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AFRICA MACRO

EXECUTIVE SUMMARY In past years, the common perception of Africa was that of a war torn and poverty stricken continent that was scarred by tribal and religious conflicts, savage civil wars, and which was ruled by brutal dictators that suppressed civil liberties. It was also viewed as being technologically backward, hobbled by an inadequate infrastructure, afflicted by diseases that had been eradicated in the developed world, and a difficult place to do business in light of corrupt bureaucracies and barely functioning banking and judicial systems. Simply stated, Africa was viewed as a lost cause and not a place of high potential that offers profitable business or investment opportunities. While there are still risk factors, these perceptions are out of date and political risk is abating as a majority of African economies are being fueled by strong foreign direct investment inflow by countries such as China, India, Russia, Brazil and the United States.

Africa Democracy Index (2010)

ANALYSIS AND STRATEGY

India have enjoyed over the last decade. Standard Bank is forecasting an average annual growth rate for the continent of around 6% through 2015. World’s Top Ten Growing Economies* 2001-2010 2011-2015 Angola 11.1% China 9.5% China 10.5% India 8.2% Myanmar 10.3% Ethiopia 8.1% Nigeria 8.9% Mozambique 7.7% Ethiopia 8.4% Tanzania 7.2% Kazakhstan 8.2% Vietnam 7.2% Chad 7.9% Congo 7.0% Mozambique 7.9% Ghana 7.0% Cambodia 7.7% Zambia 6.9% Rwanda 7.6% Nigeria 6.8% Source: IMF * Annual Average GDP Growth (%) Emerging Middle Class Growth is being fueled by large investments in the mining, oil and natural gas sectors prompted by high commodities prices and strong demand for raw materials from Asia and other emerging markets. Economic activity is also being boosted by an emerging middle class that has witnessed an increase in their discretionary income and are seeking to mimic the life styles of their counterparts in the U.S., Europe and Asia. Poverty rates are declining at a dramatic pace. In 1980, 40% of the population lived in poverty but by 2008, that ratio had fallen to 30% and by 2020, it is forecasted to drop to 20%. The African Development Bank’s Annual Development Effectiveness Review for 2011 noted that “Africa now has a growing middle class with money to spend, making it an increasingly attractive consumer market. Consumer goods driven sectors such as telecommunications and banking are expanding two to three times faster in African countries than in Organization of Economic Cooperation and Development (OECD) countries.”

Furthermore, an increasing liberalization of the business climate, improving corporate governance, reduced levels of poverty, an expanding middle class and the increasing number of free and fair elections that are being held are all contributing to a very dynamic macroeconomic environment. Rapid Economic Growth While Europe is being undermined by a sovereign debt crisis, Japan is entering its third “lost” decade and the U.S. is slowly crawling out of the 2008 credit crisis, Africa is undergoing a barely publicized boom and is doing so at a startling pace – with some countries achieving expansion rates that China and Joab’s Technologies and Research, Natu Court Flat B.

Ease of Doing Business has Improved In its annual “Ease of Doing Business Survey” for 2011, the World Bank included a study on changes in the business environment over the last five years in 174 nations. According to the World Bank, of the 15 countries that made the largest gains in making their regulatory environment more favorable to do business, six were African countries; Rwanda (in second place), Burkina Faso (in fourth place), Mali (in sixth place), Ghana (in eighth place), Mozambique (in twelfth place) and Egypt (in thirteenth place). Stock Markets are becoming more Widespread Stock markets are proliferating throughout Africa and, as a Page 6 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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