Page 15 - Strat mag_africa_1st quarter

AFRICAN ISSUES: ECONOMIC GROWTH Sources of economic WORLD BANK VIEWS growth are being ON AFRICA diversified The World Bank said in February it was cautious about growth prospects in South Africa and forecast GDP growth would dip to 2,7% this year, but improve to the US firms up its ongoing plans for QE, but that there will be a return to greater 3,4% next year and 3,5% in 2016. market confidence once the American But the Global Economic economy adjusts and proves that it can, Prospects report published in indeed, survive and prosper without the January was more optimistic artificial stimulus of quantitative easing. about sub-Saharan Africa in He predicts this return to confidence will general, projecting regional GDP happen around the end of 2014. growth would strengthen to 5,3% this year (from a forecast 4,7% Economic diversification last year), rising to 5,4% in 2015 In the interim, Africa’s growth prospects and 5,5% in 2016. It believed this The Bank of China Tower (left) in Hong Kong. Africa’s growth will continue to be will be boosted by China – a key investor A decreased reliance on oil and mining is considered important for ongoing would be supported by domestic boosted by investment from the bank and other sectors of the Chinese economy in the continent – being unlikely to reduce broad-based development in Africa demand, driven by infrastructure its investment activity. According to investment and household Ashley Cameron, a senior Bank of China consumption. Although economic WHERE TO SEEK OPPORTUNITY representative in Africa, investment by are still sensitive to commodities, they It is already evident that growth in many development in many countries large state-owned and smaller private are no longer dependent on the countries is now being driven by internal Given that investment into Africa Dr Adrian Saville, Chief Chinese companies will continue as commodity price level for growth,” factors such as human capital, innovation in the Africa region would remain will continue despite the general Investment Officer of Cannon normal in 2014. He adds, however, the panel said. “This shift has been and knowledge, rather than harder-to- stronger than in several other slowdown in emerging markets, Asset Managers, agrees. There that there has been a subtle Chinese driven largely by increased government control external factors such as the export developing economies, poor where should businesses be seeking is no correlation between (a investment switch on the continent, spending and government investment of raw resources. physical infrastructure would opportunities and investors looking nation’s) population size and with a slight move away from mining in infrastructure. As Africa has started The sentiment is echoed by Dr Axel limit growth potential, the bank to put their money? economic and social wellbeing,” he and resources in favour of investment to generate its own growth, higher Schimmelpfennig, Senior Resident said. “Unreliable electricity supply Dr Martyn Davies, CEO of states emphatically. “You can be into the likes of logistics, manufacturing consumption levels signal that living Representative in South Africa for the and poor road conditions will emerging-market consultancy small and a success or big and a and finance. standards are improving as well.” IMF. “Africa has started to generate continue to impose high costs on firm Frontier Advisory and Senior disaster – or vice versa. Size A decreased reliance on oil and mining Davies believes that diversification its own growth momentum,” he says. business, reduce efficiency and Fellow of the MasterCard Centre doesn’t matter.” is considered important for ongoing is important for national economies, but “While there is investment based around impede intraregional trade,” the for Inclusive Growth in New York, But Saville warns that language broad-based development in Africa says the only two countries in sub- (commodity) exports, there are also report noted. believes there are two key sectors: and cultural differences are and a recent report by the International Saharan Africa to have successfully improved government policy frameworks World Bank Group President education and healthcare, along with significant hindrances to doing Monetary Fund (IMF) indicates that the achieved this to date are South Africa and a better approach to investment. Jim Yong Kim said developing their associated support services. business in some parts of Africa. continent is moving in the right direction and Mauritius. “Beyond those two, I’m “Consumer consumption is a by- countries needed to adopt “If there is a rising middle class “Linguistic and cultural distance in this regard, with only four of the battling to find an example,” he observes. product of this – but it means that structural reforms that promoted and there is rising urbanisation – are far greater obstacles than 12 fastest developing countries in Africa Similarly, the more the continent people’s standards of living are rising and job creation, strengthened but government systems remain regulation, legislation or policy,” now being dependent on these. moves away from its long-held tag as that, in itself, contributes to growth.” financial systems and shored impaired – then these are the two he notes. “So it makes sense for This was emphasised at a recent ‘the world’s mineral provider’, the more Also bullish on African growth, despite up social safety nets in order to necessities,” he says. English-speaking companies to go forum hosted by Dr Martyn Davies, CEO it will see structural changes to the the emerging market slowdown, is accelerate poverty reduction. Davies also cautions against to English-speaking jurisdictions. of emerging-market consultancy firm various national economies and achieve Dr Adrian Saville, Chief Investment Officer the default position of businesses The cultural distance between South Frontier Advisory and Senior Fellow of the its inherent economic potential, the Bank of Cannon Asset Managers. Saville believes seeking to enter a specific African Africa and Zambia is equivalent to MasterCard Centre for Inclusive Growth of China’s Cameron notes. the ‘rich’ world’s prospects of zero growth country purely on the basis of it the cultural distance between SA in New York. Panel members believed the He is supported in this view by in the next 10 to 20 years will continue to having a large population or being and the UK, for example. It will be long-term outlook for sub-Saharan Africa Dr Ernest Addison, formerly with the Bank spur global interest and investment in the well located geographically. The easier for a South African company was robust, with an increasingly high level of Ghana and now Lead Economist for the emerging market economies. Africa’s growth decision should rather be based on to do business in Zambia than in of diversified growth taking place. African Development Bank. According to He also believes Africa could be on prospects will be multiple synergies and ease of doing somewhere like (French-speaking) “Economies have to some extent Addison, the increasing structural changes the brink of an economic miracle. “It’s too boosted by China business, he believes. Ivory Coast.” diversified their sources of growth and to African economies will enable them soon to call it the African miracle, but we although sub-Saharan African countries to ride out short-term economic cycles. are on the cusp,” Saville says. “The 12 strategicmarketingafrica First quarter 2014 First quarter 2014 strategicmarketingafrica 13