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AFRICA MACRO

AFRICA RISKS AND OPPORTUNITIES Political and Investment Risks are On the Decline With the economies of Africa booming and free elections becoming more common, the political risks in Africa are subsiding. The era of the coup d’etat and the “strong man” is fading. Africa’s infatuation with Marxism and revolution has long since passed. Benin for instance, which was a Marxist Leninist state between 1972 and 1990, is now classified as being “Free” by Freedom House. The ruling MPLA in Angola adopted Marxist-Leninist principles in 1977. In 1990 though, they discarded that ideology. In Ghana, the Socialist Convention People’s Party dominated the political scene following independence. In the 1965 elections, it was the only political party. In the 2008 elections however it captured just 1 seat in parliament. Africa can still be a difficult place to do business but the risk of nationalization of property is much diminished. Instead of driving foreign investors away, most African nations seek to attract them. Almost all African countries are members of the World Trade Organization, the World Intellectual Property Organization and the Multi-Investment Guarantee Agency, a World Bank body that “promotes foreign direct investment by providing political risk insurance to investors and lenders against losses caused by noncommercial risks.” They also adhere to the stipulations of the International Center for Settlements of Investment Disputes, an institution of the World Bank that “provides facilities for the conciliation and arbitration of investment disputes between member countries and individual investors” and have ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which facilitates registration and enforcement of foreign arbitral awards between contracting states. There have been many encouraging political developments in Africa recently. As an example, in 2008, former Vice President John Atta Mills won the Presidential election by a margin of just 40,000 votes (0.46%). Yet, he assumed office without any civil strife occurring. Most encouraging was the peaceful transition South Africa made from apartheid to a functioning democracy with an independent judiciary and a free press. In the last presidential election, Nigeria put aside its reputation for a dysfunctional and corrupt voting process. Liberia and Sierra Leone, with the help of the international community, are rebuilding after savage civil wars and holding free and fair elections. Mali proves that even very poor countries can be democratic. The internet, social media, cell phones, satellite television, increased trade and rising foreign investment offers the prospect of Africa becoming increasingly part of the global community. Joab’s Technologies and Research, Natu Court Flat B.

ANALYSIS AND STRATEGY

Democracy on the Advance Post-independence Africa has often had a troubled political history which still shapes much of the world’s perception toward the continent. Historically, several countries and regions have been politically unstable, and sometimes ravaged by brutal civil conflicts some of which killed hundreds of thousands of people such as the 1994 genocide in Rwanda in which 800,000 people were slaughtered; the Civil War in Angola from 1975-2003, which resulted in the death of a half million people and the Algerian Civil War that killed 150,000200,000 between 1991 and 2003. The most brutal of these conflicts was the Second Congo War that lasted from 19982003. It plunged much of the country into near anarchy and chaos and undermined the economy. By 2008 the war and its aftermath was responsible, by some estimates, for the death of up to 5.4 million people, mostly from disease and starvation. The economic damage caused by this conflict is illustrated by the fact that the Democratic Republic of the Congo has 71% more people than Kenya but its economy is just 42.4% the size of Kenya’s. Africa was also notorious for being ruled by brutal dictators that suppressed civil liberties, looted the treasury, enriched their friends and family, rigged elections and believed it was their right to rule for life. Among the most nefarious of these was Idi Amin of Uganda, Charles Taylor of Liberia, Siad Barre of Somalia, Hissen Habre of Chad, Jean Bedel Bokassa of the Central African Republic, Sekou Toure of Guinea and Mobutu Sese Seko of Zaire (since renamed the Democratic Republic of the Congo). Each of these leaders pauperized their countries, amassed huge fortunes and was responsible for the death of countless thousands of people. About 300,000 people for example were killed under Idi Amin’s eight year rule that ended in 1979. Very often the only means to change the government was via a coup d’etat by the military, which often replaced one dictator by another. Between 1952 and 2000, there were 85 coups in 32 countries. Mauritania, Nigeria, Sierra Leone, Uganda each had six coups and Burkina Faso, Burundi, Comoros and Ghana had five. There were few exceptions during this period where military coup leaders handed power to civilian leaders. Mali was a notable example of this. It is now a functioning multi-party democracy. Over the last decade, however, a degree of political stability has prevailed in much of Africa, partly as a result of higher economic growth in many countries across the continent. Coups for instance are now increasingly rare. Since 2000, there have only been six coups; Central African Republic in 2003, Mauritania in 2005 and 2008, Guinea in 2008, Madagascar in 2009 and Niger in 2010. Civil conflicts have also substantially diminished. Page 12 of 104

Equity Research in Africa, Like an Electric Train Africa is picking up, a True Emerging Market  

Economic analysis of Africa as a whole, as well as of particular countries and sectors, with special regard to their potential as investment...

Equity Research in Africa, Like an Electric Train Africa is picking up, a True Emerging Market  

Economic analysis of Africa as a whole, as well as of particular countries and sectors, with special regard to their potential as investment...

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