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AFRICA MACRO

ECONOMIC INTRODUCTION Africa has made great strides in recent years by improving its business climate and reducing the bureaucracy that has impeded business formation and capital investment. This has encouraged a surge of foreign investment, particularly into the energy and mining sectors which have benefited from high prices prompted by increased demand from emerging markets, particularly China and India. However, the reform process of easing business regulations remains uneven. For example, nations like Rwanda are further along than countries like Chad, which has hardly made efforts to encourage foreign investment.

POLITICAL AND ECONOMIC OVERVIEW

the middle class, which, in turn, has fueled strong advances in the retail and banking sectors. Africa has made significant progress in easing business regulations in recent years and is likely to continue to improve as it integrates further into the global economy. Africa is an emerging giant. Its economic awakening from decades of lethargy could prove to have as great of an impact on the global economy as the rise of China and India.

Africa must wisely utilize the income it derives from commodity exports to diversify its economic base. This is especially important as the oil, natural gas and mining sectors actually account for a modest number of jobs. Agriculture and tourism could be a main source of employment, but in many African nations these sectors have been overshadowed by the resource sector. Outside of South Africa, Tunisia, Egypt and Morocco, the manufacturing sector is relatively small. As a result, most capital, consumer and semi-finished goods have to be imported. Another area that needs improvement is that Africa does not add much value to the commodities that it ships overseas. Except for Botswana, which has a budding diamond industry, diamonds are not cut, polished and set on the continent. Instead, they are sent to Mumbai, Tel-Aviv, Antwerp, New York and Amsterdam to be cut, polished and set. Many oil producing nations do not have adequate refinery capacity, and, therefore, must import refined products. Nigeria, for example, is a major oil producer, yet imports refined products. While West Africa dominates cocoa production, it does not produce chocolate. The Democratic Republic of the Congo (DRC) has abundant sources of coltan, which is critical to making cell phones; yet, the DRC does not manufacture cell phones. At the same time, these are all examples of how Africa is a critical supplier of raw materials to the global economy.

As wage rates continue to climb in the Far East, particularly China, labor intensive sectors such as footwear, clothing, and textiles represent an excellent opportunity for Africa to broaden its economic base and increase exports of light manufactured goods. To do so it will have to further improve corporate governance, reduce corruption, modernize infrastructure and streamline business regulations. Countries such as Ghana and Rwanda have taken these steps and have been rewarded with sharp increases in foreign direct investment. The improved business environment and growing FDI inflows in these nations have helped to bolster the ranks of 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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