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Answered: - Research paper; making a case for investing in Africa
Research paper; making a case for investing in Africa
Research Paper on Making a case for investing in Africa
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Table contents
1.0. Overview.................................................................................................................................. 3
2.0. Abstract ....................................................................................................................................3
3.0. Introduction ..............................................................................................................................4
4.0. Investment opportunities in Africa ..........................................................................................4
4.0.1. Mining .......................................................................................................................5
4.0.2.Tourism and Travel ....................................................................................................6
4.0.3 Infrastructure ..............................................................................................................9
4.0.4. Oil and energy .........................................................................................................11
4.0.5. Agriculture ..............................................................................................................15
4.0.6. Manufacturing .........................................................................................................16
5.0. Civil Society and democracy .................................................................................................18
6.0. Reference ...............................................................................................................................22
1.0 Overview
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2.0 Abstract
Product boom may be over, but African sub-Sahara is still experiencing growth,
something truly remarkable given that the continent is an exporter of raw materials. With the
adoption of sound economic policies in the last two decades and the reform in this sector, most
African countries have proven to be able to support the growth trajectory and beat the "resource
curse". Despite the challenges of imports, African countries are trying to prove that they can
resist the order of product super cycle and achieve more sustainable growth and inclusivity to
diversify the economy, increase productivity, and the adoption of policies to help the poor.
James, 2000). Five African countries are among the top ten fastest growing economies in the
world according to world bank .Overly, Africa accounted for the largest number of reforms, 75
of 230 reforms.
3.0 Introduction
Africa is an investment destination that's second most attractive in the world behind only
North America. Investors are looking for more developed markets like South Africa, Nigeria and
Kenya. Increased investment and industry will help unlock the potential for creating jobs and
reducing poverty in Africa. Foreign direct Investment (FDI) in the region reached a record $ 60
billion, five times lower than levels in 2000. For example, Chinese FDI in Africa rose to $ 3.5
billion in 2013 and almost all African countries are benefiting with the participation of China
today. In Ethiopia, the total inflow of foreign direct investment in 2013 amounted to 2 percent of
GDP. Inter-African investment is also on the rise, creating a vicious cycle that encourages more
foreign investment. Investors in Africa nearly tripled its share of FDI projects in the past decade,
from 8 percent in 2003 to 22.8 percent in 2013. The reason for this is simple. the world's eyes are
turned to the African market of one billion people, including a growing middle class. Investors
also see significant opportunities for investment in non-raw sectors of the South: financial
services, construction and manufacturing now accounts for 50 percent of Chinese FDI in Africa.
4.0 Investment opportunities in Africa
4.0.1. Mining
The mining industry worldwide is undergoing unprecedented changes, including an
increase in price volatility in commodity prices and rising exploration costs. Africa, which
produces more than 60 metal and mineral products, has great potential for exploration and
extraction of mineral resources. the continent is home to nearly 30% of total mineral reserves
around the world and a large part of the deposits of diamonds, vanadium, manganese, platinum,
cobalt and gold. Investors hope the new markets, especially in developing countries, which
represents a new investment frontier for big mining companies. In this situation, the African
mining sector offers a unique opportunity for investors both domestic and international. With a
large number of mineral resources belong to the continent, Africa's production accounts for only
8% of world production of minerals. Many of these products are exported in raw form. So, to
unleash the potential of mining, Africa must overcome the obstacles to the development of the
industry. Income from mining could help African countries to strengthen their comparative
advantages and achieve greater economic diversification (James, 2000).
Investors are looking for better opportunities, and Africa, with its vast mineral potential
offers an attractive environment for investment in the mining sector. However, to attract
investment in the sector, the authorities have to deal with the risks and other constraints faced by
investors, including deregulation for prospecting and tax law firm. In turn, this will encourage
the industrialization of production, thereby increasing the share of industry in the diversification
of the economy. Lower the cost of mining and the presence of multinational companies will
increase. High cost of production in developed countries has forced multinational companies to
seek investment opportunities in Africa, which provides a relatively low cost of production. For
example, BHP Billiton, the world's largest mining group, has canceled about $ 40 billion of
projects in Australia, mainly because of higher costs, including labor costs (K?hler et al, 2001)
These costs have resulted in a greater presence of multinational mining companies in Africa. This
includes the world's largest companies, as well as companies BHP Billiton, Rio Tinto, Anglo
American and Xstrata. more than 200 companies of Australia now employ more than 650
projects in 37 African countries.
The emergence of large Asian investors in the mining sector also provides additional
opportunities for diversification of investment in African countries. In particular, China and India
recently increased their investments in the metals and minerals on the continent. This investment
is necessary to increase production of mining and processing of value-added. They also serve as
an incentive to increase the development of infrastructure, especially in energy and transport, in
order to meet the growing demand from investors an acute need for the industrial sector of the
mining industry. Most African mining production is exported as raw material. This reflects the
low level of industrialization of the mining industry in the continent (K?hler et al, 2001). Faster
structural reforms can benefit from mineral processing and value-added products related to
mining. However, this will require involvement from mature markets, technology and expertise
to improve the quality of mineral products. Improving the quality of mineral products exports,
African countries could generate additional revenue which would have been distributed in other
sectors of the economy. It is very important to create new jobs and improve the living conditions
of the people.
4.0.2. Tourism and Travel
Corporate Council on Africa recently sponsored tourism Africa. This unique event was
held from September 30 to October 2, 2002 in Atlantic City Convention Center in Atlantic City,
New Jersey. This exhibition and conference focused on entrepreneurs and companies, both of
which are planning to start or expand transportation, tourism and gaming businesses related to
the African continent. The main objective of this first of its kind conference was to consider the
role of tourism and gaming sector in economic growth and development in Africa. This event,
which is co-sponsored by the African Travel Association (ATA) has definitely provided me with
a good opportunity to learn more about the travel, tourism and game African capacity; the
identity of agents, representatives and distributors; explore joint partnerships and strategic
partnerships.; and the promotion of foreign direct investment in Africa in relation to the
gambling and tourism industry.
According to World Tourism Organization's statistics, Africa was part of the world where
the tourism industry and tourism has made great strides since 1990. International arrivals and
tourism increased by 7.5%. During this decade, the number of tourists who decided to visit
Africa doubled, going from 16 million people to 31 million. In the same period there was an
increase of fifty percent for a total number of tourists worldwide in 1998, according to TTC.
However, despite these achievements, Africa accounts for only less than 5% of world tourism.
With increased sensitization in the number of visitors from countries such as Egypt, Kenya,
Zambia, Mauritius and Morocco, the average growth rate of 2% of the continent is less than
7.5% of the world and well below the East Asia at 14% and 6.2% in Europe.
Following, the unprecedented measures of laws on the African Growth and Opportunity
Act (AGOA), entrepreneurs have a great opportunity to take advantage of the positive trends in
intent America to help African countries to continue to successfully graduate from emerging
market opportunities global economic due and commercial enterprises and increasing
investment. AGOA, hoping to eliminate barriers to free trade and economic opportunities for
American entrepreneurs who want to work with them. Africa is very promising economic region
in the world where people with business experience can be a strategic market advantage. In
particular, this historic piece of legislation should be aimed at travel and tourism industry, with
direct participation and involvement of a large number of Americans and Africans alike. Second,
in order to take advantage of this unique situation, the investor must be willing to explore the
many investment opportunities are becoming more educated about the types of possible tourist
attractions in Africa, and then to actually learn to identify specific areas that you should consider
investing your money . According to industry experts, there are three major trends in the tourism,
which will be largely on the market in the future for Africa - adventure travel, tourism and
cultural heritage tour.
According to the TTC, the fastest growing trend in the tourism sector in the world is
adventure travel. The African continent is in possession of some of the largest deserts, beaches,
tropical forests and mountain ranges in the world and invites adventurous tourists come to visit,
explore and enjoy. Most of the activities of adventure tourism, however are mainly aimed at
tourists who want to break away from stereotypical holiday. Classic examples of this kind is a
trip to climb Mount Kilimanjaro, which is popular with visitors who love rough safari in
Tanzania, balloon riding and / or bungee jumping from the Victoria Falls in Zimbabwe. As for
the nature lovers, there is also a spectacular natural environment and a wide range of animals and
plants in the world, including many settings intact to be discovered.
One can say that there are almost too many possibilities for one to experience a full life.
In all parts of the world, the greatest threat to the environment and ecology of the organisms that
live there are complex human activity itself. With this in mind distracted by the unique nature of
many natural areas in Africa, many joint efforts are being made to preserve these natural wonders
have spread as little as possible on the environment. This commitment goes beyond the
conservation of wildlife and the needs of the national economy, local residents and delicate
natural environments within key areas of the African continent.
Tourism aims to maintain this delicate balance, working responsibly with African
ministries of tourism, tour operators and community-based initiatives that activities related to the
use of building tourism and wilderness. Classic examples of this kind from the plans for the
conservation of the wildlife of the world famous Serengeti in East Africa in the Okavango Delta
in Botswana, eco-system of the sole and exclusive Madagascar. But the real story of Africa is
that it's a lot of people, stretching far back in time that is stored only in the oral tradition of
stories and legends. Surprisingly Africa is no longer referred to as the "black continent" and is
now recognized as the cradle of mankind. It is a country where great empires and civilizations
rose and fell, and even more injustice visited upon his people through the infamous slave trade in
the Atlantic and Indian Oceans. Africa is a land of great natural and human resources, which for
centuries had committed to the struggle between European countries who want to gain access
and control of these treasures often at the cost of terrible experience for native people.
4.0.3. Infrastructure
Investment in infrastructure is essential for economic growth in Africa. While there has
been significant progress in the development and quality of infrastructure in the continent, there
is still a clear deficit. Needless to say, this deficiency has consequences, including sanctions in
the ordinary course of trade and export. But funding for the development of infrastructure in
Africa is cheap. According to 2008 in Africa infrastructure country diagnostic study of the World
Bank, the continent needs about $ 80 billion in infrastructure financing needs. Of course, the
financial capacity of individual governments is limited; There are opportunities for private
investors to cooperate with African governments for the development of children up to the
implementation of the infrastructure, for example, by investing in reliable systems for electricity,
water, road and rail.
Infrastructure is a hot topic in Africa, and this is true and obvious examples of lack of
electricity. Instant same conclusion that the Dallas Cowboys' & T Stadium in Arlington, Texas,
uses more electricity on game days throughout Liberia. inefficiencies continue to suffer from
sectors such as agriculture, to make it clear that there are huge opportunities for investment in the
continent. In 2010 the World Bank has estimated that the lack of infrastructure hinders economic
growth in Africa, 2 per cent per year and business productivity by 40 percent One study suggests
that more detailed income for infrastructure investments could reach 50 percent, to considering
the growth of the GDP accounts, during the World Economic Forum found that every dollar
spent on infrastructure yields anywhere from 5 percent to 25 percent (Shaw, 2004).
In light of both social and investor opportunities,, there has been a wave of new
investment in infrastructure on the continent. For example, 58 percent of workers polled in West
Africa industry Pricewaterhouse Coopers said they plan to increase their investments by more
than 25 percent of the infrastructure in the coming period, and this figure Eco South East (53 per
cent) and South Africans (40 percent). Africa currently accounts for only 2 percent of the global
infrastructure market. In 2012, Ernst & Young found that there were more than 800 works in
infrastructure investment in Africa, with a total value of $ 700 billion. At PwC estimates that
annual spending on infrastructure in African countries south of the Sahara alone will reach $ 180
billion by 2025 in comparison, Europe has spent $ 741 billion in 2012, mainly on roads, railways
and airports.
This means that the probability of opportunities is large, if you know where to look. Two
key areas are transportation and power. Both are in the team, a great general budget of investors
and PwC survey, 36 percent and 30 percent, respectively. Yields on roadwork events have the
potential to be stunning - not only for investors but also for the people of Africa. research looking
integration of the market, according to the road of development has proved to be refusing food
can be connected directly to the paved road. It's an intuitive sense, of course: better roads linking
markets and towns have reduces the cost of doing business, lower prices. This effect may be
particularly strong for agriculture (related to food security here). Like 40 percent of harvested
crops rot before they go to market, and then you can imagine how more efficient transport
network may affect the industry. "The biggest need right now is in the energy sector," said du
Toit. Sub-Saharan Africa, with a population of 800 million (2007), currently produces about the
same amount of energy, such as Spain, which has a population of 45 million people.
As overwhelming lack of supply is an important issue in the development and cost of
doing business. In Liberia, only 1 percent of the population has power access. Even in South
Africa, there is room for improvement; while 83 percent of the population has access to
electricity, blackouts are common. Of course, it attracts a lot of interest in the region. In addition
to the local (Py noted that the government "will more or less always been involved in the
infrastructure sector"), foreign bodies and his country are suffering. For example, the US has
recently established a nutrition program in Africa to bring electricity to large parts of the
population of Africa, and the World Bank recently made a $ 5 billion for energy infrastructure.
Private investors are lining up for Africa is considered the most exciting emerging
markets in the world in a survey of private equity firm Ernst & Young. It is the influx of dollars
of investment means that competition between private investors and global warming is high.
"Competition is really growing," said du Toit. "But not to the extent that our ROI (return on
investment) have a negative impact." He notes that his fund is still a co-investor with many of its
competitors, which means that the possibility still significantly exceeds the number of investors
in the space. It is also worth noting that, in general, increased interest for investment in African
infrastructure could benefit private investors and not to harm you (Amin, 1976).
4.0.4. oil and energy
Renewable energy
Mathematics for the future of clean energy in Africa is quite promising. The first of its
kind is in Rwanda where solar farms provides electricity for 15,000 homes. Scale solar and wind
projects are under construction in Morocco and Kenya. Thanks to the technology costs continue
to fall, centralized and decentralized renewable projects as they become more and more
attractive, especially when compared with expensive diesel generation, which provides more
power in the rural areas of the continent. However, hundreds of millions of Africans - including
more than 75 percent of the population in countries such as Ethiopia, Sierra Leone and Uganda are still living without electricity (Amin, 1976). The difference is particularly striking in the
countries of sub-Saharan Africa, accounting for 13 percent of the world's population, but a
whopping 48 percent of the global population without access to electricity. continued
dependence on energy solutions that continent in the past largely because of money or lack
thereof.
There is simply not enough investment in permanent flow of capital in clean energy
projects in Africa. Shortage of private investment capital institutions, such as the US and
European pension funds, which manage trillions of dollars, is particularly striking. For projects
such as a 510-megawatt solar project in Morocco and wind project of 300 MW in Kenya,
investors have provided critical funding for the start of construction - the first phase of 160 MW
of projects in Morocco will be commissioned later this year
Despite the great power of solar energy potential estimated at 8.8 million MW in the
countries of sub-Saharan Africa alone, according to the McKinsey management consulting firm,
renewable energy installations does not occur in nearly the speed needed "Participation of the
private sector is important and central to the effective delivery of new services in Africa,"
concluded a recent report by McKinsey Power Africa. In the African countries of sub-Saharan
Africa alone, an additional $ 450 billion of investment in the energy sector is necessary to reduce
blackouts in half and achieving universal access to energy in urban areas by 2040, according to
the report, Africa Energy Outlook. Mini-grid and off-grid systems, especially those that use solar
energy, hydropower and wind energy, hold a particularly strong commitment to bring greater
energy in rural areas, the IEA report concluded.
An example of direct foreign investment efforts in the renewable energy sector is the
power Africa initiative started by Obama's administration and implemented General Electric.
African countries south of Sahara. More than two-thirds of the African population in sub-Saharan
Africa without electricity, and more than 85 percent of those living in rural areas do not. African
force to create enormous potential power of Africa, including new discoveries of huge reserves
of oil and gas, as well as the potential for the development of clean energy, hydropower, wind
and solar. This will help the country to develop the newly discovered resources responsibly, to
build from energy production and transmission, as well as expanded coverage of the mini-grid
and off-grid solutions.
According to the International Energy Agency, the countries of sub-Saharan Africa will
require more than $ 300 billion investment to ensure universal access to electricity by 2030..
With a series of six original member countries in its first phase, Power Africa initiative will add
more than 20,000 megawatts of electricity that is cleaner and more efficient. The program aims
to supply electricity to at least 20 million new households and commercial organizations in the
grid and mini-grid and off-grid solutions. It will improve the ability of energy resources,
allowing partner countries to meet their basic needs in energy, and achieve greater energy
security.
Oil and gas
New discoveries of oil and gas in Africa will increase by a significant increase in oil and
gas sector of the continent in the next 20 years despite low oil prices. Note that six of the top 10
discoveries in the world in the oil and gas industry in 2013 were made in Africa, with more than
500 companies, currently studying deposits in the continent. On a parallel meeting on the theme
"Oil and Gas of the legendary African growth", chaired by Ade Adeola, Managing Director,
Regional Head of oil and gas, Africa and the Middle East, Standard Chartered Bank, said that,
despite the low oil prices, Africa will see a significant increase in oil and gas production over the
next few decades.
Recent discovery of oil and gas in West Africa, East Africa attracted all the excitement in
the economic growth and development of the African continent. Analysts and stakeholders see
these results as potential to revolutionize African growth story.
Since more than eight percent of world oil reserves are in Africa, the continent is still one of the
hot spots in the world of oil and gas, it was said at the conference. For example, Africa currently
supplies about 12 percent of world oil reserves and has largely untapped reserves estimated at
more than eight percent of the world's proven reserves. According to PricewaterhouseCoopers
opinion, Senior Advisor in the world for the energy sector, these stocks have increased over the
past two decades, from 5.8 per cent in 1991 and 7.6 per cent in 2001, and this trend is expected
to continue.
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