Monday, September 2, 2013

AFRICAN RESOURCES....SERIES 1

Africa is the next destination for the global inflows mainly due to the natural resources. It can be termed as that there is intense completion to get a pie of the natural resources in Africa for which inflow of capital is ruling there. In my recent research I find that commodity story of Africa would include the continent within the global capitalist economy. Africa’s growth trajectory in 2012 can be mapped by a breakdown into regions: the North, South, East and West. I am not here to project or make wild projection for the African economic growth but some macro factors are projecting a substantial growth within the economy. West Africa, for example, Nigeria, Angola will be dominated by the oil-base of the region. Ghana also joined the oil club in 2011, with its first commercial output.

East Africa is forecast to be the fastest-growing region. Although Kenya has no natural resources it is the key financial and business hub which provides substantial growth to the region. In between across the border, Uganda’s discovery of oil will boost development and growth, and the country will join the oil club in a few years’ time. Africa will become an increasingly important food supplier to global markets The surprising fact is this that the major driver of the growth are India and china who are looking for the natural resources where as the second main driving force is the increasing pace of urbanization and “consumerisation” in Africa. As Africans flock to the cities, and disposable incomes rise, their demand for modern goods and services (such as telecommunications and banking services) will accelerate. Proper educated and skilled manpower population is growing over the last couple of years which provides a substantial growth to the African economy in the coming decade. It is one of the most populated and youngest markets in the world, with more than one-half of its population under 24 years of age. According to some research analysts and economist it is expected that by 2050, Africa’s population of 2bn will have overtaken that of India (1.6bn) and of China (1.4bn). Nigeria’s population will lead the pack in Sub-Saharan Africa, followed by Ethiopia, the Democratic Republic of Congo (DRC) and South Africa. Macro factors like young population, grow skilled manpower and increase in urbanization would spook the demand of services and goods for the African economy which provides substantial growth for the economy and also consistency to deliver return on assets.

 Organization planning to tap the resources of Africa should focus on affordability rather than only basic products. With technological improvements mining space has taken new shapes in African economy. Oil has been the main focus of foreign direct investment (FDI), but key minerals, such as gold, copper, iron ore, chrome and diamonds, and more exotic elements, are major draw-cards. Regional integration is another part of the story of African economy which getting new open space opportunities are the major contributing factors over the next decade. But prior to all these we first need to integrate with the cultural differences and behaviors of the African economy so that companies can strategies and develop business models and products accordingly.

 Infrastructure crisis has been often being termed has the barrier to African economic growth but I find that return on investments is too high hence business opportunity exists more. Certain bottle necks like business formation are quite divergent. Business climates are hugely divergent. In Rwanda, it is possible to set up a business in two days; in Kenya, it can take 18 months. In some countries, such as Angola, it is still very difficult to get a business visa. Demographic cultural barriers still exists which provides a high level of risk. But it is expected that over the next decade all these barriers would move out slowly and business would grow substantially. More the people become educated the demand of goods and services would increase and even the political climate would become conducive enough for the business to grow.

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