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AFRICA MACRO

ANALYSIS AND STRATEGY

allow users to bypass the poor telecommunications infrastructure and connect directly to the web. The advance of democracy in Africa will help to reinforce the improved economic climate, as democratic countries are characterized by lower levels of corruption, higher levels of transparency, a more competent bureaucracy and functioning judiciaries, which are both critical and essential for foreign investors. Rapid Economic Growth While Europe is being undermined by a sovereign debt crisis, Japan is entering its third “lost” decade and the US economy is growing very slowly, much of Africa is booming, with some countries are achieving Chinese and Indian like rates of expansion. Standard Bank of South Africa has forecast average annual growth rates for the continent of around 6% through 2015 and Joab’s Technologies and Research. Capital Joab’s Technologies and Research. believes that many African economies will outpace those of Asia into the future.

The African Development Bank (AfDB) Annual Development Effectiveness Review for 2011 expressed a note of optimism about Africa’s prospects, saying “Africa has bounced back from the global financial crisis and resumed its growth path. With its better business environment and its new potential as a consumer market, there is reason to believe that Africa stands on the cusp of a new era of self-sustaining development…This past decade has been particularly dynamic for Africa. The continent has enjoyed unprecedented growth and a rapid fall in income poverty. No country has conquered poverty without sustained economic growth, and the past 10 years have multiplied Africans’ opportunities, with governments using new revenues to finance much-needed infrastructure and services.” Africa: GDP Growth Rates 14.0 12.0 10.0 8.0 6.0 4.0 2.0

1992-2001

2002-2011

2012

Uganda

Zambia

Tanzania

Senegal

South Africa

Nigeria

Rwanda

Niger

Namibia

Mozambique

Mali

Morocco

Malawi

Ghana

Kenya

Chad

Ethiopia

Botswana

Angola

0.0

There has been a sharp acceleration in economic growth in Africa over the last ten years, particularly when compared to the previous ten years when economic activity was tempered by low commodity prices, high inflation in many countries, modest foreign direct investment inflows and civil conflicts in a number of countries such as Algeria, Angola, the Democratic Republic of the Congo, the Republic of the Congo, Ethiopia (which fought a war with Eritrea between 1998 and 2000), Rwanda and Sierra Leone. The rates of economic expansion for Africa over the last ten years (2002-2011) compare favorably with that of other major emerging market economies, with the exception of China, which expanded at a 10.6% average annual rate. This was only bested by Equatorial Guinea and Angola. Chad, Ethiopia, Nigeria and Sierra Leone had growth rates that exceeded India’s over the last ten years and Mozambique’s, Rwanda’s and Uganda’s growth rates were similar to India’s. Even some of the “laggards”, such as Botswana, Egypt, Senegal and Kenya compare favorably with such major emerging markets as Chile, Indonesia, Malaysia, Thailand and Turkey. These rates of increase for the “laggards” would be the envy of the major economies which are trapped in slow growth as a result of the debt crisis. The pace of economic activity has quickened throughout Africa in recent years in response to higher commodity prices, large foreign direct investment inflows, particularly from China, substantial debt relief, relative political stability in many countries and the introduction of measures to improve the business environment. Emerging Middle Class Growth in Africa is being fueled by large scale investments in the natural resource, oil and natural gas sectors prompted by high commodities prices and strong demand for raw materials from Asia. Economic activity is also being boosted by substantial infrastructural investment, much of which is financed by China. In addition, an emerging middle class that has witnessed an increase in their discretionary income and is seeking to mimic the lifestyles of their counterparts in the US, Europe and Asia is a major contributing factor for Africa’s stellar growth rates. In South Africa, this group is referred to as the “black diamond” market. A report by Accenture entitled “The Dynamic African Consumer Market: Exploring Growth Opportunities in Sub-Saharan Africa”, which was released on September 7, 2011, noted that “For companies looking for growth via emerging markets, Sub-Saharan Africa (SSA) looms large. Since 2000, SSA has experienced rapid growth in consumer spending of four percent annual growth, reaching nearly $600 billion in 2010. Consumer spending is expected to rise to nearly $1 trillion by

Source: Joab’s Technologies and Research. Capital Joab’s Technologies and Research.

Joab’s Technologies and Research, Natu Court Flat B.

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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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