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AFRICA MACRO and South Africa account for 53% of the world’s diamond output. On September 1, 2011, the government gave approval for the import of over $153 million of rough diamonds from Zimbabwe following the decision by the Kimberley Process to lift an embargo on importing diamonds from the Marange fields in Zimbabwe. The Kimberley Process Certification Scheme was established to certify the specific origin of rough diamonds to ensure they were not derived from areas of conflict (blood diamonds). Brazil Brazil is making a major push into Africa. Vale, the Brazilian mining giant, Odebrecht, a construction company, Açúcar Guarani, a sugar producer, Marcopolo, a bus manufacturer and Petrobras, the state controlled oil company, are all active on the continent. Under former Brazilian President Lula da Silva, expanding trade ties with Africa, particularly with the countries that speak Portuguese, was a major priority. In his eight years in office, he visited 25 African nations. Also during that period, the Brazilian Foreign Ministry opened 16 new embassies in Africa. Miguel Jorge, the former minister of development, industry and foreign trade in the Lula Administration said, “The continent is going through a process that is similar to what Brazil experienced decades ago. There are major opportunities to participate in the growth of African countries, through the transfer of technology and expertise.” There are over 100 Brazilian companies in Angola and an estimated 25,000 Brazilians live there. Angola is the largest recipient of Brazilian investment on the continent. In 2010, Odebrecht, became the single largest private sector employer in Angola where it has interests in food and ethanol production, construction and supermarkets. In Mozambique, Brazilian firms are active in the coal, construction, agriculture, bio-diesel and pharmaceutical industries.

ANALYSIS AND STRATEGY

South Africa South Africa has been very active in other African nations. It already had a dominant economic position in southern Africa, courtesy of the South African Development Community and the Southern Africa Customs Union. Not only do the countries of the SADC have close commercial ties to South Africa but they also have close financial and monetary ties. South African banks dominate the financial sector of Namibia, Lesotho and Swaziland and have a substantial presence in Botswana. The rand serves as a parallel currency in Lesotho and Swaziland. The currencies of Namibia and Lesotho are pegged at par to the rand and as a result, monetary policy is effectively made by the Reserve Bank of South Africa (the Central Bank of South Africa). Many South African companies are cross listed on the Namibian stock exchange. Other southern African nations are also very economically dependent on South Africa. In 2009, for example, it was the dominant source of imports for Malawi at 34.1%, for Mozambique at 35.4% and Zambia with a 40% share. It is the second largest export market for Malawi (after Belgium), the second for Mozambique after the Netherlands and the third for Zambia (after Switzerland and China).

This year, Vale bought Metrorex, a small Johannesburg based mining company that has a copper mine in the Democratic Republic of the Congo for $1.1 billion. Vale has indicated it will invest $12 billion in Africa over the next five years. Brazil has signed agreements to assist with the development of a bio-fuel industry with Angola, Ghana, the Republic of the Congo and Nigeria.

South Africa has literally been Zimbabwe’s life line. It accounted for 60.5% of the country’s imports in 2009 and took 52.5% of its exports. Controversially, the bulk of foreign investment in Zimbabwe originates in South Africa and millions of Zimbabweans have fled to South Africa to escape the disintegration of the economy and the political tyranny of Robert Mugabe. These migrants send valuable remittances back to Zimbabwe which helps to bolster consumer spending there.

As of 2009, Brazil’s investments in Africa were about $10 billion, which represented 6.4% of the country’s total outward investments. Bilateral trade between Brazil and Africa surged from just $5 billion in 2002 to $20 billion in 2010. About half of Brazil’s exports to Africa consist of food, beverages and tobacco while around 80% of its imports are minerals, oil and natural gas. Nigeria is the largest trading partner on the continent, accounting for 32% of total bilateral trade with Africa while Angola has a 16% share.

South African retail companies have been aggressive in expanding their presence throughout the continent. Shoprite, a grocer and fast food company, is in Madagascar, Mauritius, Namibia, Nigeria, Tanzania and Zambia. Pick N Pay, the second largest supermarket chain in South Africa, has stores in Botswana, Mozambique, Zambia, Zimbabwe and Namibia. Woolworths, the clothing and general merchandise store company, has 46 stores in ten African countries; Botswana,

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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