Thursday, January 27, 2011

Indian Firms on the Scramble for Africa

Mumbai/Johannesburg - Indian consumer goods makers are scrambling to buy assets in Africa, applying their knowledge of challenging, lower-income markets to a continent where spending power is on the rise.

Tapping Africa opens up new growth avenues for cash rich Indian makers of personal care products such as soaps, shampoos and hair and skin care products, with rising costs and fierce competition squeezing profits at home.

"We are a homegrown multinational from a developing economy," said Jimmy Anklesaria, executive vice-president for international operations at Godrej Consumer. "Our ability to understand consumers in developing economies is sharp."

Godrej bought Nigerian personal care products maker Tura last year for about $33m, according to analysts. It has also bought haircare brands Rapidol and Kinky in South Africa over the past two years, and is on the hunt for more acquisitions.

Companies and countries looking to buy up its natural resources has long dominated foreign investment in Africa.

Two blockbuster deals last year - India's Bharti Airtel paid $9bn for the African cellular assets of Kuwait's Zain and Walmart's deal to buy South African retail chain Massmart Holdings [JSE:MSM] for $4bn - show the allure of the continent's rising spending power.

That potential market has intrigued Indian makers of consumer goods such as Godrej, Dabur India, Marico and Emami, which have been among those buying up assets.

"There will be many more acquisitions made by Indian companies in the consumer space in the coming months," said a senior banker with Indian investment bank, which recently advised an Indian firm on a M&A deal in Africa.

"We can expect some mid-sized acquisitions in early 2011."

Rising spending power

African consumer spending will nearly double to $1.4 trillion by 2020, while the number of households in Africa with discretionary income will rise by 50% to 128 million over the same period, a recent McKinsey report predicted.

Indian companies hope to use their experience developing and selling products in markets where affordability is crucial to compete with global players such as Anglo-Dutch giant Unilever, which recently struck a deal to buy Sara Lee Corp's operation in Kenya.

"Africa is currently witnessing growth rates that India witnessed about 10 to 15 years back," said Anand Raghuraman, partner and director at the Boston Consulting Group.

A sizeable population of Africans of Indian origin in eastern to southern Africa give Indian companies an advantage over global competitors, including China.

Whereas global players sometimes sell one-size-fits-all products, Indian manufacturers often adjust their offerings to suit local tastes and spending habits.

"The product portfolios of Indian companies are tweaked to suit local needs," said Debashish Mukherjee, principal with consultancy AT Kearney.

India was the most acquisitive company in sub-Saharan Africa in 2010, accounting for a third of the total value of deals done in the region, according to Thomson Reuters data. That was due mainly to Bharti Airtel's purchase of Zain's African assets.

Risks and growth

Risks to Indian firms making acquisitions in Africa include overpaying in the competition for scarce attractive targets. Both the Bharti and Walmart deals were widely seen to be expensive.

Africa also remains price sensitive, so a spike in commodity prices would squeeze margins.

"In low-income countries, consumers spend a high proportion of their income on food and if prices shoot up as they did in 2007/08, they will immediately stop buying anything that's not essential," said Boris Planer, research director at Planet Retail.

Still, Indian consumer goods firms active in Africa expect growth of between 25% to 30% from their operations there, and expect opportunities to move beyond personal care to household care and over-the-counter healthcare products in coming years.

"Among all the Indian companies who are moving into Africa, Godrej and Dabur are best positioned to benefit maximum from the Africa story," given the early-mover advantage, said Shirish Pardeshi, a senior sector analyst with brokerage Anand Rathi.

There is plenty of Indian competition for African assets.

Emami, which won board approval in October to invest $1bn to buy assets overseas and in India, is looking for more deals in markets including South Africa, Kenya and Nigeria, Group Director Harsh Agarwal told Reuters.

Marico, with cash of $480m, said it is looking to buy assets in North Africa and South Africa, while Godrej, with cash of $537m as of end September, continues to hunt for buys across Africa.

Dabur, one of the most active Indian players in Africa, is sitting on cash reserves of $873m and recently brought out US-based personal care products maker Namaste Labs and its two African units for $100m.

It is looking for assets in the $10m to $50m range in South Africa, Nigeria, Kenya, Ghana, Mozambique and Tanzania, said its CEO Sunil Duggal.

"Africa is a good hedge for what is happening in the Indian markets, and now asset valuations there are attractive compared to India," he said.


Wednesday, January 26, 2011

South African Taxpayers up 73%

THE number of individual taxpayers in SA surged from 3,4-million in 2002-03 to 5,9-million in 2009-10, an increase of 73%, the South African Revenue Service (SARS) said yesterday.


The total number of companies registered for tax increased from 815000 in 2002-03 to 1,9-million in 2009-10 , an increase of 131%, a study released by the South African Institute of Race Relations (SAIRR) yesterday confirmed.

SARS collected R598,5bn for the 2009-10 financial year. While this was R8,1bn more than estimated at budget time in February, it was R27,07bn less than the R625,57bn collected in the 2008-09 financial year, a decline of 4,3%.

This was the first time in decades that total revenue was down.


The second-biggest contributor to state revenue in 2009- 10 was VAT , which contributed 25%. Corporate income tax contributed 23%.


Monday, January 24, 2011

South Africa's brain-drain generation returning home

Courtesy CNN

JSE hits all time high trading volumes

The JSE said on Monday that in spite of increased global uncertainty and the additional focus on the regulation of financial markets, the FTSE/JSE All-share Index (Alsi) rose 13.86% from December 2009 to December 2010.

It reached a high of 32 210 trades towards the end of December 2010.

"For 2010, daily average trades increased 13% to 94 656 trades compared with the corresponding period in 2009. That equates to a total of transactions for 2010 at 23 758 658, compared with 20 950 750 and 17 398 986 recorded in 2009 and 2008 respectively," it said.

Trades hit a record in June, when 205 748 transactions valued at more than R20bn were recorded on the exchange.

"This is the first time in the JSE's 123-year history that the number of trades has crossed the 200 000 mark. The previous record was set on May 7 2010, when 189 253 transactions were recorded. The rise in 2010's average daily trade numbers contributed to the record," it said.

The JSE said that SA's ranking in the World Economic Forum's 2010/2011 Global Competitiveness Review - as the world's best regulated financial market - bodes well for offshore interest in JSE capital markets.

A new equities market billing model, introduced in March 2010 in a bid to create incentives for high-volume and high-value participants, contributed to the increased trade.

"A further change will be implemented on February 1 2011, where the current minimum of R5.48 will be reduced to R5 and the ceiling amount of R12.34 will be increased to R18. This would be a second step towards moving to a more value-based billing model," said Leanne Parsons, head of the equity market at the JSE.

Retail growth focus

Volatility in the market could have also contributed to the increased trade, it said.

It would continue to encourage individual or retail investments.

"The JSE views the South African retail market as a long-term growth area and continues to pursue its strategy of increasing the financial knowledge of South Africans with the aim of growing the number of retail investors and adding to trade volumes," said Parsons.

The JSE said that while foreign investor interest in its equity market had waned from the record inflows of 2009, strong inflows continued.

By end-November 2010, foreigners were net buyers of local equities to the value of R31.4bn.

The increasing appetite for Africa as an investment destination is yielding results and in the first six months of 2010, total investment fund allocation to Africa was a record $1.39bn, according to investment research firm EPFR.

"The JSE's Africa strategy is aimed at contributing to the improvement of Africa's capital markets. The exchange's Africa board offers a destination for trade of quality African companies, acting as a gateway for investors wanting to access African securities," it said.

Falling poverty makes Africa a better bet

EMPIRICAL evidence demonstrating that poverty and inequality in Africa are falling isn’t only good news for politicians, it is good news for investors and potential investors too. The world economy has shifted to a point at which emerging markets, and particularly African markets, can no longer be treated as pariahs.

In their research paper released last year (available here), Xavier Sala-i-Martin and Maxim Pinkovskiy of the department of economics at Columbia University in New York demonstrate that "African poverty is falling, and is falling rapidly". They further show that, contrary to popular belief, income inequality is decreasing. These results go against the United Nation s finding in 2009 that "poverty continues to intensify".

Although Martin Ravallion of the World Bank takes issue with the confidence with which claims of a downward trend in poverty are being presented, he agrees that such evidence is emerging. There is no contention about the relationship between economic growth and poverty. As Richard Adams of the World Bank showed in a policy research paper in 2003: "Growth represents an important means for reducing poverty in the developing world." He says there is a strong statistical link between growth and poverty reduction

Over the past decade, economic growth in Africa has increased substantially. While the developed world slipped into recession, contracting 3% in 2009, African economies grew almost 2%. This year, most African countries will achieve growth of more than 5%, while the world economy will struggle to reach this mark.

In a research report released by the McKinsey Global Institute, Africa’s collective gross domestic product (GDP) was estimated at 1,6-trillion in 2008, and predicted to grow by 1- trillion by 2020, with consumer spending reaching 1,4-trillion. This would mark significant progress in fighting poverty in Africa.

Unlike major economies such as Japan, the US and even France, which have pronounced problems with working populations, Africa will have a working population of 1,1-billion by 2040, while per capita income would have risen from today’s 1600 to 2100 over the next 10 years.

National debt and debt management have improved for African countries — with the help of the International Monetary Fund (IMF) and other initiatives, which led to improved financial management. Many African economies now have national debt of less than 50% of GDP, and therefore below the IMF and World Bank thresholds. Botswana, Ethiopia, Ghana, Nigeria and Angola had debt-to-GDP ratios of less than 40% in 2009 while much of the developed world buckles under its debt burdens.

On the political front, more than 18 emerging African countries are putting behind them the scourge of conflict, stagnation and dictatorships, and have achieved steady economic growth, deepening democracy and political stability. Steven Radelet of the Centre for Global Development makes the following observation in his book, Emerging Africa: "(The) aggregate continent-wide approach is overdone. It combines improvements in one country with deterioration in another, and concludes nothing is changing when quite the opposite is true."

Economists and other social scientist have always understood that poverty and inequality are the breeding ground for social and political unrest and conflict. Thus, as these conditions improve, we should expect more stability and security.

This stability will allow for less investment risk. The rates of investment in Africa suggest investors are starting to see these conditions unfold. In 2008, more than 20 African countries received at least 500m each in investment, and returns on investment in Africa have exceeded those in the rest of the world. Last year, reports show that foreign direct investment and portfolio investment into African economies surged.

The shift in the growth profile of the world, the improvements in the historical profile of Africa with regard to poverty, inequality and political stability, as well as the growing relations between Africa and a growing Asia, should be points of interest to investors this year and in the years to come.


Britain's JLT to ramp up South African operations

The decision to establish a new company in South Africa follows many years of trading in the country, including a 3 year partnership with Glenrand MIB, which will now end following their expected takeover by a competitor.

JLT's entry into the market underlines its belief in the growth potential of South Africa both domestically and as a hub for the African continent. This development will provide clients with access to JLT industry specialisms in areas such as construction, natural resources, marine, financial risks, life sciences and telecommunications. In addition, the new operation will also offer both facultative and treaty reinsurance capabilities.

Direct Link

Thursday, January 20, 2011

Visualizing the Corruption Perceptions Index

Source: Transparency International

Socialism and (A)Effects


Think twice before plunging SA into a frenzy of state ownership

Published: 2011/01/20 06:58:53 AM

DON’T get me wrong. I hold no brief for capitalists, nor do I bear a hatred of socialists, for that would run against the grain of a true liberal democrat. But it has to be admitted that capitalism is an amazing engine that creates wealth and jobs, adding more value to all aspects of human welfare as measured by the human development index.

I also have no problem with leftist dogma as long as it is confined to infantile student rebellions.

But when political leaders who bask in the glory of capitalist gluttony start talking about nationalisation, I am tempted to portray socialism as an effigy of hell. "They disguise plunder, cleverly concealing it from all eyes, even their own, under the seductive names of fraternity, solidarity, organisation and association", as 19th-c entury French economist Frederic Bastiat described such leaders.

We Zimbabweans are the modern- day test tubes of socialist carnage. I have first-hand experience of how leftist ideologues experiment with political doctrines that subvert human dignity.

Consider the destructive "land nationalisation" — a crude ideological brand that has left us licking our wounds in an inaccessible part of the food-security dungeon. Thus, I have good reason to fear the state.

When socialists talk about "nationalisation" or "state control", they always portray an abstract scenario in which the fate of citizens is in the hands of a purportedly "loving, responsible government". Full -blown socialism tends to blossom into "Hugo Chavez -type" authoritarian dictatorship. The state, which has at its disposal a formidable arsenal and "law", tends to use coercive measures as a legitimate extension of its mandate. That "great fictitious entity by which everyone seeks to live at the expense of everyone else", says Bastiat of the state. Like US economist Murray Rothbard, I do not see how a government can successfully nationalise anything without being the aggressor that violates property rights.

Let’s face it, all human beings are social animals but not all act like animals in the negative sense. The frightful thing is that the ruling socialist elite has animal instincts — the survival of the fittest spiked with an insatiable desire for self-aggrandisement.

In my country, we were under a Marxist-Leninist spell that has accounted for all social, economic and political ills: 1-billion-percent inflation; 4- million citizens in exile; not one free and fair election in 30 years; hospitals closed due to a lack of electricity, water and drugs; 4000 citizens dispossessed of their land for "historical reasons".

If Karl Marx conceived socialism, Lenin perfected it, Stalin and Mao Ze dong gave it teeth and Zimbabwe’s Zanu (PF) packaged it.

My message to SA is that collective ownership, whether state-sponsored or co-operative, is a fallacy that promotes noncommittal behaviour, cronyism and corruption. It’s like a village well or a public toilet. No one is in charge, so no one cares, except vagrants.

Where there is a lack of private property, innovation is suppressed because there is no personal reward associated with hard work and the legitimate accumulation of assets. State intervention is largely driven by political or narrow business interests. SA’s Reconstruction and Development Programme (RDP) is nothing but vote- buying by the African National Congress (ANC) government. If it is on the ANC’s election manifesto, it will ride on the emotions of the "peasants" to justify plundering the fiscus in the name of the "common good".

Basic national economic theory dictates that socially driven budget deficits are a result of an over commitment to nonproductive activity. This "crowding out" effect manifests in a shortage of capital, high interest rates and a declining investment.

Besides, true ubuntu is a sense of pride and completeness in the ability to do one’s "own things" without uMalume (uncle) always tapping you on the shoulder. So if uMalume (the government) is going to build your house, create jobs, subsidise your school fees, pay your hospital bills, subsidise your electricity bills and build your roads, he obviously wants your vote in return. Socialism takes away freedoms. This has been proved wherever socialism has been implemented. You owe the state a favour. A large body of unemployed, complacent, urban peasants in a permanent state of expectation is slowly created. It is what the ANC Youth League refers to as a "time bomb".

When Economic Development Minister Ebrahim Patel refers to a "New Growth Path" that "does see a role for a strong and focused state, but we see the biggest job creation will come from sectors where the private sector has the key levers", it is reassuring.

Blogger Dave Shell puts it better: "Governments do not create jobs, people create jobs. What government is mandated to do is to provide the space within which individuals with vision and energy and a desire to roll up their sleeves and get down to work can create wealth for themselves and those whom they employ and the country as a whole." Yet it seems President Jacob Zuma , hounded by his left-leaning partners, has little room to manoeuvre.

But SA is luckier than Zimbabwe because the Convention for a Democratic SA left a legacy of honest debate. However, if it is true that the Congress of South African Trade Unions, the ANC Youth League, the South African Communist Party and all their leftist sympathisers determine who rules SA, SA may well experience another "refined" form of nationalisation.

There are 35-million South Africans who want bread on the table, so they ought to think twice before plunging the country into a frenzy of state ownership. Central and provincial governments must play a "limited" role as regulator. Laws that encourage freedom of investment, ownership and innovation should be their focus.

People must appreciate the difference between political manifestos and reality. Private sector-driven industrialisation encourages full employment and an expanded working class that pays taxes, buys property and saves money to drive domestic capital. Small- scale industry grows the middle class that supports consumption and manufacturing. Social safety is possible only when the fiscus is healthy. Corporate social responsibility encourages investment that prioritises housing, health, environment and social welfare.

What happened to the RDP, the Growth, Employment and Redistribution plan and the Accelerated and Shared Growth Initiative for SA? My answer: governments don’t deliver, they devour.

- Ngwenya is the Zimbabwean founder of the Coalition for Liberal Market Solutions.


Wednesday, January 19, 2011

Why South Africa is Relevant

Merger and Acquisition activity targeting Sub-Saharan Africa companies grew in 2010 to a record $44 billion according to research published by Thomson Reuters.

The 2010 Sub-Saharan Africa Investment Banking Analysis says South Africa was both the most targeted Sub Saharan country accounting for 54% of activity, as well as the most acquisitive nation in 2010 with 93% of the deals. At the same time, investment banking fees in 2010 dropped 15% compared to 2009 to US$302 million.


See the Thomson Reuters report here.

Tuesday, January 18, 2011

Louis Dreyfus acquires African fertiliser company

Geneva - Commodities trading firm Louis Dreyfus has acquired fertiliser company SCPA-Sivex International to help increase its presence in Africa, it said on Monday.

“The acquisition is a major step in the group's development in the Middle East and Africa,” LD Commodities said in a statement released in Geneva, a hub for raw materials trading.

SCPA-Sivex International, or SSI, was a unit of the French company Entreprise Miniere et Chimique. It is a leading distributor of crop protection and chemical products in West Africa, according to the Louis Dreyfus statement.

“The combined entity, LDC-SSI, will be one of the key agri-business players in Africa with solid potential for future growth and diversification,” it said, without disclosing a price for the purchase.

Louis Dreyfus is one of the world's largest commodities houses, trading in grains, oilseeds, cotton, sugar, rice and citrus fruit. - Reuters

Toyota ups investment in Gauteng

Toyota South Africa Motors plans to invest R363-million in a new parts distribution warehouse in Ekurhuleni, its largest investment in Gauteng.

The investment follows and will support Toyota SA’s R8 billion investment over the past five years in its manufacturing plant in Prospecton, in Durban.

Direct Link

Monday, January 17, 2011

Wal-Mart deal to buy 51% of Massmart approved

Shareholders in South Africa's Massmart Holdings Ltd. agreed Monday to sell a controlling stake in the African retailer to Wal-Mart Stores Inc. for $2.39 billion.

The proposed acquisition marks the Bentonville, Ark.-based retail giant's first foray into the growing sub-Saharan African market. However, the deal faces opposition from labor unions concerned at what the possible "Walmartization" of the local retail industry.

Source: WSJ

More on the deal:

IF ANYONE still questions whether Africa really is the next big investment play, at least one seriously big hitter, the world’s largest retailer, has no such doubts. Wal-Mart’s $2,3bn offer for 51% of SA-based Massmart is the Arkansas- based company’s second biggest investment in more than a decade. In that time, Wal-Mart has grown its non-US revenue from virtually zero to a quarter of its annual 400bn turnover.

The significance of this investment — and let’s not forget Wal-Mart was prepared to stump up double the amount for all of Massmart — has not been lost on audiences in SA or elsewhere. Recently, for instance, the Daily Record newspaper reported that farmers in far-off Uganda were likely to benefit from the deal. It predicted Wal- Mart would "extend its experience in connecting farmers with the supermarket’s global supply chain, boosting farmer incomes, and (helping) them improve the quality of their produce".

Direct Link: Business Day

Wal-Mart deal to buy 51% of Massmart approved

Shareholders in South Africa's Massmart Holdings Ltd. agreed Monday to sell a controlling stake in the African retailer to Wal-Mart Stores Inc. for $2.39 billion.

The proposed acquisition marks the Bentonville, Ark.-based retail giant's first foray into the growing sub-Saharan African market. However, the deal faces opposition from labor unions concerned at what the possible "Walmartization" of the local retail industry.

Source: WSJ

Friday, January 14, 2011

Those in the Know, Always Knew

ANC backtracks on media tribunal


The African National Congress (ANC) has temporarily backed down from its fervent call to establish a media appeals tribunal, but is adamant the press council must reform its rules to include the imposition of fines, in addition to the publication of apologies, for newspapers' mistakes.

President Jacob Zuma did not mention the media tribunal in his January 8 address in Polokwane and instead appealed to the print media to "speed up its transformation processes".

This week one of the staunchest supporters of the tribunal, ANC spokesperson Jackson Mthembu, said the ANC had toned down its demands for a media appeals tribunal to give the media time "to reform" themselves. Self-regulation, previously dismissed by the ANC as inadequate, is now back on the table.

Said Mthembu: "We will give you the space to transform yourself and then see where it takes us."

If the press council imposed measures that "discourage irresponsible reporting" the ANC would stick to the current model of self-regulation, he said. Although Mthembu would not venture to suggest the measures the ANC would consider adequate, he did say that international examples should be considered.

In India and Denmark the law provides for the fining of journalists in extreme circumstances.

Brief relief
The media heaved a collective sigh of relief when Deputy President Kgalema Motlanthe assured editors at a meeting in October that sufficient reform of the self-regulation model would keep the media tribunal at bay. But shortly afterwards Zuma threw a spanner in the works by again maintaining there was a need for a tribunal.

Zuma told a crowd of ANC supporters in Stellenbosch: "That is why the ANC called for the exploration of the need for a media tribunal. The organisation will continue processing the resolutions of both Polokwane and the NGC [national general council] in Durban in this regard."

The threat of a tribunal, backed by a Polokwane resolution that asks for the possibility of such a tribunal to be investigated, will remain. "If we feel [reform] is falling short we'll continue to do what we set out to do," Mthembu warned this week.


Shortly after the national general council of the ANC in September last year, the ruling party was adamant that it would initiate a parliamentary process to devise laws providing for the establishment of a tribunal.

It was originally envisaged that the body would consist of representatives from various groups in society and have the powers to force journalists and newspapers to pay fines if information printed was incorrect.

In July last year Mthembu was adamant there should be even harsher punishment for errant journalists. "If you have to go to prison, let it be. If you have to pay millions for defamation, let it be. If journalists have to be fired because they don't contribute to the South Africa we want, let it be," he told the Mail & Guardian.

Under pressure
Mthembu said the parliamentary process had been put on hold until the conclusion of current processes aimed at strengthening self-regulation.

Press Ombudsman Joe Thloloe said the ANC had backed down from its original proposal because of the ruling party's numerous engagements with editors and media professionals, as well as public pressure.

The media tribunal proposal drew an enormous response from all over the world, with Zuma being questioned about it at international summits. Inside South Africa various pressure groups, such as the Right2Know campaign, came into being and protest marches and petitions were the order of the day.

"The public has reacted strongly to the suggestion of a media tribunal and this led to the ANC toning it down," Thloloe said. The proposal to include fines in the sanctioning of errant journalists will be considered by the Press Council, which is receiving submissions on the reform of the council and its rules until March.

Several public hearings will be held in Johannesburg, Cape Town, Bloemfontein, Port Elizabeth and Durban, after which new proposals will be adopted by the council with the approval of its constituent members, which include the South African National Editors' Forum and Print Media South Africa.

Thloloe said all proposals must meet the criteria of strengthening journalism and being practically implementable. Although Mthembu did not attach any time frame to the process, Thloloe said it would probably take up most of this year.

Courtesy Mail & Guardian

Thursday, January 13, 2011

Africa Rising

There's a new gold rush under way for the African consumer, a campaign that spans the continent and aims to reach an emerging middle class. These are the people who have begun to embrace cellphone messages, restaurant meals and trips down supermarket aisles.

In Kenya, a battle between units of Britain's Vodafone Group PLC, and India's Bharti Airtel Ltd. has driven down the consumer's cost of a text message to a penny. Yum Brands Inc. of the U.S. recently said it wants to double its KFC outlets in the next few years to 1,200.

And Wal-Mart Stores Inc. has agreed to pay nearly $2.5 billion to buy 51% of South Africa's Massmart Holdings Ltd., with plans to use the discount retailer as a foothold for continental expansion. Andy Bond, Wal-Mart's regional executive vice-president, describes the potential as a "10- to 20-year play."

Who's Buying?

Read profiles of three African consumers

Ethiopia's Consumer Class

Per-Anders Pettersson For The Wall Street Journal

A young women tries a pair of red Prada sunglasses at the "Lady Shop"in a shopping mall in Addis Ababa, Ethiopia.

Africa's New Wealth

See a timeline of foreign investment in Africa.

A New Gold Rush

See a map and country-by-country facts on African economies.

Some analysts believe a billion-person continental market already has arrived. Consultancy McKinsey & Co. says the number of middle-income consumers—those who can spend for more than just the necessities—in Africa has exceeded the figure for India. The firm predicts consumer spending will reach $1.4 trillion in 2020, from about $860 billion in 2008.

While Africa's resource wealth continues to lure the bulk of foreign investment, the rise of that new consumer class is beginning to shift the balance. From 2000 to 2009, foreign direct investment to Africa increased sixfold to $58.56 billion, according to the United Nations Conference on Trade and Development. And that includes a sharp drop during the global financial crisis, from $72.18 billion in 2008.

A growing percentage of foreign direct investment has been going to sectors such as manufacturing and services, with the value of mergers and acquisitions in the manufacturing sector hitting a record $16 billion in 2008.

While overall investment in Africa slowed in 2009 amid the global economic downturn, investment in the services sector picked up, boosted by Vodafone's $2.4 billion increase in its stake in South Africa's largest mobile-phone operator by subscribers.

High commodity prices have helped sustain robust expansion in Africa's resource-rich economies. And with that, better infrastructure, improved governance and the creation of jobs through private investment have helped drive the growth of the middle class.

The International Monetary Fund estimates that gross domestic product in the 47 countries of sub-Saharan Africa rose 5% last year and forecasts 5.5% growth for this year.

But there's still a long way to go before Africa becomes the next Asia. Zimbabwe's economy contracted by half from 2000 to 2008, a period of sustained political turmoil for a country that once was the breadbasket of southern Africa. And cocoa producer Ivory Coast is embroiled in the continent's latest election dispute, with two candidates claiming to be president.

Poverty remains rampant. And Africa ranks at the bottom of the World Bank's Ease of Doing Business survey, which takes into account such things as taxes, enforcing contracts and protecting investors.

Many African governments are under pressure to create jobs, even if it requires giving foreign companies a greater role in domestic economies.

That's a major hurdle for African governments still grappling with a colonial past. From the 16th to the early 20th centuries, Africa was the source of an estimated 11 million slaves in Europe and the Americas.

Trevor Manuel, the head of South Africa's planning commission, says the sometimes-arbitrary boundaries set by former European colonial powers have disrupted efforts to knit together economies even in places, like West Africa, where people share a common language. "Rationally, we should be one market," says the former finance minister.

A study last year on West African transportation by the U.S. Agency for International Development found that Togo had 5.7 checkpoints per 100 kilometers, at which a total of $25.62 in bribes were demanded resulting in more than two hours of delays. In neighboring Benin, the checkpoint waits weren't as long but truck drivers had to pay about $95.03 in bribes per 100 kilometers.

The Next Continental Shift


Multinational corporations are racing to make the most of Africa's burgeoning middle class. With reporters on the ground there, a Wall Street Journal series examines the changes.

In Friday's edition, read about how Indian and British mobilephone companies are battling to win subscribers in Kenya.

Later: how African entrepreneurs are capitalizing on growing demand for used American cars in Nigeria, where young professionals want to avoid perilous public buses.

Read More

As a result, some veteran Africa watchers are skeptical about how quickly a bet on the continent's consumer will pay off.

"Where is the money tree? Where is this consumer fruit?" asks Duncan Clarke, chairman of Global Pacific & Partners, an investment advisory firm specializing in oil and gas.

In the near term, Mr. Clarke and others believe Africa's most promising opportunities won't be found in its new shopping malls but beneath its soil and sea beds, where big oil and global miners have long toiled.

Many consumer giants are more sanguine. Drinks company Diageo PLC sells Guinness stout, Smirnoff vodka, Baileys liqueur and Johnnie Walker whiskey in more than 40 countries across Africa. Chocolate maker Nestlé SA, which built its first plant in Africa in 1927, has more than two dozen factories on the continent.

Growth is changing the complexion of countries where these companies operate. In Ethiopia, which still receives about a billion dollars a year in U.S. aid, there's an expanding niche of young urban professionals. The country's economy has been growing at a double-digit clip powered by services, agriculture and infrastructure building for the past half-decade.

The growth has drawn back the Ethiopian diaspora, who had fled the famine-prone country. They are returning now with expertise and capital.

"I do believe we are on the cusp of a major transformation," says Eleni Gabre-Madhin, a former World Bank official who now heads Ethiopia's first commodities exchange.

—Robb M. Stewart
contributed to this article.

Written by Peter Wonacott of the Wall Street Journal

Wednesday, January 12, 2011

Heineken Buys 5 Breweries in Nigeria

Heineken NV, the world's third-largest brewer, acquired controlling interests in five breweries in Nigeria, expanding its capacity by nearly a third in the fast-growing African market.

The acquisition would bring additional capacity of 3,7-million hectolitres to alleviate capacity constraints in the market and to improve the geographic spread of its production.

Heineken, the largest brewer in Western Europe, has been steadily increasing its presence in faster growing developing economies, notably with last year's purchase of the beer business of Mexico's Femsa.

Heineken, which currently has a capacity of about 12-million hectolitres in Nigeria, said in a statement that it had bought two holding companies from drinks and packaging group Sona Group, Nigeria, for an undisclosed amount.

This had given it controlling stakes in the Sona, IBBI, Benue, Life and Champion breweries, which currently brew brands such as Goldberg, Williams Dark Ale and Malta Gold.

Heineken in 2009 had a share of 64% of the 16,5-million hectolitre Nigerian beer market, the second largest market in Africa and growing at an annual rate of 9% in the 10 years to 2009.

"This important move reflects Heineken's strategy of increasing our exposure to and growth from developing markets. Nigeria is one of the world's most exciting beer markets and one of the most important countries for Heineken," Heineken's Africa and Middle East chief Tom de Man said. -- Reuters

Foreign Purchasers on Nigerian Stock Exchange Double

The Nigerian Stock Exchange, NSE, yesterday announced that the Foreign Portfolio Investment, FPI, in the market has risen to N381.34 billion in 2010, from N202.483 billion recorded in 2009, representing a growth of 46.9 per cent.

Foreign Purchasers on Nigerian Stock Exchange Double

The Nigerian Stock Exchange, NSE, yesterday announced that the Foreign Portfolio Investment, FPI, in the market has risen to N381.34 billion in 2010, from N202.483 billion recorded in 2009, representing a growth of 46.9 per cent.

Tuesday, January 11, 2011

Investors wake up to Africa

Walmart's entry into Africa through the purchase of a majority stake in Massmart reflects a significant change in the attitude of global investors to the continent. African nations are being recognised as consumers -- modest consumers in the global context, but consumers nonetheless

As World Cup and vuvuzela euphoria gripped the globe in mid-2010, investment bank Goldman Sachs released a report on the potential of the continent. It compared Africa's potential growth with those of the Bric nations -- Brazil, Russia, India and China -- and the Next 11 (N-11), the most populous emerging countries after the Brics.

While not outstripping the performance of the Bric countries individually, the top 11 countries in Africa -- both in population and GDP -- could together become larger than both Brazil and Russia by 2050, the report found.

Monday, January 10, 2011

South African Economy forecast to grow at 5% thru 2050

The South African economy is expected to be ranked seventh globally in terms of its real average annual growth rate between 2009 and 2050, growing faster than Brazil and Russia in dollar terms.

However, it is likely to fall out of the top 20 economies by 2050, as Nigeria and Vietnam move up the rankings, according to a study by global business services company PricewaterhouseCoopers released on Friday.

The report, The World in 2050, concluded that the financial crisis of 2008 had accelerated the shift in global economic power to emerging economies, with China likely to overtake the US as the biggest economy by 2050.

The study projected SA’s real economic growth rate to average 5% annually between 2009 and 2050, its population to rise by an annual average of 0,3%, its gross domestic product (GDP) per capita by an average 3,6% a year and for it to experience an average annual growth rate of 1,1% due to changes in exchange rates.

The estimates were made in dollar terms — taking into account the effect of real exchange rate changes relative to the dollar — and in terms of domestic currency and purchasing power parity.

SA’s projected growth rate compared with Vietnam’s 8,8%, India’s 8,1% , Nigeria’s 7,9% , China’s 5,9% , Indonesia’s 5,8% , Turkey’s 5,1% , Brazil’s 4,4% , Russia’s 4% , Australia’s 2,4% , and less than 3% for the Group of Seven.

The E-7 emerging economies (China, India, Brazil, Russia, Mexico, Indonesia and Turkey) are likely to overtake the G-7 (the US, Japan, Germany, UK, France, Italy and Canada) before 2020 if GDP is measured using purchasing power parity , which corrects for price levels tend ing to be lower in emerging economies.

The shift in the global economic order would be slower but just as inexorable if GDP were measured on market exchange rates. The E-7 economies were projected to overtake the G-7 in 2032 and China to overtake the US in the same year, although on a purchasing power parity basis this would probably occur in 2018.

By 2050 the E-7 economies would be about 64% larger than the current G-7 when measured in dollar terms at market exchange rates — now they represent about 36% of the G-7 — or about twice as large in purchasing power parity terms (currently 72% on this basis). China, despite its projected market growth slowdown, was expected to be 35% larger than the US by 2050 at market exchange rates, or 57% larger in purchasing power parity terms.

"The key drivers of the E-7’s growth are China and India, although the former’s growth will slow down progressively due to its significantly lower labour force growth arising from its one-child policy. India’s growth will remain fairly strong even in the last decade of our projections."

Summing up the shifts in global economic power, the report said "this changing world order poses both challenges and opportunities for businesses in the current advanced economies".

"On the one hand, competition from emerging market multinationals will increase steadily over time and the latter will move up the value chain in manufacturing and some services (including financial services, given the weakness of the western banking system after the crisis).

"At the same time, rapid growth in consumer markets in the major emerging economies associated with a fast-growing middle class will provide great new opportunities for western companies that can establish themselves in these markets.

"These will be highly competitive, so this is not an easy option — it requires long-term investment — but without it western companies will increasingly be playing in the slow lane of history ".

Source: Business Day

Saudis to build $100m in Mozambique

Saudi Arabia's Rani Investment Group said on Monday it would break ground on a $100m resort on a Mozambique island next year, aiming to cash in on foreign tourists.

Construction will begin on Santa Carolina island in the picturesque Bazaruto archipelago off central Mozambique's Indian Ocean coast, said Rani's Mozambique representative Rui Monteiro.

"It will cost in the region of $100m ," he said.

Mozambique's long coastline, pristine beaches and warm climate are increasingly popular tourist destinations. The Bazaruto islands form a marine national park and are famous for their unspoilt scenery and coral reefs.

Rani is the biggest tourism investor in the country, with various resorts in other provinces. The Santa Carolina project will include a 100-room hotel, 24 apartments and vacation houses as well as a dock on the mainland.

Mozambique's tourism ministry this year approved projects worth more than $650m from January to September alone excluding the Bazaruto project, up 60% from the same period in 2009.

Visitor numbers to the country have increased from 711 000 to three million over the past six years.

Source: Fin24

Hello Africa, India is Calling

Millions of mobile phone subscribers in Africa saw the icon on their phone screens change from Kuwaiti company Zain to Indian company Bharti Airtel last year.

The change means little to the average customer, but for the continent, it's another sign that India is moving in.

The expansion by Bharti Airtel into 16 African countries underscores the rise of India in Africa, at a time when much of the focus on foreign investment here has been on China.


India and China are vying for Africa because of the bottom line: Africa represents new growth.

"This is the last growth continent in the world. Europe is a done industry. The US is a done industry. Southeast Asia is old," said Sunil Mittal, founder and chairperson of Bharti Airtel. "Our model is not suitable for a matured market. We need growth and Africa is the right place to grow."
Continue to full story...

Thursday, January 6, 2011

The Lion Kings

MUCH has been written about the rise of the BRICs (Brazil, Russia, India and China) and the shift in economic power eastward as Asia outruns the rest of the world. But the surprising success story of the past decade lies elsewhere. An analysis by The Economist finds that over the ten years to 2010, no fewer than six of the world’s ten fastest-growing economies were in sub-Saharan Africa.

Read the full story here (The Economist)

Tuesday, January 4, 2011

More math students taking higher level exams

REMARKABLE in this year’s Independent Examination Board (IEB) matric results is the growth of the numbers of candidates who wrote two mathematics exams that neither examine official matric work nor are required for entry into university.

Mathematics paper three and Advanced Programme Mathematics (APM) gave those who passed them an edge at university, IEB CEO Anne Oberholzer said yesterday.

Higher Education SA CEO Duma Malaza agreed, saying both subjects were "useful preparation" for university-level study and therefore "quite important".

The IEB results were released this morning , showing that 98,38% of this year’s 8285 IEB exam writers passed, 81,53% well enough to study at university.

A total of 641533 candidates wrote the state-set matric exams. Their results are to be released by Basic Education Minister Angie Motshekga on Thursday . Last year 60,7% of those who wrote the state-set matric exams passed, 19,8% well enough to study towards a university degree.

There was a 68,5% increase in candidates writing the IEB’s maths exam paper three, from 1414 candidates in 2008 to 2383 last year; and 40% growth over the same period in the numbers writing APM, which is likened to the UK’s A-level in maths.

Ms Oberholzer said despite neither subject being a prerequisite for maths-rich university programmes, there was a realisation that having a good maths base was useful in university . "Without a good maths base you can be in trouble, and it is easier to prepare for maths at school because it is a more nurturing environment."

While the girls at Johannesburg’s St Mary’s School, Waverley, were encouraged to study the curriculum for maths paper three, there was no need to encourage those who took APM, headmistress Deanne King said.

"Those girls who do AP maths just enjoy it. They are really good mathematicians ," she said.

Maths paper three was taught to all the matrics who had chosen to study maths instead of maths literacy at Johannesburg’s St Stithians Boys’ College, deputy headmaster Peter Wright said.

This was because the knowledge imparted was "very useful", and the boys had the option of not writing the final paper three exam, he said.

While the state sets its own maths paper three, the IEB sets the APM exam for both, and there was a "50-50 split" between the two in terms of numbers of matric candidates who wrote the subject, Ms Oberholzer said.

This year the IEB would pilot an advanced programme in English that would be fully implemented next year , she said.

While there was discussion on whether eventually to offer an advanced programme in physics and chemistry, a final decision on this would be taken later and there were no plans to offer advanced programmes in all matric subjects, Ms Oberholzer said.

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Richards Bay Coal Terminal exports increase

Richards Bay Coal Terminal Ltd., Africa’s largest terminal for the fuel, said shipments increased for the first year in five, climbing 3.8 percent to 63.43 million metric tons last year on growing demand from Asia.

Full story on Bloomberg...