Africa to Foreign Investors - We're Open for Business

Squeezing the poor for the sake of corporate profit? Or providing vital jobs and incomes? Whatever your view of foreign investors, analysts believe that business will be essential to African development.
With Africa's population likely to double in the first quarter of this century, the private sector may be the only sector able to match this growth with precious jobs. In Africa, one job goes a long way towards protecting a family or community, as Africa Progress Panel member and former Nigerian President Olusegun Obasanjo told a recent conference of investors ahead of this week's UN General Assembly meeting.
Besides, many issues confronting the African continent can only be resolved with private sector involvement. Only the private sector, for example, has the know-how to build power plants that will reduce Africa's enormous energy shortages. Fortunately, foreign investors are increasingly keen to invest in Africa, because, as stated in our policy paper, "Africa - Investment Ready", this is a great time to get involved.
Africa is home to seven of the world's ten fastest growing economies, business regulation is getting better all the time, and the outlook for continued growth is good, according to both the World Bank and IMF.
Foreign investors say foreign investment would be higher if African countries had more stable public policies, more liquid stock exchanges, or even lower risk. They cite solutions that range from venture capital to use of donor funds.
But foreign investment does not have all the answers to African development. And in some cases, especially in the oil and mining industries, the social and environmental impacts on local communities have been disastrous.
But slowly Africa's development paradigm is shifting away from aid dependency towards wealth creation as a model for the future. And business will be central.
At the Africa Progress Panel, we have several policy recommendations for African governments that will help increase both the quantity and quality of foreign investment.
Governments should strengthen regional economic integration, which makes Africa a more attractive proposition by creating larger consumer markets.
They should keep commitments to regional and international initiatives on corruption and transparency, such as the Open Government Partnership or the New Partnership for Africa's Development (NEPAD). Lower corruption levels help attract foreign investment.
And governments should demand that foreign investment supports local companies, employs Africans, and transfers technology and skills. They should make job creation an explicit objective of economic policy, because job creation means sustainable and equitable growth.
Africa's workforce is young and growing fast. Leaders across the continent and their partners must find new and effective ways to harness this energy and creativity. And business must play a central role.

Source: allAfrica

Africa May Have Up to 200 Hidden Billionaires, Mobius Says

Africa may have as many as 200 “hidden” billionaires operating in the unofficial economy who will seek to legitimize their wealth in the future, investor Mark Mobius said.
“There is a lot of hidden wealth,” Mobius, who oversees more than $40 billion as executive chairman of Templeton Emerging Markets Group, said yesterday in London. “You hear about Dangote but there are maybe 200 with the same kind of resources that we do not see. The black economy is very big.”
Aliko Dangote, Africa’s richest man, is benefiting from the continent’s economic growth, adding $3 billion to his wealth this year, taking him to $13 billion, according to the Bloomberg Billionaires Index. Africa’s gross domestic product is forecast to expand an average 6 percent a year for the next five years if Europe, the largest trading partner, records 0 percent to 2 percent annual growth, Moody’s Investors Service said today.
Dangote controls Dangote Group, one of the continent’s largest conglomerates with publicly traded businesses in cement, sugar, flour and salt that make up about a third of the Nigerian Stock Exchange’s market value. Many of the continent’s richest individuals don’t have publicly traded assets, Mobius said.
“What we see is that these very wealthy people will begin to want to legitimize their wealth by a listing, by putting these assets together, forming a company, listing it,” Mobius told reporters yesterday. “Many of these people escaped to London or other countries in order to preserve their wealth. But it is going to get more and more difficult because of anti- bribery and all the rest that is going on in the U.S. and other parts of the world.”

Hidden Wealth

A lot of “hidden wealth” is concentrated in mining, Mobius said. Dangote said in May he “needs” to invest $7.5 billion in industries including mining in the next four years.
Mobius said he’s considering buying shares in Kenyan banks, and is most interested in lenders that issue credit cards, open savings accounts and offer money-transfer services. The prospect of violence in Kenya ahead of elections next year was not a “big issue,” he said.
A disputed 2007 vote sparked two months of ethnic and political violence that killed more than 1,000 people.
“The general consensus now is that they have sort of learnt the lesson,” Mobius said. “I don’t see it as being a big issue.”

Source: Bloomberg Businessweek

Citi Raises Gold Price Forecasts for 2012-13

Citigroup raised its gold price forecasts for 2012 and 2013, saying ongoing global economic issues are causing gold to remain a favored asset for investors.
"With continued concerns over the economic health in the developed world, safe-haven demand has seen renewed investor interest in gold-linked securities," analysts at the bank said in a note dated Sept. 24.
Citi raised its year-end price forecasts for most precious and base metals.
The bank increased its 2012 price forecasts for gold, silver and platinum by about 2 percent, 5 percent and 1.5 percent, respectively, while it cut its earlier forecast for palladium prices by about 1.7 percent.
For 2013, Citi raised gold and silver price expectations by over 3 percent each, and those of platinum and palladium by over 6 percent each.
Illegal strikes in South Africa, mine closures and project delays were seen causing supply issues in the market for platinum and palladium, analysts at the bank said.
Base metals were mostly forecast about 1 percent higher for 2012, with lead expected to rise 4.3 percent from earlier. Nickel was seen falling about 1 percent for the year, from previous forecasts.
For a list of the latest price forecasts of Citigroup on precious and base metals, click the following link. (Reporting by Naveen Arul in Bangalore; Editing by Steve Orlofsky)

Source: Reuters

Statement by an IMF Mission to The Gambia for Discussions of the First Review of the ECF Arrangement

An IMF mission led by Mr. David Dunn visited The Gambia during September 5-18, 2012, to discuss performance under the authorities' macroeconomic and financial program that is supported by the IMF under its Extended Credit Facility (ECF). The mission met with Minister of Finance and Economic Affairs Abdou Kolley, Governor of the Central Bank of The Gambia (CBG) Amadou Colley, and other senior officials. It also met with representatives of the private sector, civil society, and development partners.
At the conclusion of the visit, Mr. Dunn made the following statement in Banjul:
“Last year's severe crop failure, caused by drought throughout the region, led to a sharp contraction in the Gambian economy. In 2011, The Gambia's real gross domestic product (GDP) fell by about 5 percent. Economic activity remained weak for much of 2012, but is expected to pick up substantially in the final quarter, as the upcoming harvest points to a strong rebound in crops and growth in the tourism sector continues. The relief effort by the Government of The Gambia, international aid agencies, and bilateral donors appears to have helped to mitigate the impact of the drought on vulnerable families and provided critical support to farmers. For 2012 as a whole, real GDP is projected to be about 4 percent, while inflation has remained under control at about 4½ percent (year-on-year).
“Based on a projected further rebound in agriculture in 2013, which anticipates that crop production will have fully recovered to pre-drought levels, real GDP growth could surge to about 10 percent next year, before returning to its longer-term trend of about 5½ percent a year over the medium term. There are downside risks to this outlook, as well as greater upside potential. In particular, the possibility of prolonged weaknesses in the global economy or strong shocks to food and fuel prices could dampen growth in key sectors of the Gambian economy. At the same time, sound macroeconomic policies combined with a structural agenda that seeks to promote productive private sector investment in infrastructure—as envisaged in the authorities' Programme for Accelerated Growth and Employment (PAGE)—could boost longer-term growth trends. Strengthening The Gambia's relations with the regional and international communities would be important for building confidence in the economy and generating greater support from development partners for PAGE priorities.
“The Government has taken some initial steps toward addressing its heavy debt burden. During the first half of 2012, Government's net domestic borrowing (NDB) was reduced to 1.2 percent of annual GDP, compared with 2.3 percent of annual real GDP during the same period in 2011. Moreover, the Government remains committed to ceilings on NDB of 2½ percent of GDP for 2012 as a whole and 1 percent of GDP in 2013. By easing pressure on the domestic financial market and T-bill yields, it is projected that Government's interest payments on domestic debt relative to its revenues would fall from 18½ percent in 2011, to 18 percent in 2012, to just under 15½ percent in 2013. Updated external debt indicators also show progress has been made toward reducing The Gambia's debt vulnerability.
“In line with commitments to ECOWAS (Economic Community of West African States) The Government is committed to replacing the general sales tax with a value-added tax (VAT) on January 1, 2013, which is expected to lead to a boost in revenue collections. Beyond the VAT, the Government seeks to pursue a comprehensive tax reform that broadens the tax base, simplifies procedures, and lowers tax rates, while preserving revenues. However, fuel subsidies continue to cut into potential tax revenues, as little progress has been achieved toward eliminating them, despite monthly price adjustments.
“Growth of credit to the private sector and deposits in commercial banks has slowed considerably in 2012. In May, with inflation pressures contained, the Central Bank of The Gambia (CBG) acted to ease its monetary policy stance by reducing the reserve requirement on deposits by two percentage point (to 10 percent). Also, the CBG continues to strengthen banking supervision. In preparation for the upcoming increase in the minimum capital requirement at the end of 2012, the CBG has reviewed banks' plans for meeting the new requirement and stands ready to strictly enforce the new measure.
“Preliminary data indicate that all performance criteria for the first review of the new ECF-supported program were met. In addition, understandings were reached on several key policy issues. The mission will return to IMF Headquarters, but will remain in close contact with the Gambian authorities to conclude discussions as soon as possible.
“The mission thanks the authorities for candid and constructive policy discussions and expresses its appreciation for the excellent cooperation during its visit.” 

Source: StarAfrica.Com

IMF: Gambia Could See 10% Growth in 2013

Gambia could see economic growth hit 10 percent next year on the back of an expected rebound in its drought-stricken agricultural sector, an International Monetary Fund official said on Tuesday. The tiny West African nation's central bank in July projected a 1.7 percent contraction of GDP for 2012, which would represent the second straight dip in output after growth slipped to 3.3 percent last year from 5.5 percent in 2010.
Gambia appealed for food aid in March after it said that 70 percent of its crops failed during the last growing season.
But David Dunn, who headed a one-week IMF mission to the country, said the agricultural sector is expected to return to full output next year, leading a broad economic revival.
"Based on a projected further rebound in agriculture in 2013, which anticipates that crop production will have fully recovered to pre-drought levels, real GDP growth could surge to about 10 percent next year," Dunn said at the end of the mission.
Growth is then expected to return to a medium-term trend of around 5.5 percent in the mid-term, he said.
Gambia, which had a GDP of around $1 billion in 2010 and is heavily dependent upon agriculture and tourism, remains vulnerable to external shocks.
"The possibility of prolonged weaknesses in the global economy or strong shocks to food and fuel prices could dampen growth in key sectors of the Gambian economy," Dunn said.
Some 60 percent of the country of 1.7 million people, living in a nation completely surrounded on land Senegal, are farmers.

Source: Reuters Africa

Ecobank Gambia Reaches Out to NGO Community

Ecobank Gambia, one of the leading commercial banks operating in the country, Friday organized a day’s forum for movers and shakers in the Non-governmental organization community, designed among other things to forge partnership.

Organised in collaboration with The Association of Non-Governmental Organisation (TANGO), the forum that was the first of its kind, was described as a laudable move; one that marked a turning point of collaboration between the Bank and the NGO community in the country. Ecobank, known as the Pan-African bank seeks to comply with international best practices in key areas such as anti-money laundering and cooperate governance. It further seeks social responsibility and sustainability of “our business” to contribute to poverty alleviation.

Addressing a well-attended forum, the Bank’s Gambia Managing Director, Mrs Mareme Mbaye Ndiaye, underscored that the day marked an important milestone in the annals of the Bank’s existence in The Gambia in that this is the first time that they organized such an important forum.  “Ecobank Gambia recognised the contribution of the NGOs and development partners in the structure economic development of the Gambia,” Ndiaye told the forum, while indicating that the initiative is also in line with their mission and vision to contribute to economic and financial integration and development of African continent. “Ecobank Gambia considers itself as the Bank of the NGOs and international organisation in The Gambia,” she added.

Madam Ndiaye used the opportunity to detail out the gigantic strides of the Bank, disclosing that Ecobank is serving “eight million customers on the African continent.” “The network is composed of more than 1, 000 branches, 1, 400 ATMs and over 2, 000 POs machines. As a Pan-African Bank, you can follow your activities within 33 countries using three official languages and using more than 21 currencies. Indeed, Ecobank is in all countries in Africa than any other Bank in the world. We have a fully subsidiaries in France, and representatives in Dubai and London to be able to serve our customers,” she told the forum.

Managing Director Ndiaye told the convergence that Ecobank group seeks to provide its customers with convenient, reliable product and services locally in the Gambia, regionally and internationally. “We also operate as one Bank with common banking standards, policy and processes to provide a consistence and reliable customer experience for the entire network. We are cognizant of the fact that as a bank, it is important for us to collaborate with you to achieve our intuitional policy,” she concluded.

Speaking on behalf of the chairman of TANGO board of directors, the vice chairperson, Jainaba Nyang Njie, said TANGO was founded in 1983 with the objective for better coordination, as well as to serve as the voice of the NGOs in The Gambia. “TANGO seeks to influence public policy to build the capacity of its members, government institutions and its agents, as well as the communities in order to enhance national development,” she underscored.

“TANGO being an Association of national, and international NGOs, and community base organization,” according to Nyang-Njie, “need funding to support to our various activities, and we have been calling on the private sector to support TANGO.” “We sincerely and thoroughly appreciate the Forum organised by Ecobank, all aimed at building and strengthening partnership which is a very key important element in the development,” she stated.  She expressed their appreciation to Ecobank for donating GMD25,000 to TANGO, saying the gesture went a long way in supporting the Association’s activities.

TANGO’s Madi Joberteh, who also spoke at the forum, disclosed that in October, they will stage a consultative forum with the private sector to talk about dynamics, requirement and modalities on how to bring about stronger partnership between the private sector and the civil society. “NGOs are giving lot of money to the private sector and TANGO on quarterly basis, gives US$250,000 to Ecobank. All the NGOs have accounts with various banks in the country. We cannot be giving business to our private sector while they are not investing into the community,” he stated. Joberteh decried that when they were to organise the NGO Week, they had written to all the banks, but noted that only Ecobank had responded with a donation of GMD25,000.

Elias Bah of the Ecobank delivered the vote of thanks.

About Ecobank

The Pan African Bank is operating in 33 countries in Africa, as well as operating in three continents. Ecobank employs 11 million people, and has 750 branches. The Bank was listed No. 3 stock exchanges. In 2010, Ecobank was awarded Bank of the Year in 11 countries, and it is dealing in 21 currencies and banking with 300 international organisations.

Source: Daily Observer

Understanding The Risk In The BRICs

When Goldman Sachs economist Jim O'Neil first dubbed the four nations of Brazil, Russia, India and China as the BRICs, back in 2001, he made one of the gutsiest long-term global macroeconomic calls of all time. Featuring the right demographics, vast commodity wealth, growing middle classes and relatively steady fiscal and monetary policies, O'Neil postulated that these nations would be the biggest drivers for future global growth. So far, the economist's prediction has generally come true. The MSCI BRIC index has risen by more than eight times what the S&P 500 index returned during the past decade, and the BRIC's combined GDP soared to $13.3 trillion last year.

That outperformance has prompted many investors to add the four horsemen of the developing world to their portfolios as a way to cash in on the group's torrid growth. Despite the rosy long-term growth picture for the BRICs, there are plenty of risks, aside from the global macroeconomic pressures in these nations. In the end, these nations aren't called "emerging" for nothing.

With the BRICs continuing to contribute so much to the global economy and with the nations making up a huge portion of emerging market assets, it is critical for investors to understand these risks. Yet, each of the four nations is a completely different animal and comprehending the differences in each of their risk profiles can be a daunting task. Here are some of the internal risks when investing in the BRICs.

A Dragon of Lies
When it comes to emerging market investing as a whole, China remains at the top of many investors' minds. After all, the nation represents the hallmark of the developing market thesis. However, investing in Asia's Dragon economy isn't as easy as buying stock in Germany.

Perhaps the biggest problem is the lack of GAAP or international accounting standards. That issue has even caught some of the best investors by surprise. For example, billionaire hedge fund manager John Paulson lost a bundle on Toronto-listed Chinese forestry firm Sino-Forest Corp. It was accused of faking land holdings and "cooking the books." Others have been accused of falsifying bank deposits and accounts. That lack of transparency and disclosure of information makes it a lot harder to see the real picture, especially compared with developed market stocks.

That picture gets even muddier when investors are forced to deal with questionable official Chinese data and a heavily regulated/bureaucratic communist government. The majority of the major firms in the nation are in some way owned or controlled by Beijing.

Russia's Corruption Woes Despite the nation's recent entry into the World Trade Organization (WTO), there are still some significant investment risks in Russia; corruption and political will are the two biggest. Bribes and organized crime infiltrating legitimate businesses remain standard practices. According to a report by the Information Science for Democracy Foundation, the average amount of petty bribe in the Russian Federation has increased steadily in the last 10 years. Back in 2001, it was roughly 1,817 rubles. By the time 2010 rolled around, it had grown to 5,285 rubles and represented 93% of an average worker's salary.

Then there is the national government to contend with. Voicing an opinion that conflicts with President Vladimir Putin's wishes could lead to your business or investments being seized as well as a potential prison sentence. Just ask Mikhail Khodorovsky, former Chairman and CEO of Russian oil giant Yukos, who was convicted of fraud in 2005 for reasons that are believed to be politically motivated.

LATAM's Commodity King
While outright corruption isn't as big of a problem for Brazil as it is for Russia, the government does have a hand in creating risks for investors that stem from its "protectionist" attitude. The country now has the second-highest number of protectionist measures in Latin America, after Argentina. This includes rules to favor local products, high tariffs on imported goods, tax breaks to encourage domestic production and limiting the access of foreign investors to strategic natural resource assets. For example, investors wanting to tap the nation's vast oil wealth must partner with state-owned energy giant Petrobras. Overall, these policies could derail some investment returns if Brazil decides to go one step further and nationalize various assets.

Asia's Bureaucratic Nightmare
With a democracy as large as India's, you would expect there to be some red tape when it comes to successful investment. However, the nation's bureaucracy has been called the "most stifling in the world." Starting a business in India is incredibly hard, as the local and national governments generally have a hand in the commercial markets. Likewise, enforcing contracts can be impossible, especially when there is a propensity for business partners to enter into undeclared third-party transactions. The Political and Economic Risk Consultancy, a Hong Kong-based think tank, estimates that India's bureaucratic system will prevent it from matching the growth rates of other rival nations.

The Bottom Line
The BRICs offer much in the way of portfolio and economic growth, however, there are some pretty big risks for individual investors as well. Understanding these risks is key to navigating these emerging giants successfully.

Source: Investopedia

Oil's Slide Continues, Hits 6-Week Low Below $92

Oil prices fell on Wednesday for the third day in a row as traders realized that a recent run-up to $100 may have been overdone.

Oil ended at $91.98 on Wednesday, dropping $3.31, or 3.5 percent. That was its lowest close since Aug. 3. Oil has fallen 7 percent this week.
Several things have been pushing prices down. Analysts said traders are taking profits after oil got above $100 per barrel on Friday for the first time since May. And there have more signs this week that the global economy is slowing down, which tends to push oil prices lower because people and businesses use less energy.
Also, crude inventories rose three times more than analysts had expected last week. Crude supplies grew by 8.5 million barrels to 367.6 million barrels. That's 8.4 percent higher than at the same time last year, according to the Energy Information Administration's weekly report.
Analysts expected a rise of 2.5 million barrels, according to Platts, the energy information arm of McGraw-Hill Cos.
There were also reports that Saudi Arabia is keeping production high to drive oil prices lower.
Oil's decline came despite some news that might have pushed prices higher. The Bank of Japan said on Wednesday that it would buy more government bonds, which is intended to boost Japan's economy. And ongoing tensions in the Middle East have tended to drive prices higher.
"Yet we continue to fall," said Addison Armstrong, senior director for market research at Tradition Energy. "I think that has accelerated some profit-taking. After all, crude did have a pretty good run from $86 up to $100."
Brent crude traded on the ICE Futures exchange in London fell $3.84, or 3.4 percent, to $108.19 per barrel.
Traders were also keeping their eyes on oil supplies as U.S. Gulf Coast refineries returned to production after shutting down due to Hurricane Isaac.
"We're getting back a few more refineries post (Hurricane Isaac), but on the flip side a few refineries had some restart issues and a few are headed into maintenance," said Carl Larry of Oil Outlooks and Opinions in a newsletter.
Regular gasoline at the pump fell a half a penny to an average of $3.854 per gallon.
In other futures trading in New York:
— Wholesale gasoline fell 7 cents $2.829 per gallon.
— Heating oil slipped 8.3 cents to $3.044 per gallon.
— Natural gas fell a penny to $2.762 per 1,000 cubic feet.
---
Associated Press writers Pablo Gorondi in Budapest and Pamela Sampson in Bangkok contributed to this report.

Source: Yahoo Finance    

The Rise Of Africa

For decades, much of the world has been conditioned to think of Africa, from Tangier to the Cape of Good Hope, as a uniform morass of poverty.

Nevertheless, it's limiting and unfair to treat a 12 million-square-mile continent with a billion people as a single entity. No one assumes that Finns and Greeks share a culture, nor Canadians and Mexicans; yet to many uninformed critics, Africa is one homogeneous outpost of poverty and starvation. Not only is that the grossest of generalizations, it's inaccurate.

Africa Today and in the FutureNo, Africa doesn't enjoy quite the standard of living that the world's richest countries do. On the United Nations Human Development Report, the highest-ranking sub-Saharan nation on the African mainland is Gabon, which came in at a modest #106. However, the country is inching upward, progressing along a timeline common among many African nations: colonialism, followed by nominal independence, followed by long-overdue economic reforms and a corresponding increase in the standard of living. It was over a relatively brief period - barely two generations - that South Korea and the United Arab Emirates propelled themselves from destitution to affluence. Today, we could be witnessing that same phenomenon across Africa.

The International Monetary Fund (IMF) predicts that between now and 2015, Africa will be home to seven of the world's 10 fastest-growing economies. In descending order, that's Ethiopia, Mozambique, Tanzania, West Congo, Ghana, Zambia and Nigeria. (Granted, "fastest-growing" is hardly the same as "flourishing;" by contrast, the American and Luxembourgish economies can't possibly grow as quickly as ones whose every incremental step is noteworthy.) Finally, after countless years of mass governmental corruption abetted by misguided charity, much of Africa is jumping into the 21st century.

Look no further than the sophisticated financial instrumentation befitting sophisticated economies - specifically, exchange traded funds devised to attract Western investment. Van Eck Global, a New York-based management firm, developed the Market Vectors Africa Index ETF (NYSEArca:AFK) for that very purpose. The fund restricts itself to companies that either are headquartered in Africa, or derive most of their revenues from there. The fund's main components include Tullow Oil, a British oil producer whose biggest operations are in Ghana and Uganda; Orascom, an Egyptian construction firm; Guaranty Trust, a Nigerian bank; and Attijariwafa, a Moroccan bank, with other banks and breweries rounding out the top 10. It may come as a shock to some, but Africans deposit their money somewhere and build buildings, and drink beer, just like the rest of us.

Africa-centric exchange traded funds aren't intended as "socially responsible" investing, created to make guilt-stricken investors feel good about themselves. Rather, this is real investing, done with the intention of turning a profit and building lasting wealth. The Market Vectors Africa Index ETF has gained approximately 15% so far this year.

Trade, Not Aid
Hopefully, investment will overtake handouts as the predominant form of cash flow to Africa. By and large, being on the receiving end of the rest of the world's largesse has had the opposite of its intended effect. Zambian intellectual colossus Dambisa Moyo (chemist; economist; master's from Harvard; Oxford Ph.D.; director of Barclays Bank, SAB Miller and Barrick Gold, and only 42 years old) wrote the definitive book on this topic, "Dead Aid: Why Aid Is Not Working And How There is Another Way for Africa."

She argues that the $1 trillion of well-meaning handouts that have found their way to her home continent have done more harm than good, creating a culture of idleness and indolence ("Why work when I can get what I want from a relief organization?"), and that's the best-case scenario. More often, aid payouts never even found their way past the people in charge.

The modernization of the continent is something best witnessed firsthand. A visitor to Cape Town or Windhoek would be struck by how gleaming and modern either southern African capital is. While the former does have shantytowns on its outskirts, they're strikingly similar to some of the filthier housing projects in the United States.

Unfortunately, most of the major news stories that have emerged from Africa in the last few years have been horrifying (Darfur, the Rwandan genocide.) In addition, the stories that haven't emerged have been even worse. (Like the Second Congo War, humanity's deadliest conflict since World War II. Yes, there was a First Congo War in the late 90s that you probably never heard about either.) This is the same continent that spawns a disproportionate number of the engineering and mathematics graduates at some of America's most prestigious universities - the people who will shape Africa's future.

The Bottom Line
Africa has all the natural resources a continent could hope for, and is finally assembling the wherewithal to capitalize on that. The Industrial Revolution began in the United Kingdom almost two centuries ago, moving society en masse from an agrarian, subsistence economy to one characterized by force multipliers. Today, in a world where information flows freely and trade lifts millions out of poverty every year, Africa has only started to reach its potential and promise.

Source: Investopedia

China CPI: Inflation Rising Again

After four straight months of declines, consumer price inflation has finally edged up in China.
Chinese consumers paid 2% more in August than they did a year ago, the government's National Bureau of Statistics reported Sunday. That's up from a 1.8% increase in July -- a two-and-a-half year low.
China's annual inflation rate rose 2.0% in August, the government's National Bureau of Statistics reported Sunday, up from 1.8% in July -- a two-and-a-half year low.
Food prices, which account for more than a third of the inflation calculation, rose 3.4% during the month.
Household finances in China are especially susceptible to fluctuations in food prices, as many poor families spend large percentages of their income on food.
Still, inflation remains at very low levels. As recently as one year ago, China's consumer price index stood above 6% -- well north of the government's stated inflation rate target of 4%.
The very low rate should allow the government more flexibility in pursuing economic stimulus.
In July, officials said that annual economic growth dropped to 7.6% in the second quarter -- down from 8.1% the previous quarter.
The People's Bank of China twice lowered interest rates, and the central bank has also tried to spur growth by cutting the amount of money banks are required to hold in reserves.
But those measure seem to have fallen flat. Some analysts have recently lowered their growth forecasts for the rest of the year, while some noted that weakness is likely to extend into 2013.
On Friday, the government confirmed more action, this time in the form of a $157.7 billion investment in 55 new infrastructure products. Analysts said the move should help boost growth in the fourth quarter.
Zhiwei Zhang, and economist at Nomura, said in a research note that the projects -- which include 25 new subway lines -- are a sign that the government's policy stance "has become significantly more proactive."



Source: CNNMoney

Spain Must Ask for Help: EU's Olli Rehn

Following the announcement of the European Central Banks new bond-buying program last week, a European official told Spain that if it wants help, all it has to do is ask.
"It's a very clear framework so there has to be a request by member state first, and then the euro group or euro area member states together with the commission and the ECB - and, apparently, the IMF - will define the more specific conditionality," European Monetary Affairs Commissioner Olli Rehn said in an exclusive television interview with CNBC at the Ambrosetti Forum in Italy over the weekend.

Asking for help and having conditions imposed upon Spain is very sensitive for Mariano Rajoy's government in Madrid, which has until now officially denied that it will be forced to ask for a bailout by the EU, IMF and ECB.
Negotiations over the conditions that will be imposed upon Spain are expected to take center stage when European finance ministers and policy makers meet in Cyprus this week.
Rehn believes Rajoy's government has already done enough to be seen as complying with conditions that would be imposed if Spain asks for help.
"In the case of Spain, there is a very clear path of fiscal adjustment that has been recommended," Rehn said. "And there is already a policy agenda for structural reform so that is a part of this recommendation."

"Conditionality would be certainly based on the existing current policies and recommendations," Rehn said. "But any memorandum, which would have to be signed between a country concerned and the euro area, would include very specific targets within the framework of those existing recommendations."
That key message was backed by Christine Lagarde, the managing director of the IMF who said this weekend at the APEC meeting in Vladivostok that Spain and Italy had already taken strong measures that were "adequate in and of themselves."
"It's a country's decision, in relationship with its member state partners and the institutions of the euro zone, to decide what is best for itself and for the group to which it belongs," Lagarde told the Reuters news agency at the APEC meeting.
So Spain is not under any pressure to cut or implement reforms over and above what is already has but must still make a formal request for support, and then stick to the reform program it has already put in place. Those are the terms and now all that's left is to wait and see if Mariano Rajoy will accept them.

Source: Yahoo Finance

U.S. August Jobs Report: Hiring Slows, Unemployment Falls

The labor market lost momentum last month as job growth fell to a disappointingly slow pace. The unemployment rate also fell, as more people stopped looking for jobs.

The economy added 96,000 jobs in August, down from 141,000 jobs in July, the Department of Labor said Friday. 

Meanwhile, the unemployment rate fell to 8.1%, from 8.3% in July.

Economists polled by CNNMoney were expecting 120,000 jobs to be added in the month, and the unemployment rate to remain unchanged.

The unemployment rate fell largely because 368,000 people stopped looking for work, many of them young people. Just 63.5% of the working-age population was either employed or actively looking for work -- a 30-year low.

"These numbers are not very strong," said Joseph LaVorgna, chief U.S. economist at Deutsche Bank. "The job market is improving, but only gradually."

At least 150,000 jobs need to be created each month to simply keep pace with the growing population. 

In addition to the large number of people leaving the workforce, LaVorgna said two other disappointing sings were that the number of hours people worked remained flat and wages were stagnant.

The Labor Department also revised down the job numbers for the two previous months, resulting in 41,000 fewer jobs created than originally reported.

"Clearly, it's disappointing, but it's not horrible," said Scott Brown, chief economist at the investment management firm Raymond James. "We're not losing jobs."

Employment in restaurants and bars increased by 28,000, a sign that people may have more disposable income. Professional and technical service jobs rose by 27,000, and the health care industry added 17,000 jobs.

In August, manufacturing was particularly hard hit, shedding 15,000 jobs. The government continued to shed jobs, losing another 7,000 positions. 

Just two months before the election, the jobs numbers have become a talking point for both campaigns. But the report was not good news for President Obama, who is still hoping to climb out of the jobs deficit created during his presidency before voters head to the polls. Only two more monthly jobs reports remain before then.

"Today we learned that after losing around 800,000 jobs a month when I took office, businesses once again added jobs for the 30th month in a row," Obama said during a speech in New Hampshire after the report was released. "But that is not good enough. We know that is not good enough. We need to create more jobs faster. " 

The weak numbers could also increase the chances that the Federal Reserve will take more action to boost the struggling economy. 

The overall job market still has a long way to go recover from the financial crisis. Three years after the recession ended, roughly 12.5 million Americans remain unemployed, and 40% of them have been so for six months or more. 

Source: CNN Money

What Young People Are Spending Their Money On

When people look to identify the most prominent obstacles to economic growth, the levels of consumer and federal debt are often high on any list. The current economic circumstances of the U.S. provides a case in point, as it is generally perceived that credit card debt and mortgage liability are key factors behind diminished consumer spending within society.

This is not entirely accurate because the total level of domestic debt as a share of the economy has been gradually declining. A more pertinent issue would appear to be the reluctance of national banks and financial institutions to lend money in instances where applicants have a less than perfect credit history. This cautious stance is impacting consumers and their capacity to spend and reinvest money into the economy.

Unemployment is also a contributing factor to diminished spending in the U.S., especially among Americans aged 18 to 29. The rate of joblessness within this social group is up to 12.7%, which is well above the national rate of 8.3%. This has forced many to reduce their weekly budgets and the amount that they spend on entertainment, food and transport. According to a study published by Generation Opportunity, 84% of this demographic will delay big-ticket purchases until the economy shows significant improvement. 

The Changing Face of Consumerism in the U.S.While young adults are undoubtedly spending less in the current economic climate, it is fair to say that they also have different spending priorities compared to previous generations. The pronounced decline of the U.S. automotive industry provides some insight into this. Young Americans are far less likely to purchase a vehicle than they have been in the past, and the number of young people with driving licenses has decreased significantly over the last three decades. According to CNW Marketing Research, citizens aged 21 to 34 purchased just 27% of new cars in 2010, which is considerably lower than the corresponding figure of 38% in 1985.

Technological purchases have emerged as far greater priorities among modern consumers, and this shift can be attributed to both cultural and economic factors. While it is obvious that there is a significant financial difference between purchasing a $12,000 Kia and a $2,000 Macbook Pro laptop, the multi-purpose nature of devices such as personal computers and smartphones also ensures that they offer far greater value for the consumer's money. In fact, these products are now central to the everyday function of young adults. Cars have become an optional and often unaffordable luxury.
 

The End of OwnershipThe changing cultural and economic landscape also offers considerable insight into the declining housing market. The level of ownership among Millennials continues to fall. Between 1980 and 2000, the share of Americans under 30 who owned property fell from 43 to 38%. This trend was also evident among individuals in their early 30s, whose own share of ownership declined from 61 to 55% during the same period.

In addition to soaring levels of student debt and an unstable job market, it is fair to say that the decline in Millennial home ownership has also coincided with falling marriage rates. The rate of adults aged 25 to 44 who married fell by a staggering 15% between 1980 and 2000.

The Bottom LineAs much as the current economic climate is impacting consumer spending in the U.S., it is clear that cultural changes and a significant shift in the priorities of young adults are equally influential. Millennials in America have a different set of values and beliefs than their elders. Home and auto ownership are no longer as important as they once were. A negative perception of the economy is also discouraging young-people from making long-term future plans.
 

Source: Investopedia