globalEDGE Blog - By Tag: africa

File under: Africa, South Africa, Economy

A recession is typically defined as a decline in GDP in two consecutive quarters. In the first quarter of 2014, South Africa’s economy contracted by 0.6% and only grew by 0.6% in the second quarter – narrowly avoiding a recession. Many worry that South Africa, Africa’s most advanced economy, still faces a significant risk of slipping back into a recession. South Africa’s staggering 25.5% unemployment rate is a major factor that is contributing to this risk and it must be harnessed in order for the country to experience sustained economic growth.

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Over the past months the Ebola virus has claimed more than 1,300 deaths in West Africa. This health crisis is continuing to devastate people in West Africa, and is also having a shattering impact on the economies of Guinea, Liberia, and Sierra Leone. Early estimates have shown that the economy of these countries have been deflated by 30 percent due to the Ebola virus. The mining and agriculture industries have been hardest hit by the virus outbreak. Domestic economic concerns are certainly not the only problem. In today’s globalized economy, the virus outbreak is affecting international business activity.

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Leaders from almost 50 African countries and the United States met in Washington DC on Monday, kicking off a three day conference that hopes to boost trade between the US and the largely untapped African continent. The summit highlights the realization by many US officials that greater attention needs to be paid to African countries who hold great economic potential. Leaders at the summit expect many trade and business deals to be signed during the three day conference, with some estimating that over $1 billion worth of deals will be announced by Wednesday. With these deals in hand, US African trade relationships could increase greatly in the coming years.

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On July 18, the seventh annual Global Innovation Index (GII) was released at the B20 Australia Summit in Sydney. This year, the report's theme dealt with the Human Factor in Innovation, referring to the role that people play in the overall innovative success of different countries. While Switzerland, the United Kingdom, and Sweden topped the list, a significant change was seen: nations in the region of Sub-Saharan Africa showed the most overall improvement on the list. Seventeen African nations, including Mauritius, Seychelles, and South Africa, jumped up in the rankings by several placings. Sub-Saharan Africa has already seen great strides in economic growth and freedom, and this new development spells good news for Africa and its future.

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File under: Africa, Ethiopia, Tourism

Ethiopia is home to rich natural, cultural, and historical sites, yet the number of foreign tourists it attracts ranks only 17th across the African continent.  There is no question that Ethiopia has the destinations to attract overseas visitors; however, currently it is lacking adequate infrastructure to meet tourists’ expectations.  Ethiopia needs investment to build up its infrastructure and domestic and foreign investors alike are beginning to see the country’s largely untapped tourism industry as an excellent investment opportunity.

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As Africa has moved itself into the investment spotlight, its lack of infrastructure has held the continent back from reaching its full potential. The unstable physical infrastructure in Africa, such as its transportation, communication, power, and water supply, is halting the growth that the country should be obtaining during this time, with its increased economic activity and competitiveness. With the proper investment and planning, Africa should be able to overcome this challenge and improve the now inadequate infrastructure it has long possessed.

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The International Monetary Fund (IMF) predicted that Nigeria’s gross domestic product (GDP) was $354 billion last year, making it the second largest African economy behind South Africa. This past Sunday, for the first time in a decade, Nigeria’s statistician-general announced a revision in its GDP from 42.4 trillion naira to 80.2 trillion naira.  How could an economy grow so much in just one night?

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In what is deemed the last continent for major growth in the fast food industry, several chains are finding that expansion into Africa is going to be tougher than what was once expected. Infrastructure costs, food imports, and meat shortages have led to high prices at many quick serve restaurants across Africa. This has lowered optimism among some fast food executives about the prospects of expansion into the vast African continent, though there are others who believe now is the time for growth, even with the early setbacks.

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With the current state of the global economy, the Eurozone crisis, and the large numbers of countries that have left similar unions in the past, a new currency union would not seem like an appealing idea to most regions of the world. However, six West African countries, including Ghana, Guinea, and Nigeria, have all decided to adopt the eco as a common currency by 2015. Members of Africa's current currency union, the West African Economic and Monetary Union (UEMOA), have also decided to adopt the eco by 2020. Similarly, five countries of the East African Community (EAC)—Kenya, Tanzania, Uganda, Rwanda, and Burundi—have all signed an agreement on forming their own monetary union in a decade. There are several potential advantages to these proposed unions, however these could also lead to several big problems for Africa.

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In a world with a clearly-defined gap between developed, larger countries and small countries categorized by political turmoil and radical militant groups, it is difficult to recognize the growth of peace and stability. United States based companies often view currently developing countries as risks due to economic instability. Nevertheless, these low-to-middle income countries are increasingly becoming more stable and present the potential to be beneficial business associates.

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File under: Africa, China, Zimbabwe, Energy

International relations are extremely important for developing countries. Without support from abroad, funding infrastructure projects and economic development would be nearly impossible. This is exactly the case in Zimbabwe where government officials have turned to China for help. Recently, China has lent Zimbabwe $319 million to ease electricity shortages by expanding its Kariba hydropower station. Although this project will take an estimated four years to complete, it can have dramatic effects on the development of Zimbabwe and international relations in Africa.

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In 2012 alone, piracy in Somalia cost shipping companies $6 billion.  Teresa Stevens and her husband have come up with a product that aims to make it a lot more difficult for pirates to board ships.  The product is called the Guardian Anti-Piracy Barrier.  It is a simply-designed plastic barrier which fits over the rails of a ship and makes it nearly impossible for pirates to board ships using ladders or grappling hooks.  This invention has the potential to lead to huge cost savings for global shipping companies and have a positive impact on neighboring African countries’ economies. 

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When considering Africa, one does not tend of think of it as a region of the world that is doing extremely well. Poverty, disease, and violence all still run rampant throughout the continent. However, when it comes to its business opportunities and its economy, Africa is a powerhouse that is gaining more and more attention by the day from corporations and nations from all around the world. Already, it has the fastest growing economy of any continent in the world, is home to 6 of the 10 fastest-growing economies in the world, and it is expected to undergo an immense GDP growth in the next few decades. While Africa has many challenges to overcome, several sectors of the economy have huge potential for growth and change, and the continent has plenty of promising future economic prospects.

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The development of cloud computing has certainly helped businesses to reach new heights but can it also do this for countries? The connectivity that is available from cloud computing can be far more valuable to those who lack resources than those who have an abundance of them. In many ways cloud computing acts as an equalizer and has the potential to accelerate economic growth in Africa as a whole.

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Businessmen go to Africa with hopes of profitable investment opportunities, but often they forget the level of diversity present among African countries. “You can’t treat Africa as one single market. So choosing where to play and where you will get the best return is the critical question,” said Michael Wood, the co-founder and director of consulting firm Aperio.

Many companies target the continent’s biggest economies, such as Nigeria, South Africa and Kenya; because they think these markets have mature economic structures. However, Wood suggests that companies new to the African market should first enter a smaller country. A small market usually provides investors with a lower risk of failure, less competition, and more approachable customers.

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When a business expands into a new international market, many obstacles and uncertainties stand before it. Although Africa is the fastest-growing continent today, managers in the region must deal with a variety of questions in order to achieve continued growth. In a market that has a volatile history like Africa, managing uncertainty effectively has been a critical aspect for many companies. International business managers also deal with many uncertainties as regulatory differences and political disputes are common when a company operates in several markets. Analyzing how managers in Africa deal with uncertainty can provide us with great insight on how to successfully manage an international business.

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As the 21st century has trudged on into its second decade, the increasing rate of globalization that has encouraged integrated global markets has also brought emerging markets into the spotlight of international business. Although strong economies like China, India, and Brazil have captured most of the international community’s attention, sub-Saharan African countries are beginning to make their impact on the global economy. Sub-Saharan Africa is now home to 6 of the world’s top 10 fastest growing countries in the world, and these countries have been projected by the IMF to grow between 5 and 6 percent each year over the next two years. Additionally, U.S. exports to the region now exceed $21 billion per year. Clearly, the African continent of over 1 billion people and vast natural resources has tremendous potential for investors in a global economy, but one question remains: How exactly do you approach a market place as, frankly, notorious as sub-Saharan Africa?

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File under: Africa, China, Chad, Gabon, Niger, Oil, Environment

Chinese oil companies that have held exclusive oil-extraction privileges for nearly a decade in Western Africa are now facing resistance from governments who claim that the Chinese are "gouging, polluting, or hogging valuable tracts." In Niger, private auditors have recently uncovered large costs and impractical charges made by the China National Petroleum Corporation, which has added another argument for the revisions of trade agreements that have already saved Niger tens of millions of dollars from the Chinese. In neighboring Chad, the government recently shut down Chinese oil operations after discovering immense amounts of environmental pollution within their borders. Gabon has also joined in the fight against the Chinese petroleum corporation, which surprised the oil industry by withdrawing a permit from another Chinese state-owned company, Sinopec, and giving it instead to a newly created national oil company.

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During the globalEDGE Blog’s first five years, it has served the international business community not only as a resource for global business news analyses, but also as a time capsule for events that significantly influenced international markets. Born in September 2008, the resounding news of the blog’s launching was understandingly dwarfed by other major events of the time, such as the rapid spread of cell phone use and business in Sub-Saharan Africa and, of course, the global financial crisis that’s effect on the global economy was comparable only to the Great Depression. In this blog, we will not only go back and revisit the news that captivated the world’s attention in the first months of the blog, but will also discuss the lasting effects of those events and how they continue to impact the world in 2013.

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File under: Africa, Nigeria, Oil

Nigeria’s economy has been faltering due to struggles in the oil industry. The country is the largest oil producer in Africa, outputting around two million barrels per day and consuming just 267,000 barrels per day. Interestingly enough, Nigeria has a strong dependence on fuel imports. Their struggles stem from the fact that they simply don’t have enough refineries, and the ones that exist are not maintained well enough to work to their full capabilities. The industry has been slipping into turmoil, as industrial scale theft and inefficient fuel subsidy policies have slowed production significantly.

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While it is no secret that Sub-Saharan Africa has been plagued with poor infrastructure throughout the region’s history, the region’s economic prospects and investment opportunity just took another major hit. On August 7th, a massive fire damaged much of Kenya’s main international airport, Jomo Kenyatta International Airport, causing the airport to close indefinitely with no flights arriving or departing since the blaze was first reported. What made the fire so devastating to the airport was that the Nairobi County fire department did not have a single working fire engine, due to an auction last month where three of their engines were sold in order to pay a $1,000 USD repair bail, which local papers called a “disgrace of biblical proportions.” Despite the physical damage done to Kenya’s major airport, the destruction caused by the flames is unfortunately only the tip of the iceberg when it comes to the economic havoc that this fire most likely will unleash upon developing Sub-Saharan Africa.

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According to a report by the World Bank, Sub-Saharan Africa is on pace to achieve larger economic growth than the global average over the next three years. The report stated that higher commodities, increased investment opportunities, and a steady recovery in the global economy should sustain the region’s GDP growth above 5%, while the global average remains merely 2.4% as of this year. Excluding South Africa, the region’s strongest economy, African economies are currently growing at 5.8 percent, higher than the developing country average of 4.9 percent.Coupled with an anticipated increase in global foreign direct investment, which is expected to reach $54 billion USD by 2015, the economic growth in Sub-Saharan Africa provides an immense opportunity not only to elevate the standing of African nations in the global economy, but also the chance to fight back against the region’s staggering poverty levels.

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The shale-gas industry is flourishing in the United States and West African crude oil exporters are being negatively impacted.  Because of the “U.S. shale-gas revolution”, crude oil exports from Angola, Algeria, and Nigeria to the United States have fallen by over 40%.  Thus far, this has led to a decrease in overall crude oil exports from these three countries; however, the increase in supply of sweet crude oil has led existing buyers to increase their purchases and allowed new buyers to enter the market.

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For years, Africa has been viewed as a continent stricken by poverty with practically no chance of achieving sustainable economic growth. Just over 12 years ago, The Economist even labeled Africa as “The Hopeless Continent” plagued by war and disease.  However, that paradigm is beginning to radically change. Over the past decade, Africa has been the second-fastest-growing region in the world with an annual growth rate of 5.1 percent. To the surprise of many, over 500 African companies have annual revenue of $100 million or more. How has Africa been able to turn around its fortune in such a short period of time? Many believe this economic turnaround can be attributed to greater political stability and reforms that have unleashed the private sector in many African countries. Though, the main source for this economic resurgence has actually been globalization as you will soon see.

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File under: Africa, Ghana, Energy, Environment

For the most part, Africa struggles to develop large amounts of energy, and Ghana is striving to change this. Apart from the northern and southern parts of the continent, Africa has no major energy sources and no efforts have really been made to fix the problem. Blue Energy, a British renewable energy investment firm officially verified plans to build Africa’s largest solar panel installation. It will be a one hundred fifty five megawatt photovoltaic plant, and construction will be located in Aiwaiso, Ghana. Officials are hoping that this is the start of a revolution for renewable energy in sub-Saharan Africa, and it will show whether or not governments can unlock the large potential that Africa holds for solar energy.

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Falling interest rates worldwide and a more stable Africa have together created a perfect storm for debt investment in Africa.  Globally, central banks are driving down interest rates and because of this; investors seeking higher yields are investing their money elsewhere.  Countries like Zambia, Nigeria, Ivory Coast, Senegal, and Namibia have begun issuing global bonds and investors around the world are quickly buying up these debt securities.  Many African countries are finally reaching the point of political and economic stability that is necessary to attract foreign investment.

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In a continent where the Internet is scarcely available, computers are often too expensive to buy, and online business transactions can be extremely complicated to conduct, Africa is experiencing an upwelling in mobile phone use as a means of sharing information and doing business. Of the 695 million current mobile phone subscribers in Africa, the vast majority of this demographic does not belong to the middle and upper class, where e-commerce is commonly conducted on computers. According to Primedia Online business development manager Susan Hansford, many mobile phone subscribers still live in small, remote villages, where advertising high-priced consumer goods would make little to no sense. Stemming from these circumstances, Africa has since provided innovators and investors the unique opportunity of reaching millions through markets based around mobile phone use.

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For a majority of small business owners interested in international exporting, complex African markets are typically avoided in comparison to more familiar markets, like those in Western Europe. In spite of this trend, Amethyst Technologies, a Baltimore-based company, has expanded into Tanzania and Kenya with support from the U.S. Commercial Service. Through working with government agencies, such as the U.S. Department of Defense and the U.S. Food and Drug Administration, Amethyst Technologies has found success in historically unpredictable markets, and has also made a positive impact through building laboratories that are used for drug testing and developing standards for education, health care, transportation, and agriculture.

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With poor infrastructure, pervasive corruption, and widespread poverty, being an entrepreneur in a developing country in Africa can be quite a challenge. But to one Rwandan, a problem became an opportunity. Oliver Nizeyimana started a bus transportation company in the year before he graduated with a degree in management. As a student of the National University of Rwanda in Butare, it would take him a very long time to get to class, and he had an idea to start a bus company that stressed punctuality. He saw an opportunity and took advantage, but it wasn’t without many obstacles and problems to overcome.

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Africa is a land with vast natural resources, but they come at a high price. Africa is known for having some of the most unstable countries in the world. Even with these dangers, China has broadened its exposure in the region to secure the natural resources needed by the factories and businesses of the world’s fastest growing economy.

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The Democratic Republic of Congo has faced years of harsh wars leaving the country deeply stricken by poverty, but now the country moves forward and has its eyes on recovery. A large scale plan to build a hydropower dam capable of producing enough electricity for the entire country has kept hopes high in Congo. If constructed the Inga Three dam in Congo would be Africa’s largest hydropower dam and would produce twice as much electricity as the major Three Gorges dam in China. The country’s multitude of rivers offer enormous potential for hydropower but Congo faces many difficulties if it wants to accomplish its energy goals.

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Although the BRIC grouping of emerging economies does not include a single representative from the African continent, many economic experts and multinational corporations see enormous growth opportunities across the continent.  While most businesses are now aware of opportunities in countries such as Brazil, India, and China, corporations truly utilizing global expansion as a growth opportunity are looking beyond these popular markets.  More than 12 African nations have seen economic growth exceeding six percent for six consecutive years. 

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Africa is the second largest mobile phone market in the world. Does this fact surprise you? Probably, but Africa is expected to reach over 700 million mobile subscribers in the next year. Not only is the African mobile market large in size, it is also the fastest-growing on the planet as well.  This provides an abundance of opportunity for investors, technology and mobile companies, and service providers.

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With the world population recently reaching 7 billion, many wonder how the agriculture industry will keep up to feed this multitude of people. It seems that much of the success will come from developing countries. Many of these countries are a large part of the growing population and also have natural resources that produce a large amount of the world’s agricultural products. Still, an enormous amount of effort is needed to increase agricultural production in developing countries.

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Most African economies are known for their valuable commodities like oil, copper, and gas. But as of late, countries in Africa are adding a new focus to their economies with technology innovation. Countries throughout the continent have acknowledged technology as a key component in the battle to boost prosperity. This has sparked a technology revolution in a continent with high ambitions.

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Businesses and countries alike are finding new ways to protect the environment by reducing emissions of harmful pollutants. One of these ways is a market-based approach called carbon trading which provides economic incentives for business firms that limit their output of carbon emissions. These carbon trading markets are beginning to form all around the world and the country of Kenya plans to launch Africa’s first carbon exchange.

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Africa is the second largest continent in the world by both size and population. The land in Africa is lush with many natural resources and the labor pool is massive. Yet, the economies and governments of most African countries are underdeveloped compared to the rest of the world. How is it that a continent so large and rich in resources is the least industrialized continent on Earth?

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Lately Africa has been attracting beer companies from around the world, as they look to start new ventures. Breweries interests have already begun in Johannesburg, South Africa, and Juba, Sudan. At the end of 2008, Africa produced 5% of the world’s beer supply, a number which has continued to grow since then. Although beer production has been popular in Africa since the 1990’s, companies have begun to increase their investments in the continent since African locals have struggled to be able to mass produce the product in the past.

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A lot of activity has been taking place in Africa lately.  The World Cup has been drawing constant attention to Africa, and recently five east African countries made history by forming a common market called The East African Community (EAC).  Kenyan President Mwai Kibaki launched the EAC this week with Kenya, Tanzania, Rwanda, Burundi, and Uganda all agreeing to take part in the effort. This agreement will better allow people, products, and capital across borders, leading to improved trade and employment opportunities. 

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The United Nations recently forecasted a 3 percent growth in the world economy. Much of this growth is expected to come from developing nations. The majority of this contribution by developing countries comes from growing global powerhouses China and India. A further role they play is in generating a “spill-over” effect to other developing countries, which helps to generate the growth of infrastructure, industry, and trade. One such case which can be examined is that of India and Africa.

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Founded in 2003 by Andrew Rugasira, Good African is a coffee manufacturer which has begun to penetrate the global business scene. Good African began its foray into international markets via Waitrose, a British supermarket chain, has expanded to other rival chains, and is now being sold in supermarkets across Britain. The company is also planning on expanding to the United States as well. What lessons might someone seeking to take their business global bring away from Mr. Rugasira and Good African?

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File under: Africa

In Africa, the diamond industry has become more about helping the development  of countries and less about making a profit. The revenues from diamonds is helping build a stronger economy, increase educational improvements, and help improve healthcare. Since diamonds were discovered in Botswana in 1966, the country’s GDP annual growth rate has averaged 7%. The diamond industry has been especially helpful to previously war-torn countries such as Liberia.

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File under: Africa, Capitalism

A recent Business Week article highlights how South African companies such as SABMiller, Standard Bank, and others are unlocking Sub-Saharan Africa as the biggest investor in the region - $8.5 billion thus far! While South African beer maker SABMiller leads the way in the region, Johannesburg cellular provider MTN is defying conventional wisdom by providing cell phones to people earning less than $2 a day. And neither the combat in Congo nor the drop in commodity prices have ruffled South Africa's mining company Metorex. In fact, the knowhow South Africans have gained on the continent is making their companies attractive to foreigners with ambitions in the region.

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Less than 15 years since the 1994 genocide, Rwanda is leading the world in its progessionist thinking about women.  This is particularly surprising becase this East African nation lies in a continent that has been dominated by the rule of men.  In Rwanda however, a country of 10 million with 55% women and 60% of the population below poverty line (based on gE statistics), the popular will is for women to drive the economy by filling ranks of Government.

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