In a world hungry for commodities to support its future growth, the African continent has gained sig...
In a world hungry for commodities to support its future growth, the African continent has gained significant strategic importance for the global economy.
Africa is rich in natural resources and its potential is still widely underexploited. Proven oil and gas reserves, for example, have risen by 15% over the last 10 years compared with only 8% for the world.
The last commodities boom in Africa provided high revenues from commodities exports, but this was combined with unsound economic policies that led many African states into financial disaster. Noticeable efforts have been deployed to avoid these past mistakes and have put the continent on a more sustainable growth path. Fiscal restraint is the rule, with an average 1.9% of GDP fiscal surplus this year compared with a 2.7% deficit at the start of the decade. Africa's average external debt fell to 23% of GDP in 2007 from 74% in 1994. Average inflation figures are lower than in the 1980s. Foreign currency reserves are increasing, resulting in more stable local currencies across the continent.
Some countries with smaller commodities reserves have been even more dynamic in reforming and opening their economies. Morocco and Tunisia, for example, have signed free trade agreements with both the US and the EU. Their closeness to Europe and to the energy-rich Algeria and Libya, coupled with the availability of an educated workforce, is a source of new growth opportunities.
As a result, the continent has seen an average GDP growth rate for 2002-2007 topping 5%, and was the second fastest-growing region in the world after Asia.
There is a widespread belief that doing business in Africa is nearly impossible because of corruption. But the Corruption Perception Index by Transparency International shows that many African countries rank at the same level as other emerging economies such as China, India, Brazil and Russia, where corruption is perceived to be lower. Procedures to start a new business are still cumbersome and relatively expensive but African countries regularly appear in the top ranks in terms of progress achieved. Telecoms, for example, have achieved business success by adapting to the local environment and in particular to the low income levels through innovative solutions. The sector achieved a 51% increase in mobile penetration in the 2001-2006 period. A growth of 76% in the number of African mobile subscribers is expected between 2007 and 2010, compared with global growth of 36%.
In the past, Africa has been ignored by most investors as an investment destination. But the situation has improved and impressive progress has been made. There are definitely challenges ahead but the continent has the necessary resources to tackle them.
- Impressive progress has been made in African markets like Morocco and Tunisia;
- The IMF likens Africa today to Asia in the 1970s;
- Corruption is less of a problem in Africa than it is perceived to be.
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