December 30, 2010

Thoughts on 2010, and Predictions for the New Year

It would not be the end of a year without some reminiscing about what happened in the one that is ending and predictions about what will happen in the one that is to come. So let’s begin, but with a focus on the African investment climate. For brevity, I will highlight just five things from 2010 and ‘predict’ five for 2011.

For 2010:

1. South Africa showed the world that it could host – and host well – a world class event in a world class way. The 2010 FIFA World Cup not only introduced the world to the noisome vuvuzuela, but also to the wonderful graciousness that is South Africa. For many in the world, this was the first time they got to see the promise that is South Africa, and a better investment brochure could not have been written.

2. China’s government continued to channel billions of dollars of investment of all kinds throughout Africa, and continued to promote Africa – China trade. For many African countries, the willingness of the Chinese to fund infrastructure projects – roads, railways, power stations, schools, hospitals – through grants and low-cost loans without the burdensome transparency and governance restrictions imposed by the IMF and the West makes China the ‘go to’ country for such projects.

3. Other countries’ governments, notably India’s and Brazil’s, also began to target Africa for investment. India’s focus was mostly on infrastructure and oil and gas, while Brazil’s was more agriculturally based.

4. While Western governments decried China’s investment activity as ‘unfair’ or ‘morally questionable,’ Western companies acted. One of the most noteworthy investments of the year was Walmart’s $4 billion acquisition of the South African based mega retailer Massmart, which has 290 stores in 13 African countries.

5. African stock markets continued to grow in trading volume, number of listings, and number of participants, and they continued modernizing.

For 2011:

1. For better or worse, politics will dominate African news in the first part of 2011. In the Ivory Coast, the incumbent president, Laurent Gbagbo, defiantly refuses to recognize that he lost the election to Alassane Ouattara, and has rebuffed all pressure to end the situation peacefully. That it will end without more violence is doubtful. It is encouraging to note, however, that the 15 member Economic Community of West African States (ECOWAS) is on its own trying to solve the crisis.

2. The Chinese will continue to expand in Africa, and the expansion will broaden to include more Chinese companies (both state-owned and non state-owned)

3. Indian, Brazilian, and other non-Western investment in Africa will increase, as will trade. More Western companies, especially those in consumer products and cellular telephones, will begin to invest in Africa as well.

4. Regional economic cooperation within Africa will play a greater role. This just makes practical sense, and it already is being practiced in formal and informal ways in the three most recognized regions – East Africa, Southern Africa and West Africa. What will be interesting to watch is how much interregional cooperation gets discussed.

5. GDP growth in all of Africa will exceed, on a percentage basis, gdp growth in Europe and the United States, so it will continue to be a good place to invest. As a continent with over 50 countries in it, however, there will be some ‘winners’ and some ‘losers’, so a smart person will know to seek expert advice about just where an investment should be made.

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