recent global slump in oil prices, while countries such as South Africa and the Democratic Republic of the Congo are ailing from the downturn in demand for minerals. The end of the global commodities super-cycle has certainly hurt many nations in the region.

However, Africa still posted 3.0% growth for 2015-16, and is expected to bounce back to 4% in 2017 and increase from there. Considering the state of the global economy, the results could have been far more severe.

The blow has been softened by the changed dynamic of Africa’s relationship with commodities. Firstly, the emergence of powerful Asian and Middle Eastern economies has provided African nations with new outlets for their resources. Today, Africa trades as much with Asia as it does with its traditional partner, Europe.

With hungry new markets competing for commodities, African exporters have been able to negotiate themselves better deals and secure more value from their assets. Collaborative framework agreements have been struck with new partners, often seeing African resource rights exchanged for substantial infrastructure and technology packages.

Perhaps more importantly, on the whole Africa is becoming less dependent on resources. According to a report by the global management consultancy McKinsey & Company, natural resources accounted for only 32% of the continent’s GDP growth from the year 2000 through to 2008. Africa is finally cultivating a key ingredient to sustained economic success: diversity.

New business, new Africa

Across the continent, new sectors are rapidly emerging. Telecommunications and financial services are two standout examples. Renewable energy projects are flourishing and show significant potential for future growth. Similarly, agriculture is booming and holds major potential for the future given Africa’s abundance of under-utilized arable land. The emergence of middle class consumers has given rise to a vibrant retail sector that promises to expand cyclically, as ever more citizens acquire access to disposable capital. Other industries such as manufacturing, infrastructure and construction have also been strong performers.

These flourishing sectors owe much to Africa’s improved political climate. Firstly, while some individual nations are still beleaguered by wars and terrorism, on the whole Africa is more peaceful today than in past decades. This has created the stability and climate needed for new businesses to grow.

Fiscal politics have also drastically improved across many parts of Africa. While the measures utilized vary from nation to nation, many successful policies have seen widespread adoption across the continent. Such actions include large-scale privatization of state-owned services, efforts to decrease inflation and stabilize currencies, tackling foreign debt and budget deficits, new trade agreements, and the implementation of stronger legal frameworks. These measures have laid the foundations for modern, investor friendly economies that have allowed the aforementioned sectors to immerge.

Africa averaged a mere 0.9 % growth for the first half of the 1990s. Yet this year, in the wake of the commodities downturn, and the sluggish global recovery from the financial crisis, Africa posted 3% growth, a 15 year low from which it will soon recover. Ultimately, the outlook is extremely promising. Buoyed by better governance, diversification and more globalized economies, it appears that Africa has cast off its shackles to commodities and has arrived at sustainable long term growth.

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