Posts Tagged ‘Investing in Africa’

The Decline Of The African Business Cycle

One of the regions that are currently being closely watched by many business people nowadays is the continent of Africa. As it is, the region is now experiencing an upsurge in economic activity. This why many are looking forward into investing in Africa.

However, not a few economic experts are weary of the boom that Africa is might actually be not what it seemed. They argue that the boom is just temporary and is just a part of the ongoing African business cycle. Thus, they cautioned investors into becoming overzealous and putting out too much into the region.

But of course, not all can easily understand all that economics jargon that these experts are using. Thus in order to better grasp of all that, it would be a good idea to explain everything in simple terms terms. We then need to look at how all of these fit into what Africa is experiencing and how it will affect it in the long run.

So, what is a business cycle? In simplest terms, it is essentially the periods of ups and downs in the economic production of a particular region. Though the term cycle evokes a sense of regularity, and economic cycle is actually far from being one. Each period of the cycle can last anywhere from just a few months to several decades. Also, even though it is a cycle, most often, an economic cycle does not return to its previous levels. For instance, and economy might actually come out either poorer or richer after a cycle.

What is definite about these cycles are the reasons that causes them. Here one of the causes that are being pointed out is the amount investment that is put into the region. More investments means that the region’s economy would go into a boom. However, there is actually a flip side on this one. As a particular economy can accommodate a finite amount of investment, any more will likely cause it to slow down its growth.

Also, there are several other factors that can greatly affect the business cycle of a particular country or region. One factor in particular that is worth mentioning is the region’s social and political environment. This one actually has the largest effect on the cycle, as it can easily hamper the boom or speed up the decline of the economy.

And this is where the issue on the African business cycle comes into play. You see, according some experts, the African business cycle is actually nearing the end of its peak. Thus, it is actually about to slow down. Because of this, any additional investment here is unlikely to grow at a significant rate, mainly because the African economy is not as large as, say, Japan or the United States.

However, this does not mean that investment during this period is a bad idea. In fact, investments would still be very much welcomed during this period, as it would help cushion the impact of the slowdown. However, on of the most important things that investors need keep in mind here is that they need to put in safety precautions in order to also not be fully affected by the decline.


Some Countries Investing In Africa

Aside from China, there are also other countries making investments in Africa. The “Sleeping Giant” is being noted in so many business magazines, by many business experts because of what it gained from the black continent. China is the newest talk of the town, not only that it gets juice from the world’s second largest continent, also, it brings aid to the region’s dying situation. But it is not just China that is helping Africa. Investing in the continent is infamous in the whole globe. From every continent, numerous countries have sighted the potential of Africa, pulling them to invest on different sectors like agriculture, infrastructure (which was dominated by China), telecommunications, education, mining and oil industry etc..

India and UAE are currently on partnership with some African countries, working on the development of the telecommunications industry. India’s Essar Group has some eye on the African telecom business. The India based has had talks with UAE’s Dhabi Group, an investment firm led by an Abu Dhabi Royal family. The two sides signed a preliminary agreement in Abu Dhabi on Sunday. Standard Chartered Bank is acting as financial advisor to the Dhabi Group. Their prospect country is Uganda and the rest of West Africa. Since Africa is considered as one of the least penetrated by telecom markets, a lot of investments are coming because there is a potential growth.

Japan is also doing business with Africa. Just last year, the Tokyo International Conference on African Development (TICAD) was held in Yokohama, Japan. The conference tackled the issues of ending poverty in Africa. The outcome of the conference will be fed into the later summit’s deliberations – which highlight “development and Africa” as one of the principal themes.

Russia is also reviving its affair with the region. Moscow can no longer miss its love affair with several African countries, way back in 1960’s. And so, they start investing again on minerals of the region. According to rough estimates, the investments of four companies alone – Rusal, Nornikel, Alrosa and Renova – in Sub-Saharan Africa constitute about $5bn. Others are also active, including metal group Evraz, oil giant Lukoil and a number of banks. he Russian firms that are particularly active in Africa are those involved in exploration and production of mineral resources – known as “upstream” companies. However, they face tough and constantly-growing competition.

Germany is another European investment in Africa. German companies is actually one of those big providers of jobs for people. Their investment concentrates more on the oil and agriculture industry.

Jordan, Yemen and Lebanon are other three countries that have investments in Africa. They have been working on the development on the water resource of the region, with investments almost counting to $1.5 billion just within three years.

Canada has also closed US$212 million investment fund for Africa. The Fund focuses on making mid-market private equity investments across Africa in transactions ranging from buyouts to expansion and high growth capital opportunities across a range of sectors.

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Defying the Stereotype in African Business with More Trade than Aid

If you think investing in Africa is a loosing-battle, think again. If you still think Africa is always fashioning worlds of nothingness, then you’re poorly wrong now. Present Africa is now an image of positive energies and possibilities. Out of adversity, opportunities arose and opened up more possible business growth among Africans and foreign investors. According to IMF’s Regional Economic Outlook Survey released in 2007, the Black Continent is experiencing a period of sustained growth, the best one in their history. This paints a picture of good political and economical trend, which unfolds a “new Africa” right before our eyes.

Before, aid is the heart of African survival, but now, it is trade. More business firms are entering the region to bring trade and fulfill the needs of people on slum areas. Sub-Saharan Africa is now a business destination for many countries, on top of them are superpowers like U.S. and China.

Africa’s greatest challenge is adversity, which they use to see as inextricable. But they found opportunities from it. They’ve got solution to the continent’s condition, created business opportunities and not too long, made their name shine in the global economy. Entrepreneurs invested on water, electricity, infrastructure and communication. This didn’t just improve life in the continent, it also created jobs. For every potential business, a lot of lives are changed. Investments done by investors in the country are also helpful aids, come in disguise.

Transformation of the corrupt government to a more responsible one is another key for Africa’s success. Before, the government’s officials are promoting poverty to gain more aids from other countries, but stupidly unluckily, it all goes to the pockets of those officials. That instead of countries’ survival, poor people just become more down-and-out. But now, the power is now on the entrepreneurs. Aids are handed out in the form of trade for different reasons. First, people are assured that what they really deserve will come to them, by working for it legally. Second, Africans are prevented from becoming very much dependent on charities. Instead, they are given chances to stand on their own without any discrimination to barricade their dream. They have the freedom to work and earn for themselves.

Africa is also on a rigorous campaign to stop every civil and tribal wars residing on different parts of the continent. They produce more job opportunities, with the help of entrepreneurs, to deplete conflicts. The deadly HIV AIDS is also given focus, conducting more demonstrations and lectures to Africans about safe sex and the danger of it when performed irresponsibly.

All that the Black Continent needs is to see the world believing in them. Africa’s future is now more clearer since the start of their economic growth. Their transformation made an impact worldwide, especially in business and investment. Their potential is great. Investment and business opportunities are overflowing in Africa, grabbing them would be favorable to both business and Africans.

Business Opportunities in Africa

Investing in Africa has become a saving grace for many businesses around the world. When the global financial crisis arise, Africa bloomed into a perfect business venue regardless of the bad image they had. Since 1990’s, more African countries improved on their economy, there is a big expansion on their investment and business features. More investors from different parts of the world are coming to the region to start a business. Experts say, this is a good response to battle economic decline. Investing in Africa didn’t just open development for private sectors, but it also made way for the continents transition from a chaotic place to a business haven.

Business opportunities in Africa are overflowing. The continent got rich resources that can attract investors. This something that most country, like US, didn’t notice before. Most of the time they only come to the region to give aid, but now, to come for trade is becoming a trend.

Mining in Africa is one of the driving force why the continent gain economical development.

Africa is the home of nearly half of the entire world’s diamond or 50% of the global production. By this time, Africa has produced over 75%, in value, of the diamonds purchased all over the world, with more or less 1.9 billion carats. Central and Southern Africa are places in Africa where diamond is abundant. Angola, Botswana and South Africa are the top distributor of diamonds.

South Africa produce 50% of all the gold in the world. Despite the declining production, it is inarguable that South Africa is still one of the world’s best gold producer. They’ve got two of the globe’s deepest gold mines, the East Red Mine in Boksburg and Tau Tona in Carletonville. The country also have the largest gold ore reserves measuring up to 40,000t, which represents 40% of global reserves.

Both diamonds and golds are the largest mineral foreign income earner in Africa. The continent also produce an array of mineral resources like platinum, coal, granite, nickel, copper, zinc, limestone, phosphates, clay and dolomites.

Another area where growth chances is high is agriculture. Africa has a wide range of agricultural products like coffee, veggies and fruits. South African wines are making a comeback. Algeria is another producer of first-class wines. Along with France, Canada, United Stats, South Korea and Western Europe are countries that benefits well on Algeria’s wine industry.

Telecommunications is also one of the fastest growth area. From 1999 to 2004, the annual rate of Africa’s cellphone usage grew to 58%. The region showed faster growth compared to the some countries in Asia.

Infrastructure and transportation has also improved. International tourism is given priority. With wonders like the Ancient Egypt, Mediterranean Resorts in North Africa, Victoria Falls, Cape of Good Hope and other natural and wildlife landscapes, the continent has potentials to compete against other continents. Airports and hotels facilities are also developed.

Africa is on the process of transformation than is beneficial to both Africans and business enthusiast.

Africa’s Probable and Possible Business Future

Investing in Africa is a potential profitable investment, but many are unaware of this. Multinational companies and many businessmen are always blinded by the international media exposure of the continent. Most of this news conveys negative images like bloody civil wars and crippling poverty. They are deceitful. Investment ideas are turned down because of the fear brought by many conflicts. But if we are going to talk about business, the future in Africa is clear. Studies show that Africa has been heading to development in the recent years despite the Global Financial Crisis. Opportunities on different aspects are enormous. From communication, infrastructure, tourism, agriculture, etc..

Africa’s profitability is one of the best kept secret in today’s world economy.” This is aline quoted by Kofi Annan, UN Secretary General. Companies in Africa have been gaining on their profit since 1990. The rate of return on foreign direct investment averaged 29 percent. More African countries tightened their policy environment. This step brought more foreign investors because of the improvement on economic stability and growth and much more liberal conditions. In 1997, 26 countries showed an appraising relatively liberal regime for the repatriation of dividends and capital. This report also indicates that policies on foreign investment are now similar to those of the developing countries. Numerous investment promotion agencies were set up on the whole continent to promote Africa’s resources as an opportunity to for businesses.

From the UNCTAD or United Nation Conference on Trade and Development, a study was released stating that between 1983 to 1997, Africa-based US companies grew by 10 percent. British direct investment net income in sub-Saharan Africa, with some parts of Nigeria increased by 60 percent between 189 to 1995. Same thing happened to Japanese affiliates in 1990. Trade between Africa and China has grown an average of 30% since 1999, topping $106 billion dollar last year

In the past decade, foreign investments have been increasing significantly. Before, there were more investment on oil, mineral and diamonds, but it is now changing. Services and manufacturing is now making a name, even in top oil-exporting countries like Nigeria. Now, more than 25 sub-Saharan governments are in the process of privatizing all or most of their telecommunication sectors to attract more foreign investors.

The future of any business investment in Africa is now more probable and possible. Despite its previous worse status, the UN and the whole continent is committed for a bigger transformation. Africa’s neediness for help is the gateway for more investments and later on, continent’s economical development. It is inarguable that Africa is a continent of commodities-with its forests, oil fields and mines. The demand is found and abundant on the darker part of the world.