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Africa Macro | Political and Economic Overview

November 2011

Joab Khamala, Senior Analyst, joab@carthageabc.net tel: +254724893678

Africa 2012: Winds of Change HIGHLIGHTS

The Arab Spring began in Tunisia and has toppled the longstanding strongmen in Tunisia, Libya and Egypt. Anti-government demonstrations also occurred in Morocco, Mauritania and Algeria, but they were not sustained nor did they reach a critical mass of protesters that threatened the ruling regimes. The overthrow of longstanding dictators may prove to be the easiest part of the efforts to establish a free society. New constitutions have to be written, political parties have to be formed and economic and regulatory frameworks have to be put in place. The revolutions in Tunisia, Egypt and Libya have disrupted their economies and caused a major jump in unemployment. Egypt saw its sovereign debt rating downgraded by S&P in response to the prevailing economic and political uncertainty. Political uncertainty in the countries impacted by the Arab Spring has caused a sharp drop in tourist receipts and a significant fall-off in foreign direct investment inflows. Growth prospects are poor in the near-term. This is especially the case for Libya which suffered extensive damage to its infrastructure during the conflict to overthrow Colonel Qaddafi. The Arab Spring has seeped into Sub-Saharan Africa with the outbreak of demonstrations in Senegal, Uganda and Malawi, and close monitoring in these countries is warranted. Protesters have demanded political change, improved economic conditions and a freer press. As in the Arab world, social media and the internet have helped people to organize. There are Presidential elections in 2012 in the Democratic Republic of the Congo, Angola, Senegal and Kenya which are likely to spark unrest if there are any flagrant violations in the voting process. Africa’s economic fundamentals have improved in recent years, as a result of swelling foreign direct investment, particularly in the mining, oil, natural gas, timber and telecommunications sectors, decelerating inflationary pressures, a reduction in foreign debt levels prompted by debt relief granted under the IMF and the World Bank Heavily Indebted Poor Country Initiative and privatization of state assets. Privatization will be a mainstay of economic policy. Although many of the largest companies still remain in state hands, governments are privatizing assets in order to encourage the development of the private sector as well as attract foreign investment. The improved economic performance of many African nations have enabled them to issue securities on the Eurobond market which have been warmly received by investors, thus indicating there is strong demand for frontier market securities. Despite the volatile state of global markets, the stronger African countries have been able to support a growing IPO market.

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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