DYNAMIC AFRICA

Set up in 2010, Dynamic Africa is a rich content-driven creative space with a Pan-African outlook established as an expressive platform for African experiences, African culture and African stories.


Dynamic Africa is a diverse multimedia platform, which curates global ideas, memes, attitudes and other phenomena that shape popular culture, with both a local and global African perspective.




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Posts tagged "economy"

NIGERIA: A TRULY STRONG ECONOMY?

Don’t be fooled by news reports of ‘Africa rising’ and the supposed burgeoning African middle class. Much of that is hype and not the reality for many Africans and African country. Whilst various emerging economies in Africa are important to note, they don’t always signify a progression or development in civil society, infrastructure, resources and public services. In fact, a country that was only recently named as the continent’s largest economy carries with it a number of stark contrasts.

The country is the world’s eighth-largest oil exporter, and almost 90 percent of its export earnings are tied to oil. It has the seventh-highest population in the world - 170 million people - but over 80 percent live on less than $2 a day, and most of the wealth is confined to a small urban middle class. [x]

If you’ve ever wanted to make some more sense of Nigeria’s economy, this short clip provides some necessary insight into the reality of the country’s financial state. It’s not incredibly in depth, but it’s a great starting point.

Analysts said the recalculated GDP would raise Nigeria’s profile, but change little on the ground.

"Is the money in your bank account more on Sunday than it was on Saturday? If you had no job yesterday, are you going to have a job today?" asked Bismarck Rewane, CEO of Lagos-based consultancy Financial Derivatives.

"If the answer to those questions is ‘no’, then this is an exercise in vanity," he added, though he said the new figure was more accurate.

Many Nigerians shrugged off the GDP news.

"I’m not really impressed. I don’t feel it in my pocket… It’s not the masses who are rich," said Richard Babs-Jonah, 47, a small farmer, expressing the common view that Nigeria’s economy is rigged in favour of a handful of well-connected oligarchs.

"Those controlling the economy, those with government contracts, get all the money."

South Africa overtaken as biggest economy in Africa after Nigeria rebases GDP calculation to more than $500bn.

Couldn’t agree more with these two statements. The real test of Nigeria’s developments will be when our national services, infrastructure and resources are well managed, maintained and distributed, and when people no longer feel the need to seek better opportunities abroad. When Nigerians stop leaving the country in droves, or at least try to, that’s when we’ll celebrate the country’s progress.

The most popular view puts the number at more than 300 million, a diverse basket that includes all sorts: cattle-ranchers, road-side food vendors, taxi drivers, railway pensioners etc. But this view has its critics, and though they are not as often heard, they shout when they get the opportunity, saying things like: only five percent of African consumers qualify for the ‘middle-class’ tag.

If that position was valid, it would mean this class has suddenly shrunk from 300 million-plus all the way down to about 40 million or 50 million people (bearing in mind that even the exact population in Africa is debatable due to weak census data in many African countries).

But that is not even the most disconcerting view. Someone even say that there is basically no middle class consumer segment worthy of any serious analysis in Africa at all. However you choose to spin it, the fact remains that your target consumer base has now shrunk to zero. From 300 million to zero, now that is something.

[…]

For a start, Africa’s middle-class is exceptionally heterogeneous. It is that fact rather than the sheer number of middle class consumers or even the pace of growth in these numbers that can have the strongest effect on the economic role and business significance of Africa’s middle class.

The African Development Bank (AfDB), for instance, has fixed the range of income for middle class status in Africa between two dollars and 20 dollars. This complicates things for the analyst relying on income assessment to decipher what are complex sociological issues regarding ‘aspiration’, and economic issues relating to ‘purchasing power’, and how these differ from country to country in Africa and make a simple enumeration of the Middle Class technically problematic.

Often wonder who the media is referring to when they talk about the ‘African Middle Class’ in articles and business analysis’? Yeah, me too. It’s usually a lot more complex than they make it out to be, as this in-depth analysis by Bright Simons reports.

The African growth story has been told over and over again but the reality is that there are winners and losers.

Celeste Fauconnier, RMB Africa analyst says that the services sector for example is growing and resource rich countries such as Nigeria and Zambia have become less dependent on commodities because it they have developed secondary industries. In an internal survey that RMB conducted last year, it found that most of its clients predicted that the logistics and automotive sectors would present more opportunities, followed by retail and resources were only listed in third position.

However, Fauconnier says that South African retailers face serious competition when entering some African countries, especially those in the East. The latter countries have invested in producing their own products and have established retailers such as Nakumatt in Kenya. This is one of the reasons that Shoprite has been struggling to get into Kenya and subsequently does not have a presence there.

Dianna Games, CEO at Africa@work, says that South Africans also have to be more aware of what is happening in Africa and enter with a naïve notion that they can strike a deal in a day. Sometimes signing a deal and finding the right partner can be a lengthy process, she says.

South African companies should also change the perception that they are the only ones going into Africa. Faure Heymans, analyst at RE:CM, says that there are good companies in Africa that are well managed and exist in strong markets such as Dangote Cement in Nigeria and ARM Cement in Kenya. These companies are now looking to invest in South Africa due to its opportunities, he says.

The African Growth Stroy - Tread Cautiously

"Everyone is chasing a piece of the pie for the sake of it and it’s unsustainable – analysts"

Africa’s growth story may have been oversold, according to value-based asset manager CM.

Analysts Amedi de Klerk and Faure Heymans warned this week that investors “be wary about getting caught up in the hype around the predicted economic growth on the African continent”.

Sub-Saharan Africa’s gross domestic product (GDP) is expected to grow more than 5 percent this year compared with growth of 3.1 percent globally and 2 percent in South Africa. But De Klerk and Heymans said the continent’s growth expectations were already factored into the price of listed equities in the region. After visiting four African countries, De Klerk said: “Where we did find value, liquidity was limited and where liquidity was available, valuations were excessive.”

De Klerk added: “There is no correlation between a country’s growth and the performance of its equity investments.”

Meanwhile, Africa’s prospects are dimming. The continent’s fortunes are closely linked to China’s demand for commodities. But growth is slowing in the world’s second-largest economy and latest data show its demand for other countries’ exports is falling. China has been South Africa’s biggest export market in recent years – almost entirely for commodities – and the major source of export revenue for Africa.

Frontier Advisory chief executive Martyn Davies said: “China’s growth model over the past two decades has been incredibly resource intensive with fixed asset investment spend upwards of 50 percent of GDP per annum. This has driven the so-called commodity supercycle and has largely underpinned the African growth story the past decade considering the resource-dependent nature of sub-Saharan economies.”

He said the commodities super cycle had cooled. “While China’s growth remains robust, the days of double-digit or high single-digit growth are over. Also, as China has now reached middle-income status, its resource intensity per capita will decline in line with the experience of all other markets.”

The Chinese economy grew only 7.7 percent in the first quarter, disappointing economists’ expectations of 8 percent and down from 7.9 percent in the previous quarter. Earlier this week the International Monetary Fund cut China’s growth forecast for the year to 7.8 percent from 8 percent previously.

Private sector economists had already downgraded their expectations. Last month Standard Bank researcher Jeremy Stevens lowered his growth forecast for the year from 7.7 percent to 7.5 percent.

Second-quarter figures on GDP are due on Monday.

The question is: to what extent will this translate into lower growth in Africa?

Davies said: “Much will depend on the oil price considering that no less than 40 out of 54 African states have either discovered or are exploiting oil resources.” Oil prices have slumped recently and demand for Africa’s oil from the US has fallen due to the latter’s shale gas activity. But foreign direct investment (FDI), including from China, remains strong.

Glenn Silverman, the chief investment officer at Investment Solutions, noted China’s investment in Africa had focused on “securing long-term supplies of commodities and in African infrastructure”. And he said: “To my mind, the Chinese reserves of more than $3 trillion (R30 trillion) will continue to be recycled into hard assets that secure long-term supply for China.”

Confirmation of this view comes from the China Daily, which reported last month that China’s outward-bound “FDI saw robust gains, expanding by some 20 percent in the first five months of this year to $34.3 billion”. But Silverman argued: “Africa needs to grow its other sectors and anything that propels diversification is healthy and should be welcomed.”

Davies agreed, speaking of a “remix [of] Africa’s growth model, something I regard as both healthy and necessary”.

Investec Asset Management strategist Michael Power had a similar view. He said: “Africa will become less reliant on external demand to stimulate GDP growth and more driven by emerging domestic consumption.”

He said there would be slower growth “perhaps at the margin for a couple of years but at least it will be more balanced in that it will not be so hyper-correlated to Chinese demand for resources”.

He focused on the next stage of Africa’s development. “I think Africa’s industrialisation phase is coming as China’s wage rates rise.” In other words manufacturing bases will be shifted from China to Africa as the cost of Chinese production rises.

Power noted “the growing evidence of Asian investment in African factories – Chinese investment in the Ethiopian leather/shoe business via Huajian, the world’s largest shoe-maker; Honda opening a motorcycle factory and Samsung… a computer assembly plant in Kenya”.

In a recent interview, African entrepreneur, Tony Elumelu spoke about the rules of engagement for business in Africa emphasizing that Africa is open for business but not at any cost. “Africa’s economic history has been characterised by extractive industries and rent seeking practices that have not created development in any meaningful way. Africapitalism is simply saying there is a better and more ethical way to invest in Africa for a sustainable future.

I would like to see both African and international investors review their strategies for Africa. Yes, we are open for business but not at any cost. Our rules of engagement have changed,” he said.

Elumelu was one of the high profile African business leaders handpicked by the White House to meet with President Obama on his current three country Africa tour. Elumelu, who is the former Chairman of United Bank for Africa and Chairman of diversified investment group, Heirs Holdings recently invested USD300 million in Nigeria’s largest power plant, located in Ughelli, Delta State during the Nigerian government’s recent power privatization process.

Speaking on the motivations behind the group’s investment, he said,”Unlimited access to affordable power in any country is a game changer and will move the needle on the country’s development exponentially. It’s not just the fact that children will be able to do their homework, or that computers and phones can be powered in rural villages; it is also the impact that access to affordable power will have on the economic ecosystem. Prices will come down, entrepreneurs will expand and innovate, and jobs will be created as a result. This is Africapitalism at work.”

Speaking further on his investment in Nigeria’s power sector, Tony Elumelu said: “We played a transformative role in democratizing the banking sector at a time when no one was really paying much attention to Africa, Elumelu says. “We had a clear strategy, first mover advantage and an understanding of what the market needed and we are focused on doing the same for power. We are taking over an old government-run plant that desperately needs rehabilitation and doubling its output within our first two years of operations. By 2017, we will be generating 1000MW of electricity and Nigerians across the country will feel the impact of affordable and consistent power.”

AFRICA’S oil reserves has hit 132.4 trillion barrels of oil and represents eight per cent of world supply, PriceWaterHouseCoopers, said in its latest survey on the continent’s oil and gas sector.

The survey, which was released recently and titled: “Africa Oil and Gas Review”, puts the continent’s gas reserves at seven per cent.

It disclosed that Africa currently supplies about 12 per cent of the world’s oil, boasting significant untapped reserves estimated at eight per cent of the world’s proven reserves.

The report said the continent has natural gas reserves of 513 trillion cubic feet (Tcf) with 91 per cent of the yearly gas production of 7.1Tcf coming from Nigeria, Libya, Algeria and Egypt.

According to the  review, the oil and gas industry is grappling with the severe stresses of a challenging economic and political environment on the African continent fuelled by poor physical infrastructure, corruption, an uncertain regulatory framework, and a lack of skills.

The survey draws upon the valuable experience and views of industry players in Africa‚ including international oil companies operating on the continent‚ national oil companies‚ service companies‚ independent oil organisations and industry commentators‚ to provide insight into the latest developments affecting the industry.

It stated: “Africa supplies about 12 per cent of the world’s oil‚ boasting significant untapped reserves estimated at eight per cent of the world’s proven reserves. The continent has natural gas reserves of 513-trillion cubic feet with 91 per cent of the annual gas production of 7.1-trillion cubic feet coming from Nigeria‚ Libya‚ Algeria and Egypt”.

Poor infrastructure and an uncertain regulatory framework were the two top challenges identified by the new emerging players/markets‚ particularly in Uganda‚ Ghana‚ Tanzania‚ Nigeria and Kenya.

PwC Africa Oil & Gas Industry Leader and Deputy Country Senior Partner, Nigeria, Uyi Akpata, said: “The challenges facing oil and gas companies operating in Africa are diverse and numerous. Political interference, uncertainty and delays in passing laws, energy policies and regulations are stifling growth, development and investment in a number of countries around Africa.”

“PwC’s ‘Africa oil and gas review’ analyses what has happened in the last 12 months in the oil and gas industry and in the major African markets”.

Chris Bredenhann‚ PwC Africa oil & gas advisory leader‚ said: “The challenges facing oil and gas companies operating in Africa are diverse and numerous. Political interference‚ uncertainty and delays in passing laws‚ energy policies and regulations are stifling growth‚ development and investment in a number of countries around Africa.”




Nigeria’s commercial nerve center, Lagos is set to become the continent’s 13th biggest economy, similar to the size of West African nation, Ghana, investment research and advisory firm, Renaissance Capital has revealed. In its latest report titled, “Nigeria Unveiled: Thirty Six Shades of Nigeria,” the company stated that with a per capita income of about $2,900 which is currently double amount of the national average of $1,700, Lagos is at par with countries such as Morocco and Sri Lanka.

Lagos’ economy is significant to that of Ghana and is the heart of Nigeria’s $284 billion GDP economy.

“We base our analysis on states’ internally generated revenue, which make up 15 per cent of state government revenue, and consumption data, as proxies for state income.

“Lagos State produces about 12 per cent of Nigeria’s GDP, which is equivalent to $32 billion by 2013 ending. Post rebasing, which we now expect in early 2014, we estimate a 40 per cent upward revision in the country’s national income.

“By our estimates, the Lagos State economy will become Africa’s 13th biggest economy in 2014 at approximately $45 billion – equivalent to that of Ghana,” said RenCap.

Lagos to be Africa’s 13 biggest economy by 2014, similar to the size of Ghana says Renaissance Capital

You know it’s serious when they start comparing a city to countries. And we manage all this without stable electricity, easy access to basic resources, and the necessary infrastructure to accommodate life in a commercial urban landscape.

Just think about what Lagos would be if all the above-mentioned factors were appropriately set up and maintained.

Damn.

The World Bank says, between 2013 and 2015, Sub-Saharan Africa’s economy will grow at an average of five percent while the global economy will only grow by about three percent over the same period.

However, high growth rates are no reason for euphoria, says Robert Kappel, a German Africa researcher from the GIGA Institute in Hamburg. He has been researching the development prospects of 42 sub-Saharan countries. He says international comparisons show that most of them are performing poorly.

"The growth is mainly coming from outside factors such as the demand for raw materials and agricultural products that has increased greatly in recent years and has pushed up prices. That means export has greatly contributed to this high economic growth, and that is also a great weakness," Kappel told DW.

The International Monetary Fund (IMF) and the World Bank recently warned that Africa is becoming dependent on trade with foreign countries.

At this year’s World Economic Forum in Cape Town, former UN Secretary General Kofi Annan urged the industrialized nations to apply stricter rules for trading in natural resources with Africa. He said corruption and tax evasion are bleeding wealth from the continent.

Industrialization in Africa remains slow and agriculture cannot even meet the needs of Africa’s own populations. Job markets show zero growth. In South Africa, more than 25 percent of the population, mainly young people,are unemployed.

[…]

"Africa is doing well. We are making tremendous progress, particularly in the past two decades. But if we are to sustain this and to ensure growth that allows for employment creation for the youth and greater equitable distribution of prosperity, then we need to speed up the reforms, deepen transparency, reduce bureaucracy in getting projects approved."

Major pharmaceutical companies are increasingly looking to harness Africa’s opportunity, lured by an emerging middle class across the continent’s growing urban centers.

Although the total size of the African market is still small compared to other global regions, analysts say that the continent’s big cities hold the key to unlocking the industry’s lucrative potential.

In such areas, increasing individual wealth, coupled with a stronger health system infrastructure and a rising demand for drugs treating chronic diseases, are driving demand for pharmaceuticals, say analysts.

"Urban centers have the highest concentration of the segments of the population that are more likely to be relatively wealthy, more likely to be educated and also possibly more likely to suffer from the chronic diseases of affluence that are becoming increasingly important in Africa," says Sarah Rickwood, director of Thought Leadership at IMS Health.

According to a recent IMS report, called “Africa: A ripe opportunity,” pharmaceutical spending on the continent is expected to reach $30 billion in 2016, up from about $18 billion now. By 2020, the market could represent a $45 billion opportunity for drug makers, spurred in part by robust economic growth and demographic changes.

This can only be good news for people like Rudzani Modau, owner of Mangalani Pharmacy in Soweto, just outside Johannesburg in South Africa.

"The pharmaceutical business is growing and it will grow," says Modau. "It’s the next big thing in Africa."

Modau says his profits have soared over the last decade. “We have a lot of potential in Africa,” he adds.

According to the World Health Organization (WHO), Africa is home to 11% of the world’s population, yet accounts for 24% of the global disease burden.

(read more)

A Euler diagram showing the relationships between various multinational African organisations.

The Arab Maghreb Union (AMU), comprised of Algeria, Libya, Mauritania, Morocco and Tunisia, does not participate in the African Economic Community (AEC) so far, because of opposition by Morocco.

The AMU is inactive and frozen due to deep political and economical disagreements between Morocco and Algeria regarding, among others, the issue of Western Sahara.

The Economic Community of Central African States (ECCAS; French: Communauté Économique des États de l’Afrique Centrale (CEEAC); Portuguese: Comunidade Económica dos Estados da África Central, CEEAC) is an Economic Community of the African Union for promotion of regional economic co-operation in Central Africa.

It “aims to achieve collective autonomy, raise the standard of living of its populations and maintain economic stability through harmonious cooperation”.

Members:

  • Cameroon
  • Central African Republic
  • Chad
  • Republic of the Congo
  • Equatorial Guinea
  • Gabon

The Economic Community of West African States (ECOWAS; French: Communauté économique des États de l’Afrique de l’Ouest, CEDEAO) is a regional group of fifteen West African countries. Founded on 28 May 1975, with the signing of the Treaty of Lagos, its mission is to promote economic integration across the region.

Considered one of the pillars of the African Economic Community, the organization was founded in order to achieve “collective self-sufficiency” for its member states by creating a single large trading bloc through an economic and trading union. It also serves as a peacekeeping force in the region. The organization operates officially in three co-equal languages—French, English, and Portuguese.

The ECOWAS consists of two institutions to implement policies—the ECOWAS Commission and the ECOWAS Bank for Investment and Development, formerly known as the Fund for Cooperation until it was renamed in 2001.

A few members of the organization have come and gone over the years. In 1976 Cape Verde joined ECOWAS, and in December 2000 Mauritania withdrew, having announced its intention to do so in December 1999.

Current members:

Benin
Burkina Faso
Cape Verde
Gambia
Ghana
Guinea
Guinea-Bissau
Ivory Coast
Liberia
Mali
Niger
Nigeria
Senegal
Sierra Leone
Togo

The Southern African Development Community (SADC) is an inter-governmental organization headquartered in Gaborone, Botswana. Its goal is to further socio-economic cooperation and integration as well as political and security cooperation among 15 southern African states. It complements the role of the African Union.

SADC has 15 member states, one of whose membership is currently suspended:

  • Angola
  • Botswana
  • Democratic Republic of the Congo – since 8 September 1997
  • Lesotho
  • Malawi
  • Mauritius – since 28 August 1995
  • Mozambique
  • Namibia – since 31 March 1990 (since independence)
  • Swaziland
  • Tanzania
  • Zambia
  • Zimbabwe
  • South Africa – since 30 August 1994
  • Seychelles – also previously been a member of SADC from 8 September 1997 until 1 July 2004 then joined again in 2008.

Suspended

Madagascar – Membership currently suspended after the coup d’état led by the former mayor of Antananarivo Andry Rajoelina

(image: Map of Africa indicating SADC (light green) and SADC+SACU (dark green) members)

The Common Market for Eastern and Southern Africa is a free trade area with twenty member states stretching from Libya to Zimbabwe. COMESA was formed in December 1994, replacing a Preferential Trade Area which had existed since 1981. Nine of the member states formed a free trade area in 2000 (Djibouti, Egypt, Kenya, Madagascar, Malawi, Mauritius, Sudan, Zambia and Zimbabwe), with Rwanda and Burundi joining the FTA in 2004 and the Comoros and Libya in 2006.

COMESA is one of the pillars of the African Economic Community.

In 2008, COMESA agreed to an expanded free-trade zone including members of two other African trade blocs, the East African Community (EAC) and the Southern Africa Development Community (SADC). Comesa is also considering a common visa scheme to boost tourism.

Current

  • Burundi (21 Dec 1981)
  • Comoros (21 Dec 1981)
  • Democratic Republic of the Congo (21 Dec 1981)
  • Djibouti (21 Dec 1981)
  • Egypt (6 Jan 1999)
  • Eritrea (1994)
  • Ethiopia (21 Dec 1981)
  • Kenya (21 Dec 1981)
  • Libya (3 June 2005, at the 10th COMESA summit)
  • Madagascar (21 Dec 1981)
  • Malawi (21 Dec 1981)
  • Mauritius (21 Dec 1981)
  • Rwanda (21 Dec 1981)
  • Seychelles (2001)
  • South Sudan (2011)
  • Sudan (21 Dec 1981)
  • Swaziland (21 Dec 1981)
  • Uganda (21 Dec 1981)
  • Zambia (21 Dec 1981)
  • Zimbabwe (21 Dec 1981)

Former

  • Lesotho (left in 1997)
  • Mozambique (left in 1997)
  • Tanzania (left September 2, 2000)
  • Namibia (left May 2, 2004)
  • Angola (Suspended itself in 2007)

(image: Map of Africa indicating COMESA membership. Dark green = current members, light green = former members)