Nigeria’s mighty economy
In a world of slowing growth (China), minimal growth (United States) and outright recession (Britain), it is startling to hear that Nigeria’s economy is likely to shoot up by 40 percent in the second quarter this year. Yep. Forty percent. Four – O.
An investigation by Reuters Lagos correspondent Chijioke Ohuocha came up with this staggering figure — which if borne out will lift Nigeria close to continental rival South Africa and raise it about 10 places on the IMF’s global list to around 3oth.
This mighty rise, however, is not actually because Nigeria has had a sudden spurt of growth. You can read Chijioke’s exclusive story here, but the gist is that the country is changing the base year for its GDP calculation to 2009 from its current 1990. One big reason is that data is better; another that it is more modern, taking in things like mobile phones and the internet, for example. It is the latter, and things like it, that have built up growth over thr years.
Nigeria’s current annual growth is around 7 percent, which puts it on track to overtake slower growing South Africa as Africa’s Number 1 economy. That, in itself, should make the country more of a target for investment over the longer term. It is currently considered “frontier”, which is a small pool when it comes to investment flows.
For now, though, it is as Chijioke writes: “The makeover may give the country financial bragging rights, but will change little for the millions trapped in poverty.”
The percentage of Nigerians living in absolute poverty, unable to afford only the bare essentials of food, shelter and clothing,- has risen to around 60 percent even as growth — rebased or not — has risen.
Building BRICs in Africa
Some eye-catching numbers from Standard Bank out today on the influence of BRICs countries — Brazil, Russia, India and China — on Africa.
First off, the bank says the global recession and its recovery have been nourishing these so-called South-South ties. But it is all now ready to take off. The bank estimates:
– By 2015, BRIC-Africa trade will have incresed threefold, to $530 billion from $150 billion this year.
– BRICs share of Africa’s total trade will increase from one-fifth today to one-third in the next five years.
– BRICS foreign direct investment stock in Africa will swell to more than $150 billion from around $60 billion today.
Standard Bank bases these assertions partly on estimates for BRICs growth over the next five years — eg, domestic output, global output and a doubling of BRICs trade with the world in general. But it also sees Africa growing rapidly — for example, a per capita real annual growth rate of 5.7 percent between now and 2015, and a doubling of private consumption in Africa’s 10 largest economies. And it adds:
Crucially, a host of global-minded corporates is emerging from the BRICs. In 2010 231 (11.5 percent of the total) companies listed in the Forbes Global 2000 originated in the BRICs, up from only 83 companies (4 percent) in 2005. Recent trends are a harbinger of deeper potential.
Oxfam to G8: Act now on global poverty, maternal health
He has starred in such blockbuster films as Pirates of the Caribbean, as well as the upcoming Harry Potter and the Deathly Hallows, but actor Bill Nighy’s heart is set on his real life role as an ambassador for Oxfam.
Flanked by representatives from poor and developing nations from Africa and South America, Nighy was in Toronto on Thursday to ask global leaders gathering for the G8/G20 meetings this week to keep the promises they made a decade ago to reduce maternal mortality rates by 75 percent before 2015.
Nighy was fresh off the plane from Kenya, where he saw children competing with dogs to find scraps of food in garbage dumps. In some cases small girls are forced to sell their bodies for sex to dump kingpins who control areas with the best pickings, an emotional Nighy told reporters.
“If any banker had come with me to Kenya yesterday, I don’t think they’d be reaching so quickly for their bonus cheques,” said Nighy, who stars in a commercial being aired by Oxfam, a global group of organizations advocating for relief of poverty and its causes.
In the commercial, Nighy plays a reluctant bank executive being interviewed on the merits of the so-called Robin Hood Tax, which proposes a global, 0.05 percent tax on financial transactions to raise funds for poverty relief.
The tax has been embraced by some as an easy way to raise hundreds of billions in relief capital for the poor, while some countries have opposed it as a bank tax that is unjust.
Frontier sovereign wealth funds
Macroscope has discussed the growth of sovereign wealth funds many times (see here or here). Just to recap, the global state-owned SWF industry is set to more than double in the next 10 years from the current $3 trillion, according to estimates from Deutsche Bank.
John Green, global head of business development at Anglo-African bank Investec, argues that Africa will play a key role in the expansion of SWFs in years to come.
“Africa is very rich in commodities. Africa in aggregate has gone from a significant fiscal deficit, largely funded by aid, to a continent that has a fiscal surplus. That’s what has precipitated a lot of thinking around this issue,” he says.
Green says he agrees with the view that in the next 5 years there will be enough surplus around in many African countries to begin to build future generation funds properly.
Libya is a leader here with the continent’s biggest sovereign wealth fund, which manages $65 billion in assets. Nigeria is working on legislation to create a SWF aimed at softening any impact from falling oil prices.
Read the full Reuters interview here.
Given the skewed presence of natural resources in Africa, the build up of SWF will largely be seen in countries endowed with natural resources such as oil, diamond, copper and gold. Given the political fluidity of Afrian states I’m not sure how the SWF will be ringfenced from the itchy fingers of these leaders.What will stop them fro dipping thier hands in the till, just like they do on central government coffers?
Africa alone
The good news for Africa when the global financial meltdown began was that its financial markets were generally so far behind the rest of the world that groups such as the World Economic Forum reckoned that there was little or no danger. A new paper, posted on the economic research website VoxEU, suggests that that might be a bit too optimistic.
Tilburg University economist and former World Bank official Thorsten Beck – along with the World Bank’s Michael Fuchs and Marilou Uy — write that despite shallow financial markets, sub-Saharan Africa is unlikely to escape the repercussions of the financial crisis.
Indeed, they argue that the crisis is threatening what little progress has been made to reverse what they call the alarming superficiality of African finance.
African financial systems are small, both in absolute and relative terms . In addition, Africa’s financial systems are characterised by very limited outreach, with less than one in five households having access to any formal banking service. Banking is inefficient and expensive in Africa, as reflected by high interest spreads and margins and high overhead costs. Banking is also very expensive for deposit customers, as reflected by very high minimum balance requirements and annual fees in many African countries. High documentation requirements to open an account – that is, the need to present several documents of identification – also represent significant barriers given that large parts of the population live and work in the informal sector. Similarly, physical access is limited, as the low bank branch and ATM penetration numbers for Africa illustrate.
Perhaps the most worrying aspect of the report for the region, however, is that the authors reckon Africa is more or less on its own when it comes to fixing this.
For better or worse, the future of Africa’s financial systems is closely linked to the development of global finance, as are its real economies. However, it is up to Africa’s financial sector stakeholders – bankers, donors, and policymakers – to guide financial sector reforms in a way that maximises Africa’s opportunities, learning both from their own experience over the past 50 years and the experience in other emerging and developed economies.
The big question is whether such stakeholders will do so.
A very interesting subject. The uncorrelated ‘Frontier Markets’ Theory has been discredited some. Our Economies have displayed high beta characteristics and I think it is a consequence of the low base effect and the fact that the duration of the SSA upswing was material but was not entrenched. We then witnessed the exit of Fast Money which apparently was prepared to exit at simply any price which crunched a lot of our Stock Market values.
It has transpired that we are far closer interknit with the World. Remittances have overtaken Foreign Aid and that [held up briefly with the rally in the $ now reversed] and may of our Exports [Kenyan Flowers is just one] came under further pressure.
We certainly are now sitting in the very epicentre of the V.
However, I am certain we will rebound and rebound very hard. Africa until the last 10 Years faced an egregiously one sided Demand part of the Equation. Today China [and the China Africa Trade axis is still in a hyper growth phase] is a very Big Player. And they are tapering the V as they take this opportunity to load up on Assets.
However, the real story about Africa is not one of Human Resources but of leveraging the Human Capital. Ten Years ago Kenya had 15,000 Mobile Phones [That is the rear view mirror], today we have 17.6m. Thats an ICT and communications Revolution right there. I feel it will lead a late cycle but powerful convergence and that the likes of many Mobile Phone companies and even Google get it.
I for one remain optimistic notwithstanding the very powerful near term headwinds.
Aly-Khan Satchu
http://www.rich.co.ke
Twitter alykhansatchu
Why the BRICS like Africa
There is little doubt that the BRICs — Brazil, Russia, India and China — have become big players in Africa. According to Standard Bank of South Africa, BRIC trade with the continent has snowballed from just $16 billion in 2000 to $157 billion last year. That is a 33 percent compounded annual growth rate.
What is behind this? At one level, the BRICs, as they grow, are clearly recognising commercial and strategic opportunities in Africa. But Standard Bank reckons other, more individual, drivers are also at play.
In a new report, the bank looks at what each of the individual BRIC countries is trying to do. To whit:
– Brazil’s immediate intererest in Africa is securing access to natural resources, particularly oil. But is also motivated by a desire to create a new “Southern Axis” with itself at the forefront.
– Russia is also interested in Africa’s natural resources. But it faces a problem because of the sullied reputation of the Soviet Union during the Cold War. So Moscow has also embarked on a rebranding programme within the continent by ramping up its aid programmes.
– India is attracted to Africa in part because of long historic ties. Commercial engagement, however, is also motivated by a need to guarantee the natural resources it needs for its own growth. Furthermore Africa is seen politically as a key ally in the pursuit of a competitive advantage over its Asian competitor China.
– For China, Africa provides a long-term partner in its ongoing bid to gain global economic ascendancy, providing it with the resources, markets, geopolitical support, and, eventually, food and social security in the form of a growing and engaging diaspora.
The Devil has been dancing all over Africa for 200 years. The result has been Totalitarian, corrupt Governments of the “Strongman” variety instead of democracy or any other form of good Government except for a few Countries.
Handouts from the West have caused much more damage than if Africa had been left to it’s own devices, to develop it’s own infrastructure, agriculture and industries. Now the devil returns in the form of China. Don’t be fooled by his new disguise.
from Africa News blog:
A tale of two Africas
Good news and bad news for Africa from the latest take on global risks from the World Economic Forum. Not much danger for most of the continent, it says, from an asset bubble burst. That's the good. The bad, of course, is that this is because there are not many financial assets to bubble. In fact, it deems the overall exposure even to economic risks is small because African economies are not particularly tied in to global markets.
Actually, the report shows that there are two Africas. Mapped by their susceptibility for economic and asset bubble trouble, most African countries are bunched together in a low risk range. But another, smaller cluster, including Nigeria and South Africa, finds itself in much more peril and shares space on the WEF risk map with Western and Eastern Europe.
Good news, in a contradictory sort of way.
Not so surprising as most of African countries do not have stock markets, but are heavily dependent on international financial institutions handouts to survive. These financial institutions are constrained by the crisis and this is where the whole Africa is affected as credit can’t be obtained.
