Economic Outlook
Sub-Saharan Africa enjoyed another strong year. “It’s best period of sustained growth since independence,” states the International Monetary Fund in its October 2007 “World Economic Out-look.” Overall growth in the region is projected to rise to 6.1 percent in 2007 from 5.7 percent in 2006 and further to 6.8 percent in 2008, largely reflecting the output of new production facilities in oil-exporting countries. Most other countries are projected to outperform historic trends and inflation generally will moderate, the IMF says. The region is attracting more private capital, aid and remittances, thanks to more open economies, im-proved and more consistent policy implementation, strengthening of the business environment and measures to reduce debt burdens. Foreign direct investment has been particularly strong and some countries—notably South Africa, Ghana and Uganda—have begun to attract interest from private portfolio investors.
Through the Pentagon’s Lens
Africom, the controversial U.S. Africa Command, began operations on Oct. 1, covering all of Africa, except Egypt, from its base in Stuttgart, Germany. President Bush says Africom will improve security and promote development, health, education, democracy and economic growth in Africa. That prompted Salim Lone, a columnist for a daily newspaper in Kenya, to comment, “Africa is going to look at all its development efforts through the lens of the Pentagon. That’s a truly dangerous dimension.” Africom is seeking a home on African soil, but it has encountered stiff opposition in Africa, the United States, Europe and Asia. Critics contend its true intent is to secure access to African oil and counter China’s increasing presence on the continent. Liberia argues that Africom is good for the continent and is bidding to host the command. China, meanwhile, is pressing Nigeria and leadership of the African Union to resist its establishment in Africa.
China’s Foray Continues
State-owned Industrial & Comm-ercial Bank of China Ltd., China’s biggest bank, bought a 20 percent stake in Standard Bank Group Ltd., South Africa’s biggest lender, for $5.5 billion. ICBC and Standard Bank agreed to form a strategic partnership, serving each other’s clients and supporting each other’s international expansion, the Chinese bank said. The deal is one of the biggest single foreign acquisitions by a Chinese company and comes amid efforts by the Beijing government to expand commercial and political ties with Africa as it searches for new sources of energy, raw materials and markets for its booming economy.
So Does India’s
Tata Consultancy Services, an information technology, business solutions and outsourcing entity within India’s $29 billion Tata Group, India’s largest industrial conglomerate, announced the launch of TCS South Africa. Several of its firms, including Tata Motors, Tata Steel and VSNL Ltd., already have a presence there and serve customers in southern and central Africa as well. TCS South Africa will have equity participation from Black Economic Empowerment groups in South Africa and is expected to become the hub for southern and central parts of Africa.
Stock Markets
Kenya. The Nairobi Stock Exchange is poised to go into overdrive following plans by two of Kenya’s leading banks to raise a total of 6 billion shillings (US$88 million) in the local bond market. PTA Bank will raise Ksh1 billion and Barclays Bank Kenya will raise Ksh5 billion over the next seven years and three years, respectively, from fund managers and institutional investors, officials said. Barclays Bank says the money will finance its business expansion program and increase its lending portfolio, while the PTA Bank will used its funds to finance four major projects in the banking, tourism, manufacturing and agricultural sectors.
Nigeria. Nigeria’s capital market raked in more than 4.559 trillion naira (approx. $40 billion) in the last eight years, according to the country’s Securities and Exchange Commission. The value of new issues (debt and equities) increased from N12.0 billion in 1999 to N2.8 trillion as of the third quarter of 2007. Market capitalization of quoted stocks on the Nigerian Stock Exchange posted an equally impressive rise, from N300 billion in 1999 to N5.1 trillion in 2006 and reaching N8 trillion at the end of the third quarter of 2007. The volume of securities traded rose to 100.1 billion units as of September 2007 from 3.92 billion units in 1999.
South Africa. The Johannesburg Stock Exchange launched a currency futures market in June. So far, retail investors have been able to hedge the rand against the dollar, pound and euro. The JSE is pushing to have foreign exchange controls eased so that companies can trade in this market as well. Also earlier this year, the JSE replaced India as the world’s largest single-stock futures market, which are listed contracts that allows investors to take a view on the future direction of a stock and buy a contract without having to buy the underlying stock.
Uganda. The bull run on the Uganda Securities Exchange over the past few months has been attributed to an influx of foreign investors especially from Kenya. According to fund managers, the USE all-share index steadily increased from 826.12 in July to 936.71 in September.
By Rosalind McLymont