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