EXECUTIVE SUMMARY

Africa is one of the most important destinations for the Global Businesses, as the focus
for the Developed Economies is not only on the Developing Economies but also on the Under
Developed Economies like Kenya, Namibia, etc. The most important reason for the special focus
of Developing and Developed Economies are:-

a) Untapped Market.
b) Cheap Labor.
c) Fertile Land available in Agricultural Development.
d) Abundant natural resources like Oil, Coal, etc.

India emerged as a very important economy after the Global Financial slowdown. Indian
Companies were able to counter the crisis and now are planning to tap the resources available in
African continent. Companies like Airtel, Ashok Leyland, Tata, etc are focusing on the long term
growth for the businesses in African continent.

There are various factors which is against FDI inflow in African continent because of
various factors like:-

a) High Crime rate.

b) Political Instability.
c) High rate of Diseases like AIDS, Malaria, etc.

There are both negative and positive factors for the FDI in African continent, but in the
long run, it will be very important for the Global Businesses to have their operations in African
Continent. There are various policies or incentives provided to increase the FDI by the
Government.

Indian Companies moving in the African continent in recent years or before is sign of the
potential growth available in African continent. Operations in African Continent will be
absolutely important for Indian Companies for future growth as well as to improve their
profitability through operational efficiencies which will materialize in the future if not in present
for Indian Companies.
 Introduction
Many African countries have already done much to create a more business-friendly
environment to promote local investment as well as foreign direct investment, and many have
made impressive progress towards political and economic stability. In their efforts to revive
economic activity they have scaled down bureaucratic obstacles and interventions in their
economies, embarked on privatization programmes and are putting in place pro-active
investment measures.

These efforts helped by other factors such as high commodity prices have borne fruit in
recent years, leading to a turnaround after a long period of economic contraction, in many
countries. As a result, for the first time since the early 1980s, per capita gross domestic product
of the continent as a whole has grown considerably for a number of consecutive years since
1994. Some countries that not so long ago were being torn apart by civil unrest or war have
recovered and are growing again, although this growth has to be nurtured, given recent
developments in the world economy. Foreign direct investment in Africa which can make an
important contribution to the economic development of the continent has increased only
modestly in recent years, as the image of Africa among many foreign investors still tends to be
one of a continent associated mainly with political turmoil, economic instability, diseases and
natural disasters.

However, although these problems persist in some African countries and although they
are a serious impediment to the development of these countries, little attempt is often made to
differentiate between the individual situations of more than 50 countries of the continent. As a
result, many African countries are not even listed for consideration by transnational corporations
let alone make it onto the “short list” - when it comes to locational decisions for FDI, despite
offering a number of attractions to foreign investors. On close examination, however, one finds
that a number of “frontrunners” have emerged who have attracted above-average amounts of FDI
even by the standards of developing countries as a whole , not only in traditional sectors, such as
mining and petroleum, but also in manufacturing and service industries. Most importantly, from
the viewpoint of foreign companies, investment in Africa seems to be highly profitable, more
profitable indeed than in most other regions.

Few Indian Companies in Africa or have plans to move in African Continent:-

 The Tata’s, India's largest industrial group, were the first to make their presence felt
there. The group is estimated to have already made about $1.6 billion worth of
investments in Africa, the latest being a luxury hotel in Cape Town.

 The move by India's top telecom player Bharti Airtel to acquire the African assets of
Kuwait's Zain marks the biggest foray of a domestic company into the continent. The
 landmark deal, estimated at $10.7 billion, raises the level of Indian investments in Africa
to $16.7 billion. Airtel's entry into Africa is hugely significant as it underlines the
enormous potential available in the continent for Indian industry. In the telecom sector
alone, the sky is the limit as far as growth is concerned. Tele-density in the continent is
only about 30 percent.

 The other Indian corporates which are active players in Africa include :-

o Automobile major Ashok Leyland and Mahindra and Mahindra,

o Electronics major Videocon,

o Consumer products firms Marico, Dabur and Godrej,

o Energy giant Suzlon,

o Breweries group UB,

o Drugs manufacturers Cipla, Dr. Reddy's Labs,

o Software and IT education firm NIIT,

o Diversified houses Kirloskars and Essar

 What is FDI?

Foreign Direct Investment is viewed as a major stimulus to economic growth in

developing countries. Its perceived ability to deal with major obstacles such shortages of
financial resources, technology, and skills. This has made it the center of attention for policy
makers in developing countries such as Africa. FDI refers to investment made to acquire a
lasting management interest (usually at least 10 % of voting stock) and acquiring at least 10% of
equity share in an enterprise operating in a country other than the home country of the investor.
FDI can take the form of either “greenfield” investment (also called "mortar and brick
investment) or merger and acquisition (M&A), depending on whether the investment involves
mainly newly created assets or just a transfer from local to foreign firms. Most investment have
taken the form of acquisition of existing assets rather than investment in new assets.

M&As have become a popular mode of investment of companies wanting to protect,

consolidate and advance their positions by acquiring other companies that will enhance their
competitiveness. Mergers and acquisitions are defined as the acquisition of more than 10%
equity share, involve in transfer of ownership from domestic to foreign hands, and do not create
new productive facilities. Based on this definition, M&As raise particular concerns for
developing countries, such as the extent to which they bring new resources to the economy, the
denationalization of domestic firms, employment reduction, loss of technological assets, and
increased market concentration with implications for the restriction of competition. Research
conducted by UNCTAD for the World Investment Report 2000 revealed that, for the host
country, the benefits of M&As are lower and the risks of negative effects are greater when
compared to Greenfield investments, especially at the time of entry over the short term. An
UNCTAD research on M&As concluded that:

• FDI through M&As correspond to a smaller productive investment than Greenfield

as the financial resources do not necessarily go into increasing the capital stock,
• FDI through M&As is less likely to transfer new or better technologies than
Greenfield investment,
• FDI through M&As do not generate employment at the time of entry into the host
economy, and may lead to lay-offs as the acquired firm is restructured,
• FDI through M&As can reduce competition, and may be used deliberately to reduce or
eliminate competition and
• Over the longer term, cross-border M&As are often followed by sequential investment
that do increase the capital stock.

Ideally the purpose of investment is to benefit both the investing company and the host
economy. However M&As are likely to result in profit for the investing firm but destruction of
the domestic industry.

Evidence shows that in some cases, foreign investors enter a market solely with the
purpose of closing down domestic competitors and establishing a monopoly in the economy. The
most noteworthy policy mechanism against such practices and which also serves to protect the
domestic economy is a competition policy.
 WHY FDI IS SEEN AS IMPORTANT FOR AFRICA
The Economic Report on Africa by the United Nations Economic Commission for Africa
advocates that FDI is the key to solving Africa’s economic problems. Bodies such as the IMF
and the World Bank have suggested that attracting large inflows of FDI would result in
economic development. Sub–Saharan African governments are very eager to attract FDI. They
have changed from being generators of employment and spillovers for the local economy to
governors of states that promote competition and search for foreign capital to fill the resource
gap.

This change is attributed to changes that are caused through structural adjustment
programmes and the internalization of neo-liberal assumptions promoted by the World Bank and
IMF. All African countries are keen on attracting FDI.

Their reasons would differ but may be summarized as: trying to overcome scarcities of
resources such as capital, entrepreneurship; access to foreign markets; efficient managerial
techniques; technological transfer and innovation; and employment creation. In their attempts to
attract FDI, African countries design and implement policies; build institutions; and sign
investment agreements. These benefits of FDI to African countries are difficult to assess but will
differ from sector to sector depending on the capabilities of workers, firm size, and the level of
competitiveness of domestic industries. In Southern Africa, the main five reasons governments
want to attract FDI are:

• FDI is seen as an important source of capital formation particularly when the capital
base is low. Capital inflow is seen as a way of creating a surplus in the capital account of the
balance of payments or to make up for the deficit on the current account. Consumer Unity and
Trust Society (CUTS) points out that there has been cases where FDI have not led to capital
formation but rather crowded out domestic investment.

• Transfer of technologies is expected because foreign companies will use technology

from their home country. From a developmental perspective, it is more important that technology
is diffused with spill- over into the local production process, and that technology be adopted and
adapted by local enterprises. For an economy to improve on quality, technological upgrading is
crucial. Technical inefficiency, in developing countries, can severely hinder the quality of
products produced and the ability to cope with new demands. At the moment, no studies have
shown that FDI had this diffusion-effect in Southern Africa. On the contrary, foreign investment
results in competition that tends to stifles local technology development and diverts resources
from technology development to attracting FDI.

• It is argued that FDI will lead to employment creation. International experience shows
that foreign direct investment is not always accompanied by substantial employment creation and
in most cases lead to job losses when public companies are privatized. In a special ECONEWS
report on Foreign Investment in SADC, it was pointed out that “FDI is not a good way to create
jobs”. While a quarter expands employment, a third will contract employment. For example, in
Namibia, most FDI investments went into the mining industry that reduced its workforce from
14000 to 5000 during the past 12 years.
 • Transfer of management skills, to local managers, takes place when investors set
up new plants, acquire companies or outsource to local subcontractors.

• Increased export competitiveness is anticipated. This was an important argument when

South Africa introduced its Growth, Employment, and Redistribution (GEAR) strategy. It
emphasized the importance of attracting investment in clusters of industries to develop local
companies. A closer analysis of the main reasons for attracting FDI, employment creation and
capital formation, don’t really have the desired effect.

• Employment creation: International experiences have shown that FDI is hardly

accompanied by substantial employment creation, and in some cases may even lead to job losses.
Another problem with employment through FDI is the kind of employment it creates. Namibian,
for example, the government claimed that the Export Processing Zone (EPZ) programme created
jobs and thus reduced the unemployment rate. However, the jobs that were created are mostly
characterized by poor working conditions and very low salaries. Most of the employees do not
have job security and little prospects of improving their standards of living. It is thus important
to examine the quantity and quality of jobs created.
 Challenges faced by Africa in attracting FDI
• It is assumed that when a given location does not have adequate quantity and quality of
FDI determinants, it can be very difficult for it to increase FDI inflows in a substantial
way.

• Among the features that negatively affect the flow of FDI into Africa is its image. The
image of the continent as a location for FDI has not been favorable. Too often potential
investors discount the continent as a location for investment because a negative image of
the region as a whole conceals the complex diversity of economic performance and the
existence of investment opportunities in individual countries. The Secretary-General of
the United Nations, Kofi Annan, puts it this way: “For many people in other parts of the
world, the mention of Africa evokes images of civil unrest, war, poverty, disease and
mounting social problems. Unfortunately, these images are not just fiction. They reflect
the dire reality in some African countries—though certainly not in all.”

• When investors perceive the continent as a home for wars, poverty, diseases and a
generally unfriendly investment destination, the result is the diversion of these
investments to other regions. It may then become very difficult for the continent to
increase its global share of FDI if its current negative image continues to prevail. What is
needed is for both the African continent and the international community as a whole to
eliminate those negative factors that give the continent its poor image.

• The promotion of peace, economic prosperity and sustainable development for Africa’s
people, is still a big challenge. There are many symbols of failure, despair, brutality and
people who are physically and psychologically scarred by many years of dreadful warfare
across the continent. Examples include Sierra Leone, Liberia, Somalia, Rwanda, Algeria,
Angola, and Mozambique.

• Conflicts are a barrier to efforts at increasing a location’s share of global FDI. In World
Bank, some costs of conflict in Africa are outlined. These include social and economic
costs where it occurs and in neighboring countries by generating flows of refugees,
increasing military spending, impeding key communication routes and reducing trade and
investment (domestic and foreign). Conflicts divert resources from development uses. It
is estimated that a total of $1 billion is used on conflict yearly in Central Africa. The
figure amounts to more than $800 million in West Africa. On top of this comes the cost
of refugee assistance, estimated at more than $500 million for Central Africa alone.
• Crime and violence have many direct economic and human costs that may hinder FDI
inflow directly or indirectly. They inhibit development in many ways. For example, some
factories may not operate more than one shift because employees cannot commute safely
to work. FDI projects depending on operating several shifts may therefore not be able to
do so. This may mean that they lose their profitability and competitiveness. They are
therefore likely to be scared away from investing in Africa.

• Other factors that may hinder more FDI inflow to Africa include the AIDS epidemic and
tropical diseases like malaria. There are 33.6 million people infected with the HIV virus
worldwide, 23.5 million (about 70%) are Africans. The United Nations estimates that the
number of AIDS orphans will reach 13 million by 2001. The continent has already lost
13.8 million people to AIDS, and nearly 10,500 new cases are diagnosed daily. AIDS
may hinder FDI inflow in that it decimates the already scarce skilled manpower.
According to Vàrt Land , the International Labor Organization (ILO) estimates that the
labor force in Africa will fall by 20% in the near future due to the AIDS epidemic.

• There are numerous other factors that militate against the inflow of FDI into Africa.
These will include Malaria and other tropical diseases, forces of nature such as floods and
drought.

• The refugee problem adds to the bad image of Africa. The continent is home to more than
half of the world’s refugee population—about 12 million, including those internally
displaced. Life as a refugee is not the best one can wish for. One can suffer some
psychological and emotional torture that makes one unable to work productively. That is
to say, it can be difficult for most refugees to supply their labour force for productive
work. The problem of refugees contributes to the shortage of the needed labour force in
Africa. Refugees are a cost to host governments and organizations, e.g., the United
Nations that finance them. Resources expended on refugees could have been used in
creating a more competitive environment for investments.

• The colonization of Africa by Europe led to the current artificial division of the continent.
The division has been one of the major sources of war in Africa. Countries fight with
each other mainly for the purpose of controlling resources found on the other side of
boundaries. We already discussed the consequences of war on the prospect of FDI in the
continent. The economic foundations laid by the colonial masters in Africa aimed at
serving themselves. Africa was made to be a supplier of raw materials, primarily from the
primary sector producing agricultural outputs and minerals. The continent was made to
be a market for finished products. Such economic bases are among the factors that
 contribute to the current poverty level in Africa. This poverty makes it difficult for the
continent to create an investment- friendly environment.

• The exploitative trading relations between the North and South partially account for
problems in Africa. In the current trading relation, the North dictates the price of
commodities in its favor and against the South. Most African countries find themselves
on the losing side. They mostly experience deficits in their import-export performance.
This leads to, among other things, the difficulty using domestic sources to finance their
development projects. As a result, most development projects, for example, infrastructure
development, are likely to be abandoned. Poor infrastructure, in turn, becomes a barrier
to FDI inflow.

• External borrowing may offer an alternative to financing development projects by using

domestic sources. This alternative is not without potential problems for the borrowing
countries. When debts are accumulated, the payment of accruing interests may oblige the
borrowing countries to divert resources to the service of debt repayment instead of
investing in the country in order thereby to create a more attractive business environment
for investments. Meanwhile, when they fail to repay, they fall into debt crisis and this
makes it even harder for them to borrow more. In this way, the debt crisis in Africa is a
barrier to the continent increasing its global share of FDI.

• The presence and emergence of other developing regions of the world (Asia, Latin
America, Caribbean and the former socialist states of Eastern and Central Europe) as
more attractive investment locations adds to the challenges that Africa must encounter
before it can add to its global share of FDI. Several regions of the world are competing
for limited investments. Only those locations with adequate FDI determinants are likely
to be able to increase their global share of FDI in an appreciable manner.

• The main challenge in the continent, however, remains the diversity of its countries. The
northern region is very different from the south and there is a wide range of cultures. The
levels of political stability and economic progress are also markedly different in each
area. Marketing strategies will thus vary widely from country to country.

Following are few of the challenges to faced to attract FDI in Africa.

 Initiatives taken by African countries to attract FDI

African countries, like most other developing countries have taken various initiatives to attract
FDI. These initiatives include incentives, signing of investment treaties and investment
promotion activities.

1. Incentives

Incentives can be described as policies used to attract internationally mobile. Through the
EPZ programme, African countries offer incentives to attract foreign investment in the form of
tax holidays, exemptions on export and import duties, subsidized infrastructures, and limits on
workers rights. According to Jauch and Endresen (2000), opinions about the importance of
incentives vary significantly. Governments consider them as a mean to obtain FDI whereas
transnational corporations perceive EPZs as providers of favorable investment sites. The case of
Namibia is instructive in this regard.

In 1995, Namibia passed its EPZ Act. Four years later, LaRRI carried a study to assess
the socio-economic impact of Namibia’s EPZ programme. This study revealed that Namibia had
come short of the expectation in terms of the EPZ programme. The government anticipated
creating 25 000 jobs by the end of 1999. The actual number of jobs created at the time of the
study was 400. The study carried out by LaRRi unraveled poor labour conditions that could lead
to future conflicts (LaRRI, 2000). This prediction was confirmed in 2002-2003 when
RAMATEX, a Chinese owned textile company producing for the US market from Namibia had
two strikes within months of each other. The reasons were poor working conditions and poor
salaries, typical conditions that prevail in EPZs.

African countries have improved their regulatory frameworks for FDI by opening their
economies, permitting profit repatriation and providing tax and other incentives to attract
investment. Improvements in the regulatory framework for FDI have been stressed in many
countries through the conclusion of international agreements on FDI. Most African countries
have concluded bilateral investment treaties with countries whose main aim is the protection and
promotion of FDI. They also relaxed regulations for foreign investors:

• By granting investors easier entry,

• By relaxing the ability to borrow locally although it implies a constraint on a country’s

foreign currency reserves,

• Relaxation of land and mining concession ownership,

• By forming new kinds of partnerships with the private sector (public private
partnerships) in areas which were previously the responsibility of the government e.g. water
distribution. The incentives offered by governments can be grouped into three categories such as
fiscal, financial and rule or regulatory-based:
Fiscal Incentives
• Reduced tax rates
• Tax holidays,
• Subsidies,
• Exemptions from import duties
• Accelerated depreciation allowances
• Investment and reinvestment allowances
• Specific deductions from gross earnings for national income tax purposes
• Financial Incentives
• Grants
• Loan and loan guarantees
• Modifying rules on worker’s rights
• Modifying environmental standards

2. Investment treaties

Incentives are only a part of what governments offer to attract foreign investors to their countries
for investment. Increasingly countries have entered into investment treaties, both bilateral
investment treaties and multilateral ones.

Bilateral investment treaties

The bilateral treaties contribute to the establishment of favorable investment climate

between two countries by providing assurance and guarantees to investors. In the SADC region,
only South Africa did not have a law that specifically dealt with FDI by the late 1990s. More and
more bilateral treaties are being signed by African countries to safeguard the rights of the
investors. Bilateral investment treaties are perceived as contributing to the establishment of
favorable investment climate because they include the following:

• Fair and equitable treatment for foreign investors in terms of applications for investment
approval and setting up their businesses,

• Specific provisions on expropriation and non-commercial losses and compensation for the
same, and

• Dispute or conflict settlement mechanism (CUTS, 2001).

3. Investment Promotion

More and more countries are engaging in pro-active policies to attract FDI. Most countries have
established investment promotion agencies (IPA) whose main purpose is to attract FDI and to
look after foreign firms once they have set operations. Many countries, particularly in Africa,
still suffer from a negative image. This makes the marketing role of IPAs extremely important.
Investment promotion agencies usually fulfill a dual role:
 • By acting as a one stop for investors to deal with regulatory and administrative
requirements,

• By changing or modifying investor perception of the country by attending and

organizing investor fairs and by distributing materials.

• Investment promotion covers a range of activities, including investment generation,

investment facilitation, aftercare services, and policy advocacy to enhance the competitiveness of
a location.

According to the World Investment Report (2002) the majority of countries have moved
from the first generation of investment to the second generation of investment. First generation
investments mainly involve the opening up of an economy to FDI whereas second generation
investment actively involves a government in marketing its location by setting up investment
promotion agencies.

In order to increase the efficiency of investment generation and enhance the chances of
attracting export-oriented FDI, some IPAs go further and utilize part of their FDI promotion
resources for investor targeting. Third generation promotion can be an efficiency policy tool, but
it is not an easy task and involves certain risks, such as, the process of investor targeting does not
integrate with the overall development strategy of a country. Other risks involve utilizing
resources which may be focused on seeking investments that do not materialize; attracting the
wrong types of firms; and assuming the government’s ability to foresee which types of FDI are
likely to have the greatest ability to integrate and link with local investment (WIR, 2002).Such
risks necessitates that investment promotion agencies work closely with other parts of
government to identify and create comparative advantages that are sustainable and that
developmental policies do not offset each other.. Targeting needs to be a continuous process and
not be taken as a once off initiative.
 FACTORS INFLUENCING INVESTOR DECISIONS

It is argued that a strong policy and regulatory regime, appropriate institutions, good
infrastructure, and political and economic stability are important to attract FDI. According to
Ludger Odenthal from UNCTAD, business has indicated different determinants for decisions to
invest abroad. Some of these determinants are:

• The policy framework for FDI such as political and social stability, rules about treating
operations of affiliates of foreign companies, and international FDI agreements.

• Economic determinants such as the size of the market and per capita income.

• Economic determinants for FDI that seeks natural resources.

• Economic determinants which are relevant for FDI that seeks efficiency, such as
cheaper costs for infrastructure or intermediate products.

• Business affiliation provisions such as investment incentives which are mostly

considered to be important determinants but they are not, except in case of choice between two
equally attractive locations.

• Privatization programmes have become a source for attracting FDI (Odenthal, 2001).

Jenkins and Thomas (Econews) conducted interviews with 81 UK, Swiss and German firms to
find out why these firms invest in the SADC region. Their findings were as follows:

� 84 % - Size of the local market

� 40 % - Local raw materials
� 26 % - Personal reasons
� 21 % - Strategic reasons
� 19 % - Privatization

• According to World Bank (2000) the combined GDP for the region is smaller than that of
Belgium and is divided among 48 countries with a median gross domestic product of just
over $2 billion, which is the output of a town of 60,000 in a rich country. Africa accounts
for barely 1% of global GDP and only 2% of world trade. Its share of global
manufactured exports is almost zero.

• In the World Bank report referred to above, it is indicated that Africa is regressing. Many
countries are worse off today than they were at independence in the 1960s. Although the
region’s population of about 600 million could potentially represent a huge market, low
levels of incomes in the region erode this potential. Mozambique, for example, had a per
head income of $80 in 1998. The region as a whole had an annual GDP per capita of
 $800 in the same year. The low-income level in Africa, which translates to limited
purchasing power, then is a barrier to market-seeking FDI.

• With its rapidly growing population the continent needs to grow by at least 5% per
annum just to maintain current poverty levels. In 1997, much of Africa had a GDP
growth rate of 3% and for the period 1997-2006, the growth is estimated to be 4.1%.
With population growing at a faster rate than the GDP there is a danger of growth in
poverty in Africa. This does not present a promising environment for a substantial
increase in FDI.

• Africa has poor “hard” physical infrastructure like telecommunications, power,

transportation, water and sanitation. These are very crucial for development and for a
location’s ability to attract and keep FDI. Low population density, small national markets,
and a high number of small and landlocked countries, make it difficult to develop
infrastructure in the continent. For example, small national markets limit economies of
scale, reduce competitiveness and increase risk.

• World Bank points out that Poland has more roads than the whole of Africa. With 10
million telephone lines in the continent—fewer than in Brazil, and with half of them in
South Africa—most Africans live two hours away from the nearest electronic
communication. The continent contains just 2% of the world’s telephone main lines.
According to The Economist, thirty-four countries in Africa have less than ten telephone
lines per 1,000 people, compared to the average of 500 lines to 1,000 in rich countries.
Nigeria’s 120 million inhabitants have only four lines per 1000 people. In Tanzania that
the introduction and rapid spread of mobile phones is likely to change the situation there
for the better. This seems to be the situation in some other African countries, e.g., Nigeria
and Ghana, where mobile phones are available at a rapidly increasing rate. Other
infrastructural facilities such as paved roads, railways, ports and telecommunications are
equally inadequate and, in some cases, nonexistent.

• Another issue of concern about infrastructure in Africa is its cost. According to World
Bank, the continent has the highest transport cost of any region. The continent is isolated
from major maritime and air routes and is served by peripheral, high cost routes. Freight
costs for imports are 70% higher in East and West Africa than in developing Asia. For
land-locked Africa the cost is more than twice as high as in Asia. Internal transport in
Africa is also costlier. For example, in the mid-1990s, road transport costs in Ivory Coast
were two to three times those in Southeast Asia. These high costs are attributed to, among
other things, lower road quality, higher fuel taxes, higher imported vehicle costs and
 costly bureaucratic procedures. The cost of telephone calls among African countries can
be fifty to one hundred times the cost of calls within North America.

• Physical infrastructure is among the very important FDI determinants. Its value lies in its
consumption, not its production. It is an input that is crucial to all other production. Its
poor quality results in low competitiveness because cost, quality and access are important
determinants of competitiveness. Poor infrastructure leads to weak market integration and
slower growth. From the above, it should be clear that Africa’s prospects of increasing its
global share of FDI inflow are not bright.

• Modern communication and information technology infrastructure like the Internet is yet
to be common in the region. The gap created by the digital divide between Africa and the
developed world is extremely huge. This is a negative in terms of the ability to increase
FDI in the region, especially in this e-commerce age. Ample resources will be required if
this infrastructure is to be provided at acceptable standards. There must be exponential
increases in access to electricity for more Africans, for instance. UNCTAD correctly
points out that the African continent has many challenges to overcome before it can more
fully exploit the advantages of e-commerce. These include the low level of economic
development and small per capita incomes, the limited skill base with which to build the
e-commerce services, the number of Internet users needed to build a critical mass of
online consumers and the lack of familiarity with even the traditional forms of electronic
commerce such as telephone sales and use of credit cards. Remedying the above depends
on the provision of adequate telecommunications facilities in most areas of the continent.
PEST FACTORS AFFECTING BUSINESS
IN AFRICAN CONTINENT

(Political, Economic, Social, Technological Factors)

 Political Factor

• Governance and Political Issues

On the whole, political and social stabilization has been generally progressing on the
continent, while higher political awareness among the population has obliged governments to
become more accountable, as witnessed by the organization of regular electoral consultations
and the implementation of structural reforms in public administration, which have improved
governance and increased transparency. However, the administrative capacity of government
remains weak, impeding the consolidation of democratic institutions (especially in fragile states);
the judicial system still receives little political priority. Gaps in the implementation of regulations
are common and, as a result, application of the rule of law remains tenuous.

As noted in AEO 2007/08, violence during ordinary demonstrations of democratic

dissent, like strikes or demonstrations remains a characteristic of political life in some countries
and continued during 2008. Since the end of 2007, when rising living costs triggered a series of
disturbances, political economy considerations have acquired increasing relevance and the
authorities have had to strike a careful balance between the need to take some measures to
control unrest and the need to avoid a shift to authoritarianism which would limit civil rights,
including freedom of the press. With some exceptions, the stance taken by governments faced
with these problems turned out to be constructive. The challenge will be to continue on this
track, against a background of decreasing public resources, and uncertain donor support.

• Conflicts and Political Troubles

Although slow progress towards more stable and democratic regimes continued in many
countries, in others the situation generally worsened in 2008 compared to 2007, mainly due to
further intensification of long-term conflicts, a resurgence of troubles in countries which had
gained stability in the recent past, or new waves of episodic instability in relatively stable
countries due to the rising costs of living.

Several post-conflict countries have been successful in their struggle to couple

macroeconomic normalization with the promotion of social stability. Angola and Mozambique
are good examples of this, with the former holding democratic elections for the first time since
the end of the civil conflict, and only the second time since independence. Although insecurity
remains a concern, especially in urban areas, stability has improved in Liberia and Sierra Leone,
after a decade of particularly destructive conflicts. After 6 years of civil unrest, the situation in
Côte d’Ivoire continued to stabilize.

Although successful in bringing hostilities to an end and leading to the formation of a

national union government, the signing of the Ouagadougou agreement in March 2007 has not
yet resulted in elections as originally foreseen. Despite this, violence on the part of both sides of
the conflict has decreased dramatically, while the relaxation of the social climate allowed the
state to regain control of security in the northern region and resume the delivery of basic
services.
 The Great Lakes region seems to be laying the bases for an improvement in the near
future. The conflict in Uganda has lost impetus with the elaboration of a peace agreement in
April 2008 (although not yet signed by the rebels), and, after a dramatic intensification of the
conflict in DRC, the year closed with the arrest of the chief of one of the rebel groups which had
been fuelling violence in the North-Kivu region, thanks to the fruitful co-operation between the
governments of Joseph Kabila in DRC and Paul Kagame in Rwanda.

Despite these welcome improvements, there are signs of increasing political tension that
cannot be ignored. The year had started on a positive note in DRC, with the organisation of a
Peace Conference in Goma in early January. However, violent clashes between the army and
several rebel groups poisoned the situation in the north-east part, continuing to fuel instability in
the entire region for most of the year.

In Chad, the conflict opposing President Deby and the rebellion burst into open warfare
when the latter attacked the capital city, N’djamena. With the support of France, the government
regained control, although episodic clashes between the army and the rebels continued
throughout the year, worsened by ethnic and religious feuding. Neighbouring Sudan and the
Horn of Africa remained restless. The Darfur war continues to kill civilians, while the
humanitarian situation risk becoming catastrophic after president Bachir ordered international
humanitarian non-governmental organisations out of the country in early 2009 in reaction to an
arrest warrant issued by the International Criminal Court bringing charges against him of crimes
against humanity.

In stateless Somalia the situation remains critical, and the civil war is in its eighteenth
year. The signature of a peace deal in June 2008 between the Transitional Federal Government
(TFG) and the Alliance for the Re-liberation of Somalia (ARS) did not stop the fighting, and the
lack of an effective state threatens the security of the entire region. Besides the on-going battles
among rival groups, in 2008 several attacks by pirates on foreign commercial ships spread
insecurity along the coast, and weapons which are smuggled into Somalia are also trafficked into
other countries in the region. In Central and East Africa, Burundi and the Central African
Republic have had trouble in overcoming the effects of past civil conflicts with dramatic episode
of violence threatening peace agreements.

An upsurge in the violent activities of a number of rebellion movements can also be

observed. Since mid 2007, the Touareg rebellion has acquired new strength in Niger and Mali,
intensifying killings and kidnapping of soldiers and foreigners. While the government of Niger
has not recognized the existence of a rebellion and refuses to deal with the Touareg, Mali signed
a peace agreement with them in April 2008; however, the situation has not yet completely
returned to normal.

In Nigeria the conflict in the Delta Niger region continued in 2008. Since 2005, it is
estimated that Nigeria lost some 20 per cent of its oil production due to these incidents. Despite
the creation of a ministry in 2008 to deal with these issues, pacification still seems elusive.

In Kenya, following the contested election of December 2007, some 1 300 people were
killed and more than 350 000 were displaced.
 In 2008, there were a number of coups d’état. The Mauritania military junta was
officially sanctioned by the African Union, which urged it to return to constitutional order after
the army overthrew the first ever democratically elected president in August 2008, Mohamed
Abdallahi. In December, and after months of social unrest, the army took power in Guinea,
taking advantage of the death of the former president, Lasana Conté.

The series of coups continued at the beginning of 2009, with the killing of the President
Joao Bernardo Vieira of Guinea Bissau by the army, after two failed attempts during 2008. The
country had been particularly restless in recent years, due to the increasing presence of Latin
American drug dealers using West African coasts as a channel to smuggle drugs in Europe.

In early 2009, a harsh political struggle broke out between President Marc Ravalomanana
and the mayor of Antananarivo, Andry Rajoelina resulting in violent demonstrations and a
number of deaths when the army fired on protesters. After an intervention of the army in support
of Rajoelina, President Ravalomanana stepped down, in what was condemned by the African
Union and several African leaders as an “unconstitutional transfer of power”.

Hunger riots began at the end of 2007 and intensified during 2008, triggered by
unprecedented increases in food and fuel prices which reduced the real income of households
already struggling with harsh living conditions. Burkina Faso, Cameroon, Egypt, Mozambique
and Senegal are only a few of the countries which experienced strikes, demonstration and riots.

In Cameroon, protests against high prices were coupled with discontent over president
Biya’s intention to modify the constitution in order to be allowed to run for a third mandate in
the presidential elections to be held later in 2011. In South Africa, violent riots with xenophobic
connotations in May 2008 caused the death of 62 foreigners and the displacement of several
thousand people.

The situation remains tense in some countries and new tensions could explode in the
coming months due to the worsening of economic conditions due to the global crisis affecting
employment in the mining sector as well as in services, such as construction. Although several
governments managed the situation in 2008 by implementing support measures and containing
social discontent, the situation is likely to be more challenging in 2009, in a context of reduced
public resources.

• The Political Stance

Partly in response to the rising instability, the political stance hardened considerably in
2008 in several countries. In Mali, episodes of harsh reactions to the Touareg rebellion alternated
with attempts to push negotiations forward to solve the crisis. In the case of hunger riots,
governments generally reacted by increasing the presence of the army and police, and arresting
demonstrators.

The rising pressure over state control resulted in government attacks on local and
international press. Reporters Sans Frontières expressed worries about the intimidation of
journalists, especially in countries of West and North Africa. Episodes of arrests of journalists,
withdrawal of licenses and closing of the editorial units of newspapers or magazines occurred in
some countries.

North Africa has also been very active in the fight against illegal immigration, as a result
of several bilateral agreements signed with European countries, in particular France and Spain.
This resulted in the arrest of hundreds of migrants attempting to reach the coasts of Europe
illegally on precarious and overcrowded boats. In a desperate attempt to improve their living
standards, hundreds of young people die every year.

However, the country that experienced the strongest hardening of the political stance in
2008 was Zimbabwe. Repression of all opposition increased before and after the elections
organized in May, which were won, nevertheless, by Morgan Tsvangirai, the opposition party
leader. Robert Mugabe, president since Zimbabwe’s independence in 1980, refused to accept the
result and further intensified repression, despite the disapproval of AU and SADC leaders. A
series of bans on political gatherings, curfews and repression of independent media further
restricted political and civil liberties. The country further fell into a deep economic and
humanitarian crisis, worsened by a cholera outbreak that killed several thousand people and
risked affecting neighboring countries. In February 2009, Mugabe finally accepted to constitute a
national unity government, giving the position of Prime Minister to Tsvangirai. At the time of
writing, the situation is far from being stabilized, however.

As in 2007, the political freedom index (PFI) from Freedom House for 2008 shows a
trend in Sub-Saharan Africa towards some setbacks. Eleven countries experienced a worsening
of either political or civil rights, only six showed improvement. The PFI is based on measures of
several components of political freedom such as: free and fair elections; honest tabulation of
ballots; the extent to which citizens are free to organise in different political parties or other
political groupings of their choice; whether there is a significant vote for the opposition and a
realistic possibility of coming to power through elections; self-determination, and freedom from
any kind of domination; reasonable self-determination for cultural, ethnic, religious and other
minority groups; and the extent to which political power is decentralised.

• Peace and Security

According to the Heidelberg Institute for International Conflict Research, the number of
conflicts in Africa (Sub-Saharan African and Maghreb, according to the definition) remained
stable at 89, mainly driven by conflicts over natural resources and, to a lesser extent, political
power at the national and regional levels. However, in 2008, the number of highly violent
conflicts rose from 9 to 12 reversing a trend towards decreasing intensity of violence in recent
years. The deterioration of the situation in Chad resulted in its reclassification as a country at
war, alongside conflicts in Darfur and Somalia. In the latter case, the retreat of the Ethiopian
troops at the beginning of 2009 did not bring about a significant improvement, and clashes
continue between the Transitional Federal Government (TFG) and groups loyal to the United
Islamic Courts (UIC). As a result, while still ranking second in the world for the number of
conflicts, after Asia and Oceania, Africa is now the region with the highest number of wars
(highly violent conflicts).

As in the past, Sub-Saharan Africa hosted the largest number of UN-led peace operations
in 2008 (10 out of 17), including in Burundi, Central Africa Republic/Chad, Côte d’Ivoire, DRC,
Ethiopia/Eritrea, Liberia, Sierra Leone, Sudan (South), Sudan (Darfur), and Western Sahara. In
2008, UNMEE, the UN mission to Ethiopia and Eritrea came to an end, despite the increasing
tension over border demarcation in 2007. Although no new mission was deployed, the African
Union/UN Hybrid Operation in Darfur (UNAMID) approved in December 2007 was effectively
implemented in 2008. This initiative represents the realisation of the UN’s goal to strengthen co-
operation with multilateral and regional organisations. However, peacekeeping operations did
not manage to improve the situation significantly. In view of the increasing instability in DRC,
the Security Council decided to increase the number of troops by 3 000 units for the mission
(MONUC).

After a very active 2007, which saw the launch of a number of new regional initiatives,
new interventions by the African Union (AU) in 2008 were limited to the AU mission to Somalia
(AMISOM) and the hybrid UN-AU mission in Sudan. Furthermore, AU observers are still
deployed along the border between DRC and Rwanda, with observers from the UN and the two
parties, as well as in Southern Sudan. AU Liaison Officers, based in Asmara and Addis Ababa,
contribute to the monitoring of the Temporary Security Zone between the two countries. The
deterioration of the situation in Somalia caused the UN Security Council to extend the AMISOM
mandate by six months on February 2008. In March, AU troops supported the Comoros
government in its intervention in dissident Anjouan Island to return it to central government
control.

Efforts to make the African Peace and Security Architecture (APSA), launched in Durban
in 2002, operational are continuing: the Annual Consultation between the Commission of the
African Union (AU), members of the AU Peace and Security Council (PSC), the Regional
Mechanisms for Conflict Prevention, Management and Resolution, representatives of the G8
member countries, the European Union (EU), the United Nations (UN) and other partners was
held in June 2008 in Addis Ababa. Progress and the implementation of the AU peace and
security agenda were assessed and the Panel of the Wise was inaugurated in December 2007. At
the end of January 2008, a Memorandum of Understanding (MoU) on Co-operation on Peace
and Security between the AU and the Regional Mechanisms for Conflict Prevention,
Management and Resolution was signed. As part of the capacity building component of the
Africa Peace Facility (APF) put in place by the EU at the request of the AU, a number of
Regional Mechanisms have already deployed Liaison Officers with the AU in Addis Ababa.
Moreover, the EURO RECAMP initiative was launched in November 2008 by the EU and aims
to train African military and civilian leaders belonging to the African Stand-by Force (ASF) in
order to compensate for the severe capacity shortage. The ASF is expected to be able to provide
rapid reaction in emergency situations. The
 • Electoral processes
Some 36 million Africans were called to express their vote in parliamentary and
presidential consultations in 2008 held in 10 countries; 70 per cent of voters participated,
compared to 36 per cent in 2007.

Elections in Ghana, the biggest country in terms of population that had an election,
accounted for much of this result with a turnout of 70 per cent, while in Angola 98 per cent of
voters went to the polls. Generally the outcomes were positive: Angola held its first democratic
elections after the end of the war, and the second after independence. The electoral process was
peaceful and international observers did not report any major irregularities. Rwanda, Zambia,
Ghana conducted peaceful elections.

In Ghana, the opposition leader, John Atta-Mills, of the National Democratic Congress
(NDC) won the poll, while, in Rwanda, women took 56 per cent of the total parliamentary seats,
making this country‘s Chamber of Deputies the first in the world to have a female majority.

However, post-electoral violence plagued Zimbabwe, where the situation deteriorated

leading to state-sanctioned violence directed towards opposition members. Elsewhere, incidents
of violence triggered by the 2007 elections in Kenya and Nigeria continued into 2008.

In 2009 15 electoral consultations are expected, including the long-delayed elections in

Côte d’Ivoire, and national elections in South Africa, where rising tensions during the electoral
campaign resulted in the split of the major party. The first democratic elections for the
presidency are also expected in Angola, although a constitutional reform might delay elections to
2010.
 Economic Factors

 Macroeconomic Performances in Africa

In 2008 GDP growth in Africa was 5.7 per cent; it was 6.1 per cent in 2007. This was,
thus, the fifth consecutive year when growth exceeded 5.5 per cent. However, the impact of the
global economic crisis is expected to slash growth rates to 2.8 per cent in 2009, less than half of
the average growth rate achieved during the past five years. The IMF found that over the last 30
years a 1 per cent slowdown in the rest of the world has led to a fall of 0.5 per cent in Sub-
Saharan Africa, therefore any further worsening of international economic conditions could well
reduce the growth prospects for Africa in 2009 and 2010 even further. The steady process of
integration of the continent into the global economy that occurred during the last 15 years has
increased the vulnerability of Africa to drastic falls in financial flows, such as foreign direct
investment, trade credit and remittances and to reductions in export earnings. A greater-than-
expected fall in these flows will certainly have negative consequences for African growth. On
the other hand, the impact of these negative effects could – at least partially – be offset by the
prudent macroeconomic management (See Box 7) of most African countries during the last
decade, as well as increased trade links with China, India and other emerging economies.
Moreover, more than 60 per cent of the population live in rural areas, they are
consequently dependent on domestic food production, and are thus somewhat less vulnerable to
external shocks.

• Economic Growth
• Inflation
• Public Finances
• Balance of Payments

Economic Growth
In 2008, growth was driven by the commodity-price boom, which peaked at mid-year and
had clearly collapsed by the end of the year, accompanied by strong growth in private
investment. Growing conditions in the agricultural sector were also generally favorable.
Countries were beginning to have problems with controlling inflation, but, by and large, were
continuing to reap the benefits of sound macroeconomic policies. As in previous years, oil
exporters fared better than oil importers. All countries had to cope with higher prices of food and
fertilizers. Thus, the gap in GDP growth rates between the two groups of countries widened to
two percentage points. Growth would have been somewhat higher for the oil importing countries
were it not for the energy crisis in South Africa and the post-election civil unrest in Kenya.

In 2008, GDP growth was particularly strong in net oil-exporting countries, at 6.6 per
cent, down only slightly from the exceptionally strong 6.8 per cent registered in 2007 largely due
to the increase in oil prices and increases in production in a number of countries, together with
increased public and private investment. However, the growth differential between these and net
oil-importing countries widened from 1.4 percentage points in 2007 to a full two percentages
points in 2008 with average GDP growth in the latter of 4.6 per cent in 2008, down considerably
from the 5.4 per cent registered in 2007.

The contrast with the growth projected for 2009 is striking. Growth is expected to be
markedly lower in both groups. However, the impact of the global crisis is expected to be felt
more strongly in the oil-exporting countries (and mineral exporters) than in more diversified
economies and in those exporting certain agricultural commodities such as beverages. Thus, the
net oil importers can expect a GDP growth of 3.3 per cent in 2009 compared to 2.4 per cent for
the net oil exporters. A major factor accounting for the slowdown of growth in the oil exporters
is the assumption that the African members of OPEC (Angola, Algeria, Libya and Nigeria) fully
respect the agreement reached within that organisation to reduce production quotas in an attempt
to sustain oil prices at levels somewhat above those assumed in this report. Our assumption is
that the quota reductions will translate on average into a reduction of production of about 8 per
cent for these four countries.

GDP growth is expected to pick up in 2010 when the average real GDP growth rate for
the continent as a whole is expected to be 4.5 per cent, with net oil-exporting and net oil-
importing countries growing at the same pace.

These forecasts are based on a number of plausible but somewhat optimistic assumptions,
suggesting that they are subject to significant downside risk such as a more severe and prolonged
international economic recession than expected, and greater than expected falls in aid,
remittances, capital and trade flows. Apart from assuming a resumption of moderate growth in
the global economy in 2010, they also assume that oil prices rebound to USD 50 per barrel in
2009 and USD 55 in 2010; that growing conditions in agriculture will be favourable in 2009 and
2010; that oil output of OPEC members will increase by about 3 per cent in 2010; that no new
regional conflicts having significant macroeconomic impacts emerge; and that the worsening
fiscal balances and current-account balances forecast for many of the net oil-importing countries
(and a few net oil-exporting countries) will be fully financed. Thus, the continued
implementation of debt-relief agreements for a number of the HIPC countries that began in 2006
will be particularly helpful.
North Africa

Economic growth was 5.8 per cent on average in 2008, up from 5.3 per cent in 2007. It is
expected to slow significantly in 2009, to 3.3 per cent before increasing to 4.1 per cent in 2010.
The 2008 growth rates reflected strong performances in nearly all the countries of the region.
Exceptionally high growth was recorded in Egypt (7.2 per cent), Libya (6.5 per cent), and
Morocco (5.7), while growth in Mauritania and Tunisia was slightly above 5 per cent. A sluggish
hydrocarbon sector brought GDP growth in Algeria down to 3.3 per cent. All North African
countries will grow more slowly in 2009, with reductions of about 3 percentage points for
Algeria and Libya, due to cutbacks in oil production, and in Egypt because of lower tourism,
Suez Canal revenues, and income from a range of other exports. Morocco and Tunisia have a
pattern of production and exports that is less vulnerable to the reduction in demand resulting
from the global crisis, but growth will slow there as well. With a global recovery in 2010,
resumption of demand for exports from North African countries is expected to reverse many of
the negative factors, leading to better figures for growth of between 3.7 per cent in Algeria and
Libya to 5.4 per cent in Morocco.

West Africa

Real GDP growth in the countries of West Africa was 5.4 per cent in 2008, as it was in
2007, and is projected to slow by more than one percentage point to 4.2 per cent in 2009, before
strengthening to 4.6 per cent in 2010. In the West African Economic and Monetary Union
(WAEMU), consisting of Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger,
Senegal and Togo, economic performance improved in five of the eight countries, but slipped
back a bit in Niger and Senegal. In Togo, however, GDP growth in 2008 was estimated to have
been barely positive, at 0.8 per cent, continuing the pattern of declining growth in per capita
income over the past several years, which was worsened by severe flooding in June 2008.
Among the factors for the improved growth in most of these countries was the consolidation of
political stability in Côte d’Ivoire – the largest economy within WAEMU – which had GDP
growth of 2.3 per cent, about one-half percentage point higher than in 2007. Growth slipped back
to 3.7 per cent in Senegal, primarily because of weakness in the output of cereals and
groundnuts, as well as in industrial output, especially of phosphates and fertiliser. Cotton
production increased, especially in Burkina Faso where it reached record levels in 2008. The
major positive development in the WAEMU was the sustained growth in agricultural production
in several of them. Mali benefited from high gold prices and reasonably strong growth in food
production, and Niger from uranium prices. GDP growth in Mali was 3.6 per cent, up from 3.2
per cent in 2007; in Niger, it was 4.8 per cent, rather less than the 5.7 per cent registered in 2007.

Within the eight non-WAEMU members (Cape Verde, The Gambia, Ghana, Guinea, Liberia,
Nigeria, Sierra Leone and São Tomé and Principe), Nigeria – by far the largest economy in West
Africa – had GDP growth of 6.1 per cent in 2008, about the same as in 2007, despite reduced oil
output of 8 per cent caused by disrupted oil production in the Niger Delta. Projections for 2009
indicate a slowdown of Nigeria’s growth rate to 4 per cent, mainly due to the binding constraint
of the OPEC quota on oil production and the slowing down of growth in investment. Cape
Verde’s growth performance remained strong in 2008 (6.1 per cent), compared to 6.9 per cent in
2007. In Liberia post-conflict spending on infrastructure and the recovery of agricultural
production were responsible for exceptionally strong growth of about 7.3 per cent for the third
year in a row, while in Ghana and Sierra Leone growth in 2008 was 6.4 per cent and 5.4 per cent,
respectively, on the basis of good performance in cocoa production and processing, and strong
increases in food production. Forecasts for 2009 are mixed, but, in addition to Nigeria which was
mentioned above, most other countries are also expected to exhibit slower growth due mainly to
slower growth in public and private investment associated with lower commodity prices and
remittances. Unlike other countries in this group, Liberia and Sierra Leone are expected to
continue to enjoy high growth levels as output recovers after years of conflict.

Central Africa

In 2008, average GDP growth in the seven countries of Central Africa was 5 per cent, up
from 4 per cent in 2007. In 2009, GDP growth is expected to slow sharply, to 2.8 per cent and to
increase to a moderate 3.6 per cent in 2010. The strong growth in 2008 was due mainly to a
strong rebound of oil production in the Republic of Congo and continued strong growth in
Equatorial Guinea (9.9 per cent) and Gabon (5.5 per cent), also net oil exporters. GDP failed to
increase significantly in Chad in 2008 for the third consecutive year as a strong increase in
agricultural output was offset by a sharp decline in oil production. Growth is projected to
strengthen to 7.7 per cent in 2009 (compared to 7 per cent in 2008) in the Republic of Congo due
mainly to increased oil production and high international oil prices which underpinned an
expansion of public investment. In all other countries growth is expected to remain low or to fall,
reflecting mainly the reduction in demand for the oil and minerals as a result of the global
economic crisis. In the case of the Democratic Republic of the Congo, the effects of the global
crisis have been compounded by renewed civil unrest, leading to a forecast of essentially zero
GDP growth in 2009. The projections for Cameroon show some weakening in 2009 and 2010
with GDP growth of about 3 per cent per year, down from 4.1 per cent in 2008.

East Africa

GDP growth in East Africa averaged 7.3 per cent in 2008, down from a very strong 8.8
per cent in 2007, despite the turmoil in Kenya which caused growth to slow to 2.6 per cent,
compared to 7 per cent in 2007. This strong growth is expected to slow to 5.5 per cent in 2009
and is projected to be about the same in 2010. In 2008, Ethiopia, Rwanda, Sudan, Tanzania and
Uganda continued to be the fastest growing countries within East Africa, growing at 11.6 per
cent, 8.5 per cent, 8.4 per cent, 6.8 per cent and 7 per cent, respectively. All five countries are
also projected to maintain strong, but lower growth in 2009 and 2010 because demand for their
major agricultural and horticultural exports is less sensitive to the effects of the global crisis than
minerals and textile fibers; tourism has, however, been heavily impacted, and, these forecasts are
subject to considerable uncertainties due to the unstable political situation in some countries.
Burundi, Comoros and Seychelles, which have recently been exhibiting slow growth, are
expected to continue stagnating, the latter two countries experiencing depressed tourism due to
the global recession and, in the case of Comoros, to civil unrest as well. Djibouti, however,
which grew by 5.9 per cent in 2008, is expected to experience an acceleration of GDP growth in
2009 and 2010, reaching about 6.6 per cent on average in this period. Kenya is also expected to
exhibit strong growth in 2009 (5 per cent) due to recovery of domestic demand following the
sharp slowdown in 2008. However, this rate of growth is about 1 percentage point lower than the
average rate of growth in 2005-2007, reflecting the continued weakness of demand in the
tourism sector

Southern Africa

Economic growth in Southern Africa was 5.2 per cent, down sharply from the 7 per cent
registered in 2007. It is expected to slow dramatically in 2009, to only 0.2 per cent before
recovering to 4.6 per cent in 2010. This dramatic slowdown is mainly due to developments in
South Africa and in Angola. In South Africa, growth slowed to 3.1 per cent, down from 5.1 per
cent in 2007 due mainly to the energy crisis which affected large portions of the economy, a fall
in private consumption and less buoyant private investment. The further slowdown to 1.1 per
cent projected in 2009 is due mainly to the impact of the global economic crisis on demand for
South Africa’s mineral exports compounded by a contraction in private consumption and
investment. In Angola, growth remained extremely high (15.8 per cent) in 2008, but down from
the 21 per cent registered in 2007. However, the economy is expected to contract by 7.2 per cent
in 2009 on the assumption that the reduction in quotas by OPEC countries will translate into a
reduction of oil production in Angola of about 10 per cent. In Madagascar and Malawi, growth
accelerated to reach 7 per cent and 8.4 per cent, respectively due to strong growth in agriculture
in both countries and to large investments in the mineral sector in the former. Growth slowed in
all the other countries in the region, many of them affected by the slowdown in South Africa. In
addition, mineral exporters (Mozambique, Namibia, Tanzania and Zambia) began to experience
a slowing of investment in the second half of the year. Growth in Mauritius remained high,
although it, too, lost some momentum compared to 2007. These trends are expected to intensify
in 2009 with a further slowing of growth forecast for all countries. In the case of Madagascar, the
situation is expected to be worse because of the impact of the political crisis, particularly on the
tourism sector, with GDP growth expected to fall by more than 2 percentage points, to 4.8 per
cent. On the assumption of a resumption of moderate growth in the world economy in 2010,
these trends are expected to be reversed symmetrically with growth likely to accelerate (or
resume, in the case of Angola) in nearly all countries
 Inflation

Inflation in Africa (excluding Zimbabwe) accelerated to the double-digit level of 11.6 per
cent in 2008, up sharply from 7.5 per cent in 2007, largely due to the impact of higher energy
(mostly hydrocarbons), fertiliser and international food prices. This surge in inflation affected
both net oil exporters and net oil importers although, as might be expected, the increase in
inflation was larger by about 1 per cent for the latter. This group, (excluding Zimbabwe)
experienced an upward surge of inflation from 7.9 per cent in 2007 to 13.5 per cent in 2008. In
2009, inflation in this group of countries is expected to return to about the same level as in 2006,
and to fall further in 2010. In oil-exporting countries, inflation, which increased by less, is
expected to fall more slowly. The number of African countries (excluding Zimbabwe) with
double-digit inflation increased from only 6 in 2007 to 28 in 2008. This number will decline to
11 in 2009 and then to 6 in 2010. Even CFA franc countries, which have had historically low
rates, experienced inflation in the high single digits, thus increasing the differential between
them and the Euro zone considerably. The forecasts assume that the authorities will not need to
tighten monetary policy significantly since commodity prices have already fallen sharply and
domestic demand has weakened along with the deterioration of the economic outlook due to the
international financial and economic crisis.

North Africa

Inflation in North Africa accelerated to 8.1 per cent in 2008, up from 6.8 per cent in 2007
as inflation rose to 11.7 per cent in Egypt, to 7.6 per cent in Mauritania and to 11.2 per cent in
Libya, increased from 3.1 per cent to 5 per cent in Tunisia, and remained high in Mauritania at
7.4 per cent. Algeria and Morocco managed to keep inflation at around 4 per cent. The average
rate of inflation in North Africa is projected to decline in both 2009 and 2010, when it is
expected to average 5.3 per cent. However, in Egypt it is expected to increase still further in
2009, to 13 per cent, before falling back to single-digit levels in 2010.
West Africa

In 2008, the average rate of inflation in West Africa was 10.6 per cent, up from 5.4 per
cent in 2007. The WAEMU countries, whose currencies are pegged to the Euro, still have a far
lower average inflation rate than the member countries of the West African Monetary Zone
(WAMZ), four out of five of which had inflation rates ranging from 11 to 19 per cent. In Guinea,
inflation remained high, at 19.3 per cent, but this was a bit lower than in 2007. The rate of
inflation in Nigeria accelerated from 5.4 per cent in 2007 to 11 per cent in 2008. In Ghana
inflation surged from 10.7 per cent in 2007 to 14.1 per cent in 2008. In São Tomé and Principe
inflation increased from 18.5 per cent in 2007 to 25.9 per cent in 2008, reversing the modest
improvement it had made in 2007. In Sierra Leone inflation increased from 12.1 in 2007 to 13
per cent in 2008. Inflation in Liberia increased from 11.4 per cent in 2007 to 17.5 per cent in
2008. In Cape Verde, where inflation has generally been much lower than in other West African
countries, it increased from 4.3 in 2007 to 6.7 per cent in 2008, and in The Gambia, inflation
increased from 5.4 per cent in 2007 to 6.4 per cent in 2008. Projections for 2009 and 2010 are for
gradual declines in the region as a whole but to remain in the high single digits.

Central Africa

The average rate of inflation in Central Africa accelerated to 8.8 per cent in 2008, up
from 2.9 per cent in 2007 due to large increases in Cameroon (5.7 per cent, up from 1.5 per cent),
Central African Republic (9.2 per cent, up from 0.9 per cent), Chad (9.2 per cent, up from 9 per
cent), and DRC (26.2 per cent, up from 16.7 per cent). Inflation was about 5.5 per cent in Congo
Republic, Equatorial Guinea and Gabon in 2008, as well, but the year-to-year increases were
much lower. All of these countries are net food importers and depend on imports of refined
petroleum products even if some of them are net oil exporters. The projections for 2009 and
2010 are for a gradual reduction in inflation to 6.5 per cent in the latter year. In fact, all but the
DRC are expected to have inflation rates of 5 per cent or less, with most countries below that
rate, moving closer to the convergence target of 3 per cent accepted by the countries belonging to
the Bank of Central African States (BEAC) -Cameroon, the Central African Republic, the
Republic of Congo, Equatorial Guinea and Gabon-. Only in the DRC is little progress expected,
with inflation expected to remain at about 20 per cent in both 2009 and 2010.

East Africa
In 2008, inflation increased dramatically in East Africa (excluding Somalia), to 17.8 per
cent, up from 10.1 per cent in 2007. This was substantially higher than in any other African
region. Inflation exceeded 20 per cent in four countries: Burundi (24.5 per cent), Ethiopia (25 per
cent), Kenya (25.8 per cent), and Seychelles (37 per cent). It was at least 10 per cent in another 6
countries (Djibouti, Eritrea, Rwanda, Sudan, Tanzania, and Uganda. Only in Comoros did
inflation remain at a moderate level (5.9 per cent). The high inflation in East Africa in 2008 was
largely due to the high prices of imported fuel (essentially hydrocarbons), fertilisers and food,
which had knock-on effects increasing the cost of domestic food production. However, domestic
factors also played a role, particularly in three of countries where inflation exceeded 20 per cent.
In Ethiopia, sustained rapid growth added to the upward pressure on prices. In Kenya, the civil
unrest which followed the tightly contested elections in the first half of the year, disrupted
transportation and agricultural production and, thus, the movement of food from farms to
markets pushing prices of agricultural products. In Seychelles, a major devaluation magnified the
effect of increases in the international prices of imports. The inflation outlook in East Africa for
2009 and 2010 is for substantial reductions in most countries. In 2009, inflation is expected to be
above 20 per cent only in Seychelles because of further depreciation of the currency, and is
expected to be in the range of 10 to 15 per cent in only 3 others. In 2010, inflation is projected to
be at or below 10 per cent in all 11 countries, although achieving this will be a challenge for
monetary policy. Thus, the average rate of inflation in East Africa is expected gradually to fall to
10.1 per cent and 8 per cent in 2009 and 2010, respectively.

• Southern Africa

In Southern Africa (excluding Zimbabwe), inflation averaged 15.2 per cent in 2008, but it
was already nearly 10 per cent in 2007. The average is dominated by South Africa, where
inflation was 11.5 per cent in 2008, up from 7.2 per cent in 2007. In 2008 it ranged from 8.3 per
cent in Malawi to 13.2 per cent in Angola, but in all but 3 countries, it was above 10 per cent.
The high rates in all countries were caused by the acceleration of international fuel, fertiliser and
imported food prices, as in other African regions. However, high rates of government spending
and supply constraints in Angola, and the pervasive effects of the electricity crisis in South
Africa were aggravating factors. Since most of these factors were transitory, inflation in the
region as a whole (excluding Zimbabwe), is expected to decline to 7.6 per cent in 2009 and to
6.6 per cent in 2010. Moreover, inflation in 2010 is projected to be below 10 per cent in all
countries, although achieving this in some of them, which have had a history of generally high
inflation (Angola, Madagascar), may prove to be a challenge for the monetary authorities.
 Public Finances
In 2008 the overall fiscal balance (including grants) of the group of net oil-exporting
countries increased to 6.1 per cent in 2008, up from 4 per cent in 2007, mainly because of higher
oil prices but also because of increases in production in some of them (but not in Algeria, Libya
or Nigeria). The group of net oil-importing countries exhibited an overall deficit equivalent to
1.8 per cent of GDP in 2008, compared to a very small deficit in 2007 (0.3 per cent). The
increase in the deficit of the net oil-importing countries reflects increases in fuel, fertiliser, and
food subsidies in many countries as they attempted to mitigate the effects of high import prices.
The continuation of generally good macroeconomic management and the maintenance of a high
level of grants, including a portion provided in the form of debt relief prevented deficits from
increasing even further. Projections for 2009 are dramatically different for these two groups of
countries. Net oil-importing countries are expected to experience a further widening of their
average deficit to 2.7 per cent mainly because of a decline in tax receipts as GDP growth slows.
However, for the net oil exporters, the fiscal surplus in 2008 is expected to give way to a large
deficit equivalent to 7.5 per cent of GDP mainly due to declines in oil prices and production (in
some countries). Small improvements for both groups of countries are expected in 2010. The
forecast for government spending in the oil-exporting countries assume that these large deficits
can be financed by drawing on the surpluses accumulated in earlier years. However, it remains
important for the oil exporters to continue investing in the types of project that promote
diversification of their economies to reduce dependence on their oil sectors. For the poorer oil-
importing countries, debt relief and other forms of financial support from international financial
institutions and their bilateral development partners will be particularly important as they attempt
to maintain positive GDP growth during the current global recession. For countries where
inflation has increased to double-digit levels, monetization of the increase in these projected
deficits would be problematic. There is a clear need to improve domestic resource mobilization
in most African countries and the awareness of the importance of this agenda is growing.
 • North Africa
In North Africa the average fiscal balance was equivalent to a surplus of 5.3 per cent of
GDP in 2008, up from 3.6 per cent in 2007. The higher oil prices resulted in substantial increases
for the largest oil-exporting countries in the region, Algeria (6.8 per cent of GDP, up from 4.8
per cent) and Libya (34.5 per cent of GDP, up from 26.2 per cent). In Egypt the deficit widened
to 6.8 per cent of GDP in 2008, up from 5.6 per cent in 2007. Mauritania and Tunisia, on the
other hand, experienced little change in their fiscal deficits in 2008 compared with 2007, while
Morocco continued to show a small surplus. In 2009, fiscal balances are projected to deteriorate
for all countries in the region, dramatically in the case of the oil exporters. In Algeria, the surplus
of 2008 is expected to give way to a deficit of 11.5 per cent in 2009, while in Libya the large
2008 surplus will disappear in 2009. Few changes are expected in fiscal balances in 2010 for any
of these countries.

• West Africa

In 2008, fiscal balances (including grants) deteriorated in most West African countries.
However, as a percentage of GDP only four countries registered deficits of 4.5 per cent of GDP
or more: Burkina Faso (6.4 per cent), Ghana (10.0 per cent), Mali (5.4 per cent) and Senegal (4.5
per cent). Guinea-Bissau which had a large deficit in 2007 (10.3 per cent of GDP), momentarily
moved into surplus due to debt relief. In 2009 all five countries are expected to continue to have
large deficits, most showing little change. The small Nigerian surpluses in 2007 and 2008 will
give way to a deficit of 11.1 per cent in 2009. Fiscal balances are projected to remain about the
same in 2010. Apart from Nigeria, which has large surpluses to draw upon, the large deficits
projected for the five countries mentioned above may prove difficult to finance. This suggests
that the GDP outlook for these countries as presented in this AEO is subject to considerable
downside risk should funding difficulties translate into reductions in projected government
spending,

• Central Africa

In 2008, five of the seven countries in Central Africa, most of whom are oil exporters,
registered surpluses which were larger than in 2007. The exceptions were the Central African
Republic, whose small surplus fell slightly, and the Democratic Republic of Congo. The fiscal
balance of the DRC, in fact, moved from a small surplus in 2007 to a deficit of 5.8 per cent in
2008. Projections for 2009 and 2010 are for further reductions in the surpluses of Cameroon,
Central African Republic, Chad, Congo Republic, Equatorial Guinea and Gabon. The already
substantial deficit of DRC is projected to increase still further. Since the inflation outlook in that
country is already quite poor, this deficit would need to be financed from external sources. This
suggests that there is considerable downside risk associated with the (poor) outlook for GDP
growth in this report.
 • East Africa

In 2008 the combined fiscal deficit (including grants) in East Africa (excluding Somalia)
improved, falling from 3.6 per cent of GDP in 2007 to 2.2 per cent in 2008 due to strong growth,
increases in export earnings and improved resource mobilization. However, there were
considerable differences among the 11 countries. Deficits fell substantially or remained low in 8
countries. However, deficits as a percentage of GDP worsened or remained high in three others:
Burundi (8.9, up from 3 in 2007), Eritrea (8.5, down slightly from 10 in 2007), and Kenya (6.1,
up from 1.1 in 2007). The reasons for the differences in performance varied widely. In Kenya the
deterioration was linked to the decline in economic activity in several sectors in the first half of
2008. Improvement in the Seychelles was due to the implementation of an economic austerity
and reform programme. In Sudan and Tanzania the improvements were due to increase in the
value of their export earnings. Since many of these factors were transitory, prospects for 2009
are rather different. The small surplus exhibited by Sudan in 2008 is expected to give way to a
deficit of 10.6 per cent of GDP in 2009. On the other hand, Burundi is projected to benefit from
sizeable debt relief and, thus, to exhibit a large surplus in 2009. The high deficit in Kenya is
expected to return to a more moderate 3 per cent. However, the large deficit in Eritrea is
projected to persist. Relatively little change in these fiscal positions are expected for 2010. Thus,
the overall deficit for the region is expected to worsen to 4.8 per cent of GDP in 2009 and 5.2 per
cent in 2010.

• Southern Africa

The average fiscal surplus of the countries in Southern Africa fell slightly from 2.3 per
cent in 2007 to 1.9 per cent in 2008. However, surpluses fell or deficits increased in 9 of the 11
countries. Only in Mauritius and Zambia did fiscal balances improve with reductions in the
deficits of both countries of about 1 percentage point of GDP. The projections for 2009 are
dominated by changes in two countries. In Angola, the surplus of 10.8 per cent of GDP
registered in 2008 is expected to be transformed into a deficit of 8.7 per cent in 2009 due to the
fall in oil prices and the reduction in production required to respect the quota reductions agreed
within OPEC. In South Africa the deficit is expected to widen substantially, from 1 per cent of
GDP in 2008 to 3.7 per cent in 2009 due to the effects on government revenue of the economic
slowdown and the decision of the government to implement a counter-cyclical fiscal stimulus in
the face of the global crisis. Some improvement in budget balances is generally expected in
nearly all countries in 2010 along with improved rates of economic growth. Thus, the combined
fiscal deficits of the region as a whole in 2009 and 2010 are expected to be 4.6 and 3.6 per cent
of GDP, respectively.
 Balance of Payments

In 2008, Africa’s average current account balance exhibited a surplus equivalent to 3.3
per cent of GDP, up from 2.2 per cent in 2007. This overall figure, however, masks large
differences among countries. On the one hand, net oil-exporting countries recorded a current
account surplus of 10.7 per cent in 2008 (up slightly from 8.9 per cent in 2007); on the other
hand, the group of net oil-importing countries experienced a large average current account deficit
of 7.1 per cent of GDP in 2008 (up from 5.4 per cent in 2007) compared with an average of 1.6
per cent in the period 2000 to 2005. Among the net oil importers, only 7 countries out of 40
improved their current account balances significantly (Burundi, Cameroon, Chad, Guinea,
Liberia, Mali and Swaziland). The surplus in the current account balances of net oil-exporting
countries is projected to give way to deficits of 3.5 and 2.4 per cent of GDP in 2009 and 2010,
respectively, due to declines in oil prices and production (among the African OPEC countries).
Meanwhile the average current account deficit of the net oil-importing countries is expected to
improve in 2009 with reductions in the international prices of their imports exceeding reductions
in the prices of their exports, but then to worsen slightly in 2010 as imports pick up along with
economic growth.

In recent years, Africa’s overall balance of payments has benefited from increased
foreign direct investment flows and significantly reduced debt service payments in many heavily
indebted poor countries (HIPCs) (see details in previous section). However, the rapidly rising
current account deficits associated with the global recession is rapidly eroding international
reserves, with African countries increasingly turning to the IMF for support in order to avoid
exchange rate crises.
 • North Africa

In 2008, northern African countries continued to display large differences in their current
account balances. Algeria and Libya continue to exhibit large current account surpluses of about
25 per cent and 32 per cent of GDP, respectively in 2008, similar in size to those of 2007, despite
little growth in exports of hydrocarbons, as improvements in terms of trade offset strong growth
in import volumes. Egypt registered a small surplus, which was slightly lower than in 2007. The
deficits of Morocco and Tunisia worsened somewhat, but remained moderate as a percentage of
GDP, at 3.7 and 4.2 per cent, respectively. Mauritania’s deficit decreased slightly in 2008 to
9.3 per cent, down from 11.3 per cent in 2007. In 2009 and 2010, the surpluses of Algeria and
Libya are projected to fall quite sharply due to the collapse of oil prices. Egypt is expected to
exhibit a small deficit in 2009, while the deficits of Morocco and Tunisia are expected to fall
slightly, whereas the sizeable deficit in Mauritania is expected to worsen. Little change in current
account balances is expected in 2010. As a result of the above, North Africa’s current account
surplus fell from 12.1 per cent of GDP in 2007 to 11.5 per cent in 2008, but is expected to be
only about 1 per cent in 2009 and 2010.

• West Africa

In 2008, 8 countries out of 16 in West Africa registered current account deficits ranging
from about 7 to 14 per cent of GDP. The deficits of three other countries were even higher,
ranging from 18 to 34 per cent. Surpluses were registered only in Côte d’Ivoire and Nigeria. The
combined current account balance in West Africa is dominated by Nigeria where the current
account surplus was 3.2 per cent of GDP in 2008, little changed from 2007. In 2009 many
countries are expected to exhibit major changes due to the effect of the global crisis on their
terms of trade, reductions in import volumes - in some of them- as large investment programmes
slow down (Liberia) or public investment growth slow due to balance of payments constraints.
Thus the deficits of Gambia, Guinea, Mali, Senegal and Togo expressed as a percentage of GDP
are expected to decline by amounts in the range of 3.8 to 9.5 percentage points, and the deficit of
Liberia is expected to decline from 28.8 per cent in 2008 to 5.7 per cent in 2009. In Nigeria, the
surplus in 2008 is expected to give way to a deficit of 9.1 per cent in 2009. In 2010 the pattern is
for a slight widening of these deficits in most countries. However, under the assumptions of
higher oil prices and production in Nigeria, the current account deficit in that country is expect to
fall somewhat. Thus for the region of West Africa as a whole, the current account is expected to
exhibit deficits of 8.4 per cent of GDP in 2009 and 7 per cent in 2010.

• Central Africa

In 2008, the average current account balance in Central Africa was in surplus equivalent
to 9 per cent of GDP (compared to -0.5 per cent in 2007), largely due to further large increases in
the nominal value of oil exports in Chad, the Republic of Congo, Equatorial Guinea and Gabon.
Cameroon and DRC also registered small surpluses which represented improvements in their
current account balances compared to 2007. However, the deficit in the Central African Republic
increased significantly, to 9.4 per cent of GDP, up from 6.1 per cent in 2007. Because of the
lower oil prices for 2009, the surpluses of oil exporters in that year are expected to disappear;
and, indeed, the Congo Republic is projected to register a large deficit. In 2010 the pattern on
current account balances not expected to change much. Thus, in 2009 and 2010, the countries in
Central Africa as a group are expected to register a deficit on their current accounts of 5.4 per
cent and 3 per cent, respectively.

• East Africa
In 2008 the average current account deficit in East Africa fell slightly to 6.3 per cent of
GDP (down from 9.3 per cent in 2007) compared with an average of 5.5 per cent for the period
2000-05. All the countries in East Africa, except for Sudan, are net oil-importing countries and
many import fertilisers and food as well. They were thus especially affected by the increases of
international prices for these products in 2008. Consequently, all of them experienced a
worsening in their current account deficits. In Sudan, the only net oil exporter, however, the
current account deficit fell to 3.4 per cent, down from 16.3 per cent in 2007. For 2009 and 2010,
the fall in oil prices is expected to nearly reverse this situation with deficits falling or remaining
roughly unchanged in the net oil importing countries, but deteriorating in Sudan. Little further
change is expected in 2010. Thus, for East Africa as a whole current account deficits in 2009 and
2010 as a percentage of GDP are expected to be 7.6 per cent and 8.3 per cent, respectively. These
large deficits have also taken a toll on international reserves, for example, nearly exhausting
those of Ethiopia.

• Southern Africa

Among the countries in Southern Africa, a worsening of the current account deficits of 9
of the 11 countries in 2008 was offset by an increase in the surplus of Angola due to the increase
in oil prices and, to a much lesser extent, in the current account of Swaziland because of a large
increase in net transfers. Among the deficit countries, Madagascar experienced an increase from
13.9 per cent of GDP in 2007 to 25.8 per cent in 2008 due to large increases in imports of
investment goods associated with a major mining project. In 2008, South Africa had a current
account deficit of 7.8 per cent of GDP due to a fall in exports and an increase of imports due to
the implementation of a massive infrastructure modernization programme. In 2009, South Africa
expects to continue with its infrastructure programme requiring large imports of capital goods.
The deficit is therefore expected to be around 6.4 per cent of GDP but will depend on export
prices and the value of the ZAR. In 2009 in Angola the decline in international oil prices and the
reduction in production of oil required to stay within its OPEC quota are expected to result in the
current account surplus of 12.9 per cent of GDP realized in 2008 giving way to a deficit of 8.1
per cent in 2009. Not much change in this picture is expected for 2010. Thus, for the region as a
whole the overall current account deficit in expected to worsen from about 2 per cent of GDP in
2008 to 6.8 per cent and 7.4 per cent in 2009 and 2010, respectively. In some countries, such as
Malawi, international reserves have already declined to critical levels, making support from the
IMF essential to avoid compounding the effects of the crisis.
 Social Factors
Many African countries, including Senegal, Mozambique, Burkina Faso, Cameroon,
Uganda, Ghana and Cape Verde, have lifted significant percentages of their citizens above the
poverty line, and may be on course to meeting the income poverty Millennium Development
Goal (MDG) target of halving poverty by 2015, according to a World Bank report released
today.

Launched at World Bank headquarters in Washington and simultaneously in five African

countries, African Development Indicators 2006 reveals a broad range of indicators, where some
countries made remarkable progress, some stagnated, and others fell seriously behind.

But, while economic results varied greatly, the continent as a whole demonstrated real
progress in better health, education, growth, trade, and poverty-reduction outcomes. Africa’s per
capita income is now increasing on a par with other developing countries.

ADI (Africa Development Indicators) 2006 confirms that 16 African countries have
sustained annual GDP growth rates in excess of 4.5 percent since the mid-1990s. In addition,
inflation on the continent is down to historic lows, most exchange rate distortions have been
eliminated, and fiscal deficits are dropping. The continent weathered higher oil prices better than
previous shocks, and its real GDP grew by 4.3 percent, compared to 5.4 percent in 2004.

Also in the good news column, primary enrollment rates have risen significantly across
the continent, HIV/AIDS prevalence and child mortality rates have started to fall, and the gender
gap has started to shrink in several countries.

Despite the progress, ADI 2006 details the many challenges facing the continent. Africa
is still the one region of the world where the number of the poor continues to rise. The continent,
which received a mere 1.6 percent of global foreign direct investments (US$10.1 billion), is
home to six of the 10 countries with the most difficult environment for starting a business. And
African firms still struggle to enter the global marketplace, hampered by inadequate roads,
inefficient ports, and power outages.

The report also warns of the immense burdens from the staggering rates of HIV/AIDS,
malaria, and tuberculosis, and points to the threats to development caused by corruption, anemic
aid, trade barriers, and dwindling foreign direct investments.

Drawn from the World Bank Africa Database, ADI 2006 provides the most detailed
collection of development data on Africa in one volume covering the period 1980-2004. The data
is drawn from all 53 African countries and 20 regional country groups for more than 1,200
indicators of macroeconomic, sectoral, and human development variables.

Progress accounts of Africa's development are making a scene. Little by little, they are
reducing poverty through organizational development. They are improving in different sectors
one at a time. These changes are reversing the region's poor economic performance. Once a
forgotten continent, now, Africa is the center of attraction. Countries were astounded with the
firmness they showed against the appalling strike of the global financial crisis.

Poverty is a like a worldly dirt that Africa needs to clean. But the improvement they have
made is really tremendous. This is brought by the support for the fight by different trade
companies and sectors. Profit is not the only benefit that business men get by doing business in
Africa, they were also able to contribute in poverty reduction.

Education is another present focus of the African government. They believe that by
educating people, they can step out of poverty. The government was urged to invest more on
African women's education. This will defy tribal and traditional beliefs. This will drive women
away from destitution because they will be educated. In the future, they will be very essential in
the maintenance and growth of the continent.

Agriculture is another key to rapid rural and urban development. Individual owned
agriculture business can provide source of food to Africans. It is also a juicy fruit to improve
country's national health. The Africans' health condition is dreadful. Most of its people are
malnourished. The government is funding the agricultural sector to address the problem in
poverty and health.

Following are some of the Important factors considered in Social Aspects of African
Continent:-

• Demographics
• Religion
• Languages
 • Demographics

Africa's population has rapidly increased over the last 40 years, and consequently it is
relatively young. In some African states half or more of the population is under 25 years of
age. African population grew from 221 million in 1950 to 1 billion in 2009.

Speakers of Bantu languages (part of the Niger-Congo family) are the majority in
southern, central and East Africa proper. But there are also several Nilotic groups in East Africa,
and a few remaining indigenous Khoisan ('San' or 'Bushmen') and Pygmy peoples in southern
and central Africa, respectively. Bantu-speaking Africans also predominate in Gabon Equatorial
Guinea, and are found in parts of southern Cameroon. In the Kalahari Desert of Southern Africa,
the distinct people known as the Bushmen (also "San", closely related to, but distinct from
"Hottentots") have long been present. The San are physically distinct from other Africans and are
the indigenous people of southern Africa. Pygmies are the pre-Bantu indigenous peoples of
central Africa.

The peoples of North Africa comprise two main groups; Berber and Arabic-speaking
peoples in the west, and Egyptiansin the east. The Arabs who arrived in the seventh century
introduced the Arabic language and Islam to North Africa. The Semitic Phoenicians, the
Iranian Alans, the European Greeks, Romans and Vandals settled in North Africa as well.
Berbers still make up the majority in Morocco, while they are a significant minority
within Algeria. They are also present in Tunisia and Libya. The Tuareg and other often
nomadic peoples are the principal inhabitants of the Saharan interior of North
Africa. Nubians are a Nilo-Saharan-speaking group (though many also speak Arabic), who
developed an ancient civilisation in northeast Africa.

Some Ethiopian and Eritrean groups (like the Amhara and Tigrayans, collectively known
as "Habesha") speak Semitic languages.

The Oromo and Somalipeoples speak Cushitic languages, but some Somali clans trace
their founding to legendary Arab founders. Sudan and Mauritania are divided between a mostly
Arabized north and a native African south (although the "Arabs" of Sudan clearly have a
predominantly native African ancestry themselves). Some areas of East Africa, particularly the
island of Zanzibar and the Kenyan island of Lamu, received Arab Muslim and Southwest
Asian settlers and merchants throughout the Middle Ages and in antiquity.
 Prior to the decolonization movements of the post-World War II era, Whites were
represented in every part of Africa. Decolonization during the 1960s and 1970s often resulted in
the mass emigration of European-descended settlers out of Africa – especially from Algeria
(pieds-noirs), Kenya, Congo, Angola, Mozambique and Rhodesia. Nevertheless, White
Africans remain an important minority in many African states. The African country with the
largest White African population is South Africa. The Afrikaners, the Anglo-Africans and
the Coloureds are the largest European-descended groups in Africa today.

European colonization also brought sizeable groups of Asians, particularly people from
the Indian subcontinent, to British colonies. Large Indian communities are found in South Africa,
and smaller ones are present in Kenya, Tanzania, and some other southern and East African
countries. The large Indian community in Uganda was expelled by the dictator Idi Amin in 1972,
though many have since returned. The islands in the Indian Ocean are also populated primarily
by people of Asian origin, often mixed with Africans and Europeans. The Malagasy
people of Madagascar are an Austronesian people, but those along the coast are generally mixed
with Bantu, Arab, Indian and European origins. Malay and Indian ancestries are also important
components in the group of people known in South Africa as Cape Coloureds (people with
origins in two or more races and continents). During the 20th century, small but economically
important communities of Lebanese and Chinese have also developed in the larger coastal cities
of West and East Africa, respectively.

• Religion

Africans profess a wide variety of religious beliefs and statistics on religious affiliation
are difficult to come by since they are too sensitive a topic for governments with mixed
populations. According to the World Book Encyclopedia,
o Islam is the largest religion in Africa, followed by Christianity.

o According to Encyclopedia Britannica, 45% of the populations are Muslims, 40%

are Christians and less than 15% are non-religious or follow African religions.
o A small number of Africans are Hindu, Baha'i, or have beliefs from the Judaic
tradition.
o Examples of African Jews are the Beta Israel, Lemba peoples and
the Abayudaya of Eastern Uganda
• Languages
o By most estimates, well over a thousand languages (UNESCO has estimated
around two thousand) are spoken in Africa. Most are of African origin, though
some are of European or Asian origin. Africa is the most multilingual continent in
the world, and it is not rare for individuals to fluently speak not only multiple
African languages, but one or more European ones as well. There are four
major language families indigenous to Africa
o The Afro-Asiatic languages are a language family of about 240 languages and 285
million people widespread throughout the Horn of Africa, North Africa, the Sahel,
and Southwest Asia.
o The Nilo-Saharan language family consists of more than a hundred languages
spoken by 30 million people. Nilo-Saharan languages are spoken by Nilotic tribes
in Chad, Ethiopia, Kenya, Sudan, Uganda, and northern Tanzania.
o The Niger-Congo language family covers much of Sub-Saharan Africa and is
probably the largest language family in the world in terms of different languages.
The Khoisan languages number about fifty and are spoken in Southern Africa by
approximately 120,000 people. Many of the Khoisan languages are endangered.
The Khoi and San peoples are considered the original inhabitants of this part of
Africa.
o Following the end of colonialism, nearly all African countries adopted official
languages that originated outside the continent, although several countries also
granted legal recognition to indigenous languages (such
as Swahili, Yoruba, Igbo and Hausa). In numerous countries,
English and French (see African French) are used for communication in the public
sphere such as government, commerce & education.
o Arabic, Portuguese, Afrikaans and Malagasy are examples of languages that
trace their origin to outside of Africa, and that are used by millions of Africans
today, both in the public and private spheres.
Poverty is not something new in Africa. In fact, poverty was there before man and it has become
part of life, attaching itself to nature like the blood through our veins. We cannot see it clearly or
feel its presence under normal circumstances but especially when the heart is beating so fast and
the blood moves up and down harshly through our chests but the harm might have been done
already

The Poor is poor and the rich is rich but life still goes on in Africa, displaying all levels of
poverty. There are varieties in culture and natural resources but a specific culture common to all,
the culture of Poverty. The Culture of poverty appears to be the same throughout the
communities in Africa especially around the sub-Saharan Africa. From Senegal to Gambia,
Guinea to Guinea Bissau, sierra-Leone to Liberia, Ivory coast to Gold Coast ( Ghana), Togoland
to Benin, Nigeria to Cameroun and above all, DR. Congo. Within these individual communities
per se, there exist different groups of people forming tribes, clans, extended families, villages
and towns who are categorize based on their individual distinctive characteristics such as
different languages, staple foods, taboos and norms. However, all these groups partake or share
almost equally in this unique culture (culture of poverty). Taking a small village like Fuman in
Ghana, it should not be a surprise to see it display if not all, most of the aspects of poverty in
Africa. Life in poverty, some causes of poverty and may be its prevention.Life in Africa
Life is still the same in Fuman and it is staying out on the baobab tree all these seasons.
Departing from the main Sunyani-Kumasi road, notice the face of poverty along the way. It
appears to be wearing a veil in Sunyani but tends to be a catapult and eventually a hunter near
the green. It hides itself beyond the mountains and hills but reveals its true colors beneath the
green. The birds continue to sing its favorite song even though it refuses to dance to the tune.
Departing from the main street is nothing but a wonder, a different world all together. The road
is bumpy and the weather is sunny. Beside this road is the evergreen. The tall trees continue to
flourish, canopying the shorter ones who depend on the mercies of the creator, for a little
sunlight. Nowadays, beside the sound of the birds do not be surprise to hear the roaring voices of
the chain saw along this road, pulling down the mighty odum and sapele trees of ancient times
just for timber.

Descending down the road leading to the village appears these numerous foot paths, branching
north and forth from the main road, like a network of channels in the termitarium (Ant hill),
taking people into and out of their cocoa farms. Just a few steps appear these erected structures,
thatched and roofed with dry grasses sometimes with some rusty sheets on them, housing human
souls from the serpents and scorpions at night. Mosquitoes do their part at night, biting even the
eyeballs, digging through the bodies in search of gold and raising the temperature to a thousand
degrees Celsius within a few days.

Because there is no pipe borne water in my village, you will mostly find little children with big
buckets and pans heading towards the riverside to fetch water especially in the morning and in
the evenings. the living conditions in Africa

This river serves as the main source of drinking water and water for domestic purposes. Even
when boiling was intended to kill the germ the causes Cholera, what about the numerous black
flies that cause night blindness. When the guinea worms approaches thee with heavy hearts, who
are you to turn the temperature down and so goes the tradition of death. When Cholera designs
the throats of men, forget about the deadly diphtheria that tears children into pieces and above
all, when mighty polio captures the legs, how good is soccer to the soul. Dry season on this river
is nothing but joy but the small canoes children make for their expedition in the dry season,
paddle themselves in the next season. diseases in Africa

Overview of Sectors in African Continent

• Agriculture

Around 60 percent of African workers are employed by the agricultural sector, with about
three-fifths of African farmers being subsistence farmers. Subsistence farms provide a source of
food and a relatively small income for the family, but generally fail to produce enough to make
re-investment possible. Larger farms tend to grow cash crops such as coffee, cotton, cocoa,
and rubber. These farms, normally operated by large corporations, cover tens of square
kilometers and employ large numbers of laborers.

The situation whereby African nations export crops to the West while millions on the
continent starve has been blamed on developed countries including Japan, the European
Union and the United States. These countries protect their own agricultural sectors with
high import tariffs and offer subsidies to their farmers, which many contend leads the
overproduction of such commodities as grain, cotton and milk. The result of this is that the
global price of such products is continually reduced until Africans are unable to compete, except
for cash crops that do not grow easily in a northern climate.

Because of these market forces, in Africa excess capacity is devoted to growing crops for
export. Thus, when civil unrest or a bad harvest occurs, there is often very little food saved and
many starve. Ironically, excess foodstuffs grown in developed nations are regularly destroyed, as
it is not economically viable to transport it across the oceans to a market poor in capital.
Although cash crops can expand a nation's wealth, there is often a risk that focusing on them
rather than staples will lead to food shortages and hunger.

In modern years countries such as Brazil, which has experienced great progress in
agricultural production, have agreed to share technology with Africa to greatly increase
agricultural production in Africa to make it a more viable trade partner. Increased investment in
African agricultural technology in general has the potential to greatly decrease poverty in Africa.
The demand market for African cocoa is currently experiencing an enjoyable price boom. The
South African and Ugandan governments have targeted policies to take advantage of the
increased demand for certain agricultural products and plan to stimulate agricultural sectors. The
African Union has plans to heavily invest in African agriculture and the situation is closely
monitored by the UN.

• Mining and drilling

Africa's most valuable exports are minerals and petroleum. A few countries possess and
export the vast majority of these resources. The southern nations have large reserves
of gold, diamonds, and copper. Petroleum is concentrated in Nigeria, its neighbors, and Libya.

While mining and drilling produce most of Africa's revenues each year, these industries
only employ about two million people, a tiny fraction of the continent's population. Profits
normally go either to large corporations or to the governments. Both have been known to
squander this money on luxuries for the elite or on mega-projects that return little value [citation
needed].

In some cases, these resources have turned out to be detrimental to economic

development. Although Congo is rich in minerals, the country remains one of the poorest
countries in the world. This is historically due to ownership fights over these minerals, tracing
back to the early 1900s. After Congo's independence from Belgium, the colonial government
hesitated to leave behind these resources. Congo solicited UN help against Belgium, but that
turned out to be a bad idea. In an attempt to get out of the quagmire, Congo sought Soviet
assistance. This led the country into deeper trouble, as the country separated into two and a long
proxy war between the West and East began. However, countries such as Angola and Uganda are
experiencing booms in drilling and oil drilling and manufacture.

• Manufacturing

Africa is the least industrialized continent; only South

Africa, Egypt, Morocco and Tunisia in general have substantial manufacturing sectors. Despite
readily available cheap labour, nearly all of the continent's natural resources are exported for
secondary refining and manufacturing. According to the AFDB, about 15% of workers are
employed in the industrial sector.
The multinational corporations that control most of the world's major industries and their
financiers require political stability before erecting an expensive factory and risk losing that
investment through nationalization. An educated populace, good infrastructure and a stable
source of electricity are essential to investments. These factors are rare in most countries in
Africa. Other developing regions of the world such as India and China have been more attractive
to companies looking to build a new factory or invest in a local enterprise.

Many African states used to limit foreign investment to ensure local majority ownership.
Close governmental control over industry further discouraged international investment. Attempts
to foster local industry have been hampered by insufficient technology, training, and investment
money. The paucity of local markets and the difficulty of transporting goods from major African
centers to world markets contribute to the lack of manufacturing outside of South Africa and
Egypt.

Both the African Union and the United Nations have outline plans in modern years on
how Africa can help itself industrialize and develop significant manufacturing sectors to levels
proportional to the African economy in the 1960s with 21st century technology. This focus on
growth and diversification of manufacturing and industrial production, as well
as diversification of agricultural production, has fueled hopes that 21st century will prove to be a
century of economic and technological growth for Africa. This hope coupled with the rise of new
leaders in Africa in the future inspired the term "the African Century" referring to the 21st
century potentially being the century when Africa's vast untapped labor, capital and resource
potentials might become a world player. This hope in manufacturing and industry is helped by
the boom in communications technology and local mining industry in much of sub-Saharan
Africa. Namibia has attracted industrial investments in recent years and South Africa has begun
offering tax incentives to attract foreign direct investment projects in manufacturing.

Countries such as Mauritius have plans for developing new "green technology" for
manufacturing. Developments such as this have huge potential to open new markets for African
countries as the demand for alternative "green" and clean technology is predicted to soar in the
future as global oil reserves dry up and fossil fuel-based technology becomes more economically
nonviable.

• Investment and banking

Banking in Africa has long been problematic. Because local banks are often unstable and
corrupt, governments and industry rely on international banks. South Africa and Egypt alone
have a thriving banking sector, aided by the international sanctions of the apartheid era, which
forced out the once-dominant British banks for the former. In the years after independence,
African governments heavily regulated the banking sector and placed strict limits on
international competition. In recent decades, banking reform has been a priority of
the IMF and World Bank. One important reform was obtaining permission for increased
penetration by foreign banks. South Africa and Egypt have been the most successful in attracting
local operation of foreign banks. In 2007, Egypt surpassed South Africa as the biggest recipient
of FDI recording $11.1 bn. This trend continued in 2008, where Egypt attracted $13.2 bn in FDI.

Encouraging foreign investment in Africa has been difficult. Even Africans are reluctant
to invest locally; about forty percent of sub-Saharan African savings are invested in other
markets. The IMF and World Bank only lend money after imposing stringent and controversial
conditions such as austerity policies. However, China and India have showed exponentially
increasing interest in emerging African economies in the 21st century. Investment in Africa by
China and African trade with China has increased dramatically in recent years, even regardless
of the current world financial crisis. The increased investment in Africa by China has attracted
the attention of the European Union and has provoked talks of competitive investment by the
EU. Members of the African diaspora abroad, especially in the EU and the United States, have
increased efforts to use their businesses to invest in Africa and encourage African investment
abroad in the European economy. Remittances from the African diaspora and rising interest in
investment from the West will especially be helpful for Africa's least developed and most
devastated economies, such as Burundi, Togo and Comoros.
 Angola has announced interests in investing in the EU, Portugal in particular. South
Africa has attracted increasing attention from the United States as a new frontier of investment in
manufacture, financial markets and small business, as has Liberia in recent years with new
leadership.

• Communication and information technology

The continent has the largest growth rate of cellular subscribers in the world. African
markets are expanding nearly twice as fast as Asian markets. The African cell phone has created
a base for cellular banking. Namibia has attracted international attention with new phone
services and liberalization of regulatory controls in Kenya are producing a boom in Internet
services demand and demand for modern communication technology.

Foreign Direct Investment in Africa

 FDI has been one of the principal beneficiaries of the liberalization of capital flows over
recent decades and now constitutes the major form of capital inflow for many SSA
countries, including some low-income ones like Chad, Mauritania, Sudan and Zambia.
Economies are often considered less vulnerable to external financing difficulties when
current account deficits are financed largely by FDI inflows, rather than debt-creating
capital flows. For instance, in South Africa in 2007, FDI covered the whole of the current
account deficit. There is no denying the importance of FDI inflows both for their
contribution to sustaining current account imbalances in countries and for their
contribution to broader economic growth, through technological spillovers and
competition effects.

 Prior to the financial crisis, foreign direct investment (FDI) inflows to Africa had been
rising strongly since 2002, reaching USD 53 billion over 2007, a 47.2 per cent increase
on 2006 and their highest historical level. In 2007, USD 22.4 billion was directed to
North Africa and USD 30.6 billion to Sub-Saharan Africa. Africa’s share of global FDI
flows registered a significant decline to 2.9 per cent of global FDI in 2007, down from
3.2 per cent in 2006. Even according to recent estimates, while global FDI may have
 fallen by up to 20 per cent in 2008; flows to Africa have remained resilient, growing by
16.8 per cent to USD 61.9 billion over 2008, despite the slowdown. The rate of return of
FDI in Africa has been, increasing since 2004 and, at 12.1 per cent, was the highest
among developing host regions in 2007. Mergers and acquisitions (M&A’s) in Africa
rose by an estimated 157 per cent to USD 26 billion in 2008.

 Behind a large share of the rise in FDI lies surging prices for raw materials, particularly
oil, which fuelled a boom in commodity-related investment. High raw-material prices
also helped maintain outward FDI flows from Africa, which remained stable at USD 6.5
billion in 2007. As a percentage of gross fixed capital formation, inflows stabilized at 21
per cent. Nevertheless, with the advent of the crisis, lower world demand and depressed
prices for Africa’s commodity exports are expected to affect investment levels, with
particularly negative short-term effects for the resource-exporting countries in the region.

 Attracting FDI into diversified and higher value-added sectors remains difficult in many
countries. According to UNCTAD data, the primary sector remained the main focus of
foreign investment. However, foreign interest in communications, manufacturing and
infrastructure investments also increased. Service-sector investment rose in North Africa,
but remained negligible in Sub-Saharan Africa, barring financial institution buy-ins.
Notably, some commodity-exporting countries have been making significant efforts to
move up the value chain by, for example, expanding their refinery activities (Côte
d’Ivoire, Egypt, Nigeria), though higher labour costs than other developing countries still
hobble the potential for FDI in manufacturing.

 FDI increased in 36 countries, and declined in 18. Top FDI destinations for 2007 were:
Nigeria (USD 12.5 billion) Egypt (USD 11.6 billion) and South Africa (USD 5.7 billion)
followed by Morocco, Libya, and Sudan. South Africa shifted back to a positive balance
after having found itself a net exporter of investment capital in 2006, according to
preliminary estimates, South African inflows more than doubled over 2008 to USD 12
billion. The most attractive countries for investment tend to hold significant natural
resource endowments, active privatization programmes, liberalized FDI policies and
active investment promotion activities.

 FDI levels and prospects still vary widely by region, sector and country. North Africa’s
sustained privatization programmes and investment-friendly policies continued to attract
large FDI inflows, reaching USD 22 billion in 2007, a 15 per cent increase on 2006.FDI
investments in North Africa were the continent’s most diversified, with projects in
textiles, oil and chemicals and the production of generic pharmaceuticals. Inflows to
Egypt remained substantial, reaching USD 11.6 billion. Privatizations also boosted FDI
to the sub-region (for example the privatization of the Crédit Populaire d’Algérie and the
USD 5.4 billion foreign entry into Libya’s state-owned Tamoil). West Africa continued
to benefit from the commodity boom and ambitious privatization schemes, leading to
inflows of USD 15.6 billion in 2007. Nigeria still accounted for 80 per cent of total West
African investment, mostly reflecting oil industry expansion projects.

 Central African inflows grew by 28 per cent to USD 4.1 billion. East Africa, still the
lowest recipient of FDI on the continent, saw a 65 per cent increase in FDI flows in 2007,
 from USD 2.3 billion to USD 3.8 billion, thanks to new prospects in the primary sector
and through projects in Madagascar and privatizations in Kenya.

 In Southern Africa, Angola remained a net capital exporter in 2007. South Africa, the
continent’s most diversified economy after having become a net exporter of capital in
2006, once again registered positive net inflows of USD 5.7 billion. Preliminary
estimates suggest a further boost of inflows over 2008, reaching USD 12 billion at year’s
end. South Africa’s stock of FDI at work in the country remains the highest in the
continent by far at USD 93 billion, nearly a quarter of total FDI stock in Africa (standing
USD 393.4 billion at end 2007). In 2007, FDI to the LDCs increased to USD 10 billion,
from USD 9.6 billion the previous years.

 Ten African countries introduced policy measures to improve the investment climate in
2007, most notably improving regulations pertaining to FDI and transnational company
involvement in the economy. Regional entities also introduced FDI-promoting measures
in 2007, including the COMESA Common Investment Area, which ambitions to establish
a free investment area by 2010 and help its members, most of which are too small to
attract sufficient investment to support national development and regional integration
projects. ECOWAS created a department to promote cross-border investment and joint
ventures so as to foster investment and public-private partnerships and is working to
deepen the financial integration of the sub-region through its Finance and Investment
Protocol. The SADC is also undertaking a joint investment promotion programme with
the EU. In May 2008, the AfDB signed a memorandum of understanding with the
Export-Import Bank of China, with provisions for co-financing and guarantees for public
and possibly private sector projects.

 FDI outflows from Africa remained strong in 2007 at USD 6 billion, though short of the
peak of USD 8 billion of 2006. This performance was due to expanding operations of
trans-national corporations, particularly from South Africa but also from countries that
had been benefiting from high commodity prices. Top contributors to outward FDI were
South Africa, Egypt, Morocco, Liberia, Angola, Algeria and Nigeria, mostly investing in
natural resources exploitation and the services sector. South African firms invested
heavily in banking, ICT and infrastructure. South African TNCs accounted for 80 per
cent of total African outflows in 2007, with Morocco, Liberia and Nigeria accounting for
a further 12 per cent. Though African FDI outflows remained centered on extraction,
African TNCs also engaged in telecommunications and retail-sector investments.

 While the boom in commodity markets contributed to maintaining growth in foreign

investment through 2008, lower demand and depressed raw material prices brought on by
the crisis have made disinvestment a looming prospect. This is echoed by the latest
UNCTAD survey findings, stating that only 20 per cent of investors plan to increase
investment in Africa between 2007-09 (against 80 per cent for Asia), illustrating foreign
investors’ narrow perspective on African investments.

 The composition of non-FDI capital flows shows persistent variations between country
groupings: ODA and bank lending predominate in Low Income Countries (LIC); equity
flows are largely restricted to South Africa; bond financing is making inroads into
 middle-income countries, even though Nigeria had to cancel its first global Naira-
denominated bond issue in early 2009 due to bad market conditions. South Africa is also
developing into a source of external financing for other African countries.

 The value of cross-border mergers and acquisitions (M&A) activity fell sharply in 2007
to USD 10.2 billion from USD 19.8 billion in 2006, partly due to fewer extractive and
exploration projects for sale. Nevertheless, preliminary estimates for 2008 show sharp
swing back of 157 per cent to USD 26.3 billion, thanks to a massive jump in M&A
activity in Egypt to USD 15.9 billion.

 China expanded its support to Chinese investments in Africa, building on its general
investment policy on Africa adopted in 2006. In 2007 the Export-Import Bank of China
financed over 300 projects in the region, constituting almost 40 per cent of the Bank’s
loan book. The Industrial Bank of China (ICBC) made a large investment in the Standard
Bank Group of South Africa. Japan announced in May 2008 its decision to set up a USD
2.5 billion investment fund (the Facility for African Investment, managed by JBIC) to
help Japanese firms do more business in Africa, as part of its target to double Japanese
private-sector investment on the continent to USD 3.4 billion by 2012.

 Sovereign Wealth Funds and national investors are also investing more in Africa’s
infrastructure and have become, through their sheer size (predicted to reach at least USD
5 trillion by 2012), important potential sources of FDI. Also increasing importance are
investors from the Middle East, especially, but not limited to, North African projects.

 While Africa was recently being hailed as an exciting financial frontier, even barring the
crisis, local equity markets remain small, and local currency debt markets often too
illiquid to exert a significant growth impact. Though the number of functioning stock
markets has risen from five in 1989 to sixteen in 2007, in effect, the majority of African
exchanges lists only a handful of companies and is highly illiquid. There was for example
no trading on the Maputo Stock exchange for the whole of 2004. Excluding South
Africa’s Johannesburg Stock exchange (JSE, with 401 listed companies in 2006), the
average number of domestic companies listed per exchange was only 43 in 2006.

 In response to perennial size and liquidity problems, two exchange operators are
attempting to create centralized, continent-wide exchanges. The Johannesburg Stock
Exchange (JSE), the largest on the continent, is attempting to bring the largest African
firms to make secondary listings in South Africa. The second initiative involves Financial
Technologies, the operator of India’s commodity exchange, which is seeking to establish
a pan-African commodity bourse. Based in Botswana, Bourse Africa could facilitate
trades across the continent.

 The African Union has also been looking to develop a pan-African Stock exchange, but
the project remains in early stages. Widespread exchange controls, incompatible
regulatory regimes and national resistance remain formidable hurdles to any pan-African
exchange project.
 As of March 2009, the Johannesburg Stock Exchange (JSE) had lost 45 per cent from its
peak in May 2008. This is not a bad performance, relative to that of many mature
markets, but the rapid currency depreciation following the repatriation of foreign capital
has exacerbated the impact of the fall.

 Private equity fund raising, static at USD 2.3 billion in 2006 and 2007, increased to USD
3.2 billion for 2008, bringing the total funds invested through private equity funds to
USD 7.6 billion for 2008. South Africa’s private equity industry reached ZAR 86.6
billion in funds under management at end-2007, an increase of 46 per cent over 2006, and
with funds under management representing 2.8 per cent of GDP, up from 1.7 per cent in
2006. Sixty-four per cent of funds raised over 2007 were from US sources, up from 39
per cent in 2006. Private equity investment activity reached 5 per cent of total South
African M&A activity (measured in terms of deal size i.e. debt and equity) in 2007. South
African private equity investment activity reached 11th place in 2007 global rankings, its
highest ever position.

 Nevertheless, knock-on effects of the downturn are starting to be felt through the
suspension of projects. A USD 3.3 billion Nigerian-Chinese deal to build cement plants
throughout the continent was suspended. A USD 9 billion agreement between China and
the Democratic Republic of Congo for mineral resources in exchange for infrastructure
has also stalled, in part due to unwillingness from Western creditors to write off the
country’s significant outstanding debt as it contracts new debt.

 The Institute of International Finance forecasted in January 2009 that net private sector
capital flows to emerging markets would fall to about USD165 billion in 2009 from the
USD466 billion recorded in 2008, and warned that capital flows to emerging markets are
in danger of collapse as the financial crisis in developed economies chokes off the supply
of credit to developing economies. According to the IIF, commercial banks are expected
to make a net withdrawal of about USD61 billion from emerging markets in 2009.
Remittance inflows to Africa, estimated at USD 10 billion for 2007, are also set to fall by
up to a third as the economic situation of migrants in developed host countries
deteriorates.

 While the small size and isolation of Africa’s financial markets initially appeared to
provide effective protection in the first stages of the financial crisis, it has quickly
become clear that the continent, dependent on external factors such as the Asia-driven
commodity boom for its outstanding growth run of recent years, is very much in the front
line for the second-round effects of a global recession.
Africa’s access to external finance is likely to be severely constrained, creating
uncertainty as to how it will secure the substantial foreign investment it requires to fund
projects, create jobs, finance current account deficits and continue to develop. With
global banks pulling back capital from all emerging markets, African banks, while not
initially affected by the crisis and little exposed to toxic instruments, will find themselves
with much tighter credit conditions limiting the availability of trade finance and
constraining their own lending.
  There is however the possibility that South-South investments could help take up some
of the slack. Two recent examples are noteworthy. First, the Liberian government has
recently signed a USD 2.6 billion agreement with a Chinese company, China Union, to
excavate iron ore, in what constitutes one of the largest ever FDI projects in the
continent. Secondly, the Brazilian company Petrobras has announced a massive
expenditure plan for the period 2009-2013, reaching USD 174 billion, of which 2 billion
are planned for Nigeria and 800 million for Angola. Over the medium to long term, as
commodity prices recover investor interest can be expected to return. These new forms of
co-operation are not without risks, however.

 Nevertheless, the impact of tighter credit conditions on African small and medium
businesses is likely to be limited. Most companies have always had very limited access to
bank credit, which accounts for example for only 10 per cent of the capital lent to
Nigeria’s manufacturing sector.

 As private sources of capital dry up, so development finance institutions, such as the IFC,
will have a critical role to play. The African Development Bank’s plans to triple lending
for African infrastructure schemes in an effort to salvage key projects are an indication of
the increasingly important role multilaterals, development banks and DFIs may be led to
play should downside risks materialize fully.

 The AU has established the African Investment Bank, which while not yet functional,
appears to be making some progress, with a proposed launch set for 2011. To be based in
Tripoli, Libya, and wholly-owned by African actors, the bank is designed to serve finance
private sector development and development initiatives, notably infrastructure.

ACTUAL INVESTMENT FLOWS in Africa

FDI flows to developing countries surged in the 1990s and became their leading source of
external financing. In Africa, the main attractions for FDI are market-related, notably the size
and the growth of the local market and access to regional markets. In China and India, the
biggest attractions are the size of the domestic markets.

In Latin America, investment has been attracted by profitable opportunities from

privatization. Most new investment inflows go into non-tradable service and manufacturing
industries producing mostly for the domestic market.

Investment flows to Africa have declined steadily. In the 1970s, Africa accounted for
25% of foreign direct investment to developing countries. In 1992 it only accounted for 5.2%
whereas in 2000 it received 3.8% of the total FDI to the developing world. During the period of
1982-1999, most FDI flows to developing countries were directed towards the South, East and
South-Eastern Asia followed by Latin America. The SADC region on the other hand experienced
a decline from 0.9% to 0.3% between 1995 and 2000. According to the WIR (2001) FDI inflows
to Africa declined from $10.5 billion in 1999 to $9.1 billion in 2000. African share of FDI in the
world fell below 1 percent in 2000. The inflow to its top recipients, namely, Angola; Morocco;
and South Africa have fallen by half. The main sources of FDI to Africa were France, the United
Kingdom, and the United States, and to a lesser extent, Germany and Japan (WIR, 1999).

On average FDI flows to North Africa remained more or less the same as in the previous
year, $2.6 billion. Flows declined into Morocco and Algeria but increased to Sudan
(concentrated in petroleum exploration) from $370 million to $392 million. Egypt has remained
the most important recipient of FDI flows in North Africa. In sub-Saharan Africa, there has been
a decrease in FDI from $8 billion in 1999 to $6.5 billion by the year 2000. A sharp drop of
inflows into two countries caused the overall drop of inflows into Sub-Saharan Africa: Angola
and South Africa. In South Africa, the reduced inflow of M&As in the country played a role in
the downturn. The decline of inflows in Angola resulted in FDI flows to the least developed
countries to drop from $4.8 billion in 1999 to $3.9 billion in 2000.

More recently, a group of African countries including Botswana, Equatorial Guinea,

Ghana, Mozambique, Namibia, Tunisia and Uganda have attracted rapidly increasing FDI
inflows. The reasons I differ from country to country. In the case of Equatorial Guinea it was
mostly rich reserves of oil and gas. Natural resource reserves also played a role in the case of
Botswana, Ghana, Mozambique and Namibia.

Privatization has been pointed out as a factor which is attributed to attracting FDI to
countries like Mozambique, Ghana and Uganda. Angola has attracted most FDI in Africa,
compared to its GDP, particularly in offshore exploration of gas and petroleum. The Angolan
case proves that it is insufficient to base an analysis of FDI trends only on what business
determines as attractive for FDI. Angola attracted resource-seeking FDI despite being the site of
a longstanding war. After Angola, South Africa is attracting most FDI in the Southern African
region, mostly from the US and the UK. Even though South Africa is supposed to be one of the
recipients of FDI, the figures given by UNCTAD do indicate that South Africa is also a massive
exporter of capital. South Africa is seen as the most attractive country for FDI by business

Flows by region: SADC

 The Southern African Development Community (SADC) was established in 1992 out of
the South African Development Coordination Conference. SADC committed itself to
develop protocol that should take into account the heterogeneity of the region and
interests of the different stakeholders (International Investment Treaties in S.A).

 The SADC trade protocol was signed in 1996 by all member states and it provides for the
creation of a free trade zone among the member states. The main aim of the protocol is to
contribute towards the improvement of the climate for domestic, cross-border and foreign
investment.

 Due to the drop of FDI flows into Angola and South Africa, the overall SADC region
experienced a fall in flows from $5.3 billion in 1999 to $3.9 billion in 2000. However,
countries like Mauritius and Lesotho experience strong increases in FDI whereas others,
 for example, Zimbabwe experienced a significant drop from $444 million in 1998 to $59
million in 1999 and only $30 million in 2000 (WIR, 2001).

 The latest figures of FDI into SADC by UNCTAD (2001) reveal that the highest amount
of FDI inflow in absolute terms was recorded by Angola (US$ 1,8 billion), followed by
South Africa with an inflow of US$ 877 million. The rest of the region accounted for FDI
inflows of less than US$300 million in the year 2000.

Flows by sectors
 A large proportion of FDI is directed towards the primary sector, especially oil and gas.
Between 1996 and 1999, most investments in the SADC region went into the metal
industry and the mining sector and thereafter into the food, beverages and tobacco
sectors. Other sectors like tourism accounted for a small amount of FDI.

 Sectors attracting FDI in the SADC region in order of priority are: the mining and
quarrying; financial services; food; beverages and tobacco; agriculture, forestry and
fishing; hotel; leisure and gaming; other manufacturing; energy and oil; telecom and IT;
retail and wholesale and construction.

Indian FDI in Africa

 The move by India's top telecom player Bharti Airtel to acquire the African assets of
Kuwait's Zain marks the biggest foray of a domestic company into the continent. The
landmark deal, estimated at $10.7 billion, raises the level of Indian investments in Africa
to $16.7 billion. Airtel's entry into Africa is hugely significant as it underlines the
enormous potential available in the continent for Indian industry. In the telecom sector
alone, the sky is the limit as far as growth is concerned. Tele-density in the continent is
only about 30 percent.

 The Tata’s, India's largest industrial group, were the first to make their presence felt
there. The group is estimated to have already made about $1.6 billion worth of
investments in Africa, the latest being a luxury hotel in Cape Town.

 The other Indian corporates which are active players in Africa include automobile majors
Ashok Leyland and Mahindra and Mahindra, electronics and white goods giant
Videocon, consumer products firms Marico, Dabur and Godrej, energy giant Suzlon,
 breweries group UB, drugs manufacturers Cipla, Dr. Reddy's Labs, software and IT
education firm NIIT, and diversified houses Kirloskars and Essar.

 Even state-run firms like the Oil and Natural Gas Corp (ONGC) bought a 25-percent
stake in Sudan's Greater Nile Project seven years ago in a bid to improve the country's
energy security, raising quite an eyebrow. But crude supplies to India have already begun
and ONGC maintains its entire investment of nearly $1 billion had been paid off in three
years. Unfortunately, ONGC has been less than successful in recent years in acquiring
oilfields in less controversial parts of Africa like Uganda and Algeria, where it has been
outbid in some cases by China.

 This, in turn, highlights the fact that Indian investment in Africa are way behind that of
China which is estimated to have invested about $60 billion in that continent.

 Thus despite India's traditional ties with countries like Kenya, Uganda and Tanzania,
China has recently made substantial investments that go far beyond the Indian private
sector initiatives.

 Even so, it is clear that there is vast potential for Indian industry to have a larger presence
in Africa. One major plus point is the huge middle class estimated to range from 350
million to 500 million, even larger than the Indian market.

 Automobiles, IT and fast-moving consumer goods of Indian companies have already

made their mark. The pharmaceutical industry has also played a role in providing cheap
and effective drugs for a market that earlier relied on high-value drugs produced in
developed countries.

 As for telecom, Airtel is not the first Indian entrant to the African market as Essar has
already launched its YU brand in Kenya and is planning to be a pan-African player.
Telephone density ranges from 14 percent in Congo to 123 percent in Gabon though most
countries are in the lower ranges

 In the consumer goods sector, Marico has already acquired a hair products brand in Egypt
while Godrej has bought Tura, a soaps and lotions brand that is a household name in
Africa.

 As far as India-Africa trade is concerned, a target of $70 billion has been set for the next
five years from the existing level of about $40 billion annually. This is much lower than
the existing level of China-Africa trade, currently estimated at $109 billion. At the same
 time, there appears to be a recognition in official circles that India needs to ramp up
political and economic ties with Africa.

 The recent Africa-India conclave in New Delhi, sponsored both by industry and
government agencies, managed to discuss business projects worth $10 billion.
Simultaneously there was an effort to highlight the difference in the Indian and Chinese
agendas in the continent, with India's focus being on capacity building, training and
private investment. The effort was to stress the fact that in contrast to the mere profit-
seeking approach of China, India's approach was to bring about empowerment of the
continent.

 It seems even India Inc. is turning away from the tried and tested markets of the West and
is finally taking the plunge into the relatively less-explored countries of Africa. With
growth momentum picking up in many African economies, this is clearly the time for
India Inc. to make the right moves in this highly potential and yet greatly neglected part
of the world.

Few Indian Companies in African Continent

 TATA’s Presence in African Continent

 Ghana
The Tata Group began its Ghana operations in 1998 when Tata Africa Holdings (South Africa)
set up a subsidiary in Ghana with operations in Accra and Tema.

The business includes sales of Tata vehicles and spare parts, and provision of after sales service.
The company also deals in steel products, mining consumables and forklifts

 Kenya
The Magadi Soda Company is Africa’s largest soda ash manufacturer and one of Kenya’s
leading exporters. The company was established in 1911 and is a wholly owned subsidiary of
Brunner Mond Group, a Tata Chemical subsidiary.

Magadi Soda Company is a leading producer of sodium carbonate and salt. The company
employs over 450 people at its facilities at Lake Magadi, Kenya.

 Mozambique
The Tata Group set up Tata De Moçambique Lda (TDML) in Maputo, Mozambique in 1991.
Over the years, the company has achieved business growth through tie-ups with local businesses
for sales of automobiles and other products. TDML works in the area of sales and service of Tata
vehicles. It is also engaged in the trading of products such as tyres, PVC leather, PP bags, cycles
and plastic floor coverings. The company has invested in a warehouse facility and has service
workshops for Tata vehicles in Maputo, Beira and Nampula.

In 1996, TDML acquired Cometal SARL, a large metal fabrication unit that manufactures
railway wagons for the regional railways. Cometal SARL is located in Machava, approximately
15km from Mozambique's capital city, Maputo.

 Nigeria
Tata Africa Holdings (South Africa) set up its Nigerian subsidiary, Tata Africa Services
(Nigeria) in 2007 in Lagos.

The company intends to sell Tata vehicles and spare parts, forklifts and construction equipment,
and provide after sales service on all these products. It will also provide IT related services and
participate in power projects. The company proposes to commence business by October 2008.

 Senegal
Tata Africa (Senegal) SARL was incorporated as a fully owned subsidiary of Tata Africa
Holdings (South Africa) in 2007. It commenced operations from June 2008. The company
operates from the capital city of Dakar and is involved in the sales of Tata vehicles and spare
parts, generators, motorcycles and scooters, tyres and flexible packaging material.
  South Africa
Tata Africa Holdings today serves as the nodal point for the Tata Group’s business activities in
Africa. It was established in Johannesburg in 1994.

With the help of several joint ventures and subsidiaries, Tata Africa Holdings has established a
name for itself in the areas of automobiles, steel, chemicals, mining products, power, IT and
related services. Areas of focus and further exploration include telecom, power, mining,
agriculture and tourism.

The company has the following subsidiaries and joint ventures: Accordian Investments (Pty),
Tata Automobile Corporation (SA) (Pty), Consilience Technologies (Pty) and Ehlobo Industrial
Developments (Pty).

In addition, the Tata Group has a stake in Neotel, South Africa's first converged communications
network operator. Both Tata Communications and TCS have a presence here. Tata Tea through
its subsidiary, the Tetley Group, has acquired a stake in South African tea company Joekels Tea
Packers.

 Tanzania
Tata Africa Holdings (Tanzania) was established in 1995. The company’s major business is the
distribution and service of commercial vehicles from Tata Motors (India) and Tata Daewoo
(South Korea). Other businesses include industrial chemicals for the mining sector, textiles, food
and beverages, cosmetic and leather industries, construction glass and pharmaceuticals.

 Zambia
The Tata Group has been present in Zambia for more than three decades. Tata Zambia,
established in 1977 to market Tata Motors vehicles has since expanded its sphere of business to
cover sectors like hospitality, mining machinery and agriculture.

Tata Zambia operates in four business areas. The vehicles division handles sales of vehicles and
spare parts, and manages the workshops and training centre. Today, it is the market leader in the
medium commercial vehicles segment. The general trading division deals in bicycles, steel,
tyres, water treatment chemicals, pipes, roofing, steel sheets, electrical supplies, school furniture
and miscellaneous projects. The mining division supplies products to the mining industry, and
the investments and property division looks after Taj Pamodzi and other properties. The Taj
Pamodzi is a premium hotel owned by Tata Zambia and managed by the Taj group since 1997.

Tata Farms and Foods was set up in 1989 as a division of Tata Zambia. It owns a 508-hectare
farm at Ngwerere near Lusaka that grows export quality roses, crops such as maize and wheat,
and vegetables. Exotic vegetables and roses are exported to Europe, while field crops find their
way to the local markets.

The Tata Group has recently entered into a 50-50 joint venture between Zambia Electricity
Supply Corporation and Tata Africa Holdings Ltd for developing a 120mw hydro project at
Itezhi-Tezhi at an estimated investment of around US$200 million.

Bharti Airtel Presence in Africa

Bharti Airtel Limited (“Bharti”), Asia’s leading telecommunications service provider, announced
that it has entered into a legally binding definitive agreement with Zain Group (“Zain”) to
acquire Zain Africa BV based on an enterprise valuation of USD 10.7 billion.

Under the agreement, Bharti will acquire Zain’s African mobile services operations in 15
countries with a total customer base of over 42 million. Zain is the market leader in ten of these
countries and ranks second in four countries. With this acquisition, Bharti Airtel will be the
world’s fifth largest wireless company with operations across 18 countries. Bharti group’s global
telecom footprint will expand to 21 countries along with the operations in Seychelles, Jersey, and
Guernsey. The company’s network will now cover over 1.8 billion people - the second largest
population coverage among Telcos globally.

The move by India's top telecom player Bharti Airtel to acquire the African assets of
Kuwait's Zain marks the biggest foray of a domestic company into the continent.

Bharti Airtel has a fantastic track record in running successful operations in the emerging
markets and we are delighted that the African telecom asset that we so assiduously built is
becoming part of such a committed and reputable telecom powerhouse.

Airtel's entry into Africa is hugely significant as it underlines the enormous potential available in
the continent for Indian industry. In the telecom sector alone, the sky is the limit as far as growth
is concerned. Tele-density in the continent is only about 30 percent. At the same time, Airtel will
have to contend with stiff competition from MTN, a company it tried to merge with on two
occasions, which is already making aggressive public comments about the Indian company
having made a mistake in going with Zain.

Even so, it is clear that there is vast potential for Indian industry to have a larger presence in
Africa. One major plus point is the huge middle class estimated to range from 350 million to 500
million, even larger than the Indian market.

The main challenge in the continent, however, remains the diversity of its countries. The
northern region is very different from the south and there is a wide range of cultures. The levels
of political stability and economic progress are also markedly different in each area. Marketing
strategies will thus vary widely from country to country.

Airtel's buyout of Zain's African assets thus is not a mere indicator of the growing strength of
Indian industry. It also highlights the increasing importance of Africa as an investment
destination and market for Indian goods and services.

Zain Africa BV has mobile operations in the following 15 countries - Burkina Faso, Chad,
Congo Brazzaville, Democratic Republic of Congo, Gabon, Ghana, Kenya, Madagascar,
Malawi, Niger, Nigeria, Sierra Leone, Tanzania, Uganda, and Zambia. The total population of
these 15 countries stands at over 450 million with telecom penetration of approximately 32%.

Standard Chartered Bank is the Lead Advisor to Bharti on this transaction. Barclays Capital is
the Joint Lead Advisor and SBI Group is the Lead Onshore Advisor. Global Investment House
KSCC is the Regional Advisor to Bharti on this transaction.

Godrej Presence in Africa

Godrej Consumer Products (GCPL), which has acquired as many as three companies in
Africa since 2006 — Rapidol, Kinky and Tura — is now looking at a consolidation plan which
will involve the merger of Rapidol and Kinky. Though Tura is being kept out of the
consolidation plan for now, given that GCPL is still completing the formalities of the acquisition,
it is understood that the Nigeria based beauty care company would eventually be consolidated
into the single entity created by the merger of Rapidol and Kinky.
 Rapidol Pty, which was acquired by GCPL in September 2006, gave the company an
opportunity to enhance its global presence through the modern trade network and the ownership
of ethnic hair colour brands like Inecto and Soflene in ten countries. Inecto has a 92% market
share in the South African Rand 135 million ethnic hair colour market. Kinky, which was
acquired in 2008, offers a variety of products like hair, hair braids, hair pieces, wigs and wefted
pieces to the South African consumer.

Tura’s acquisition will further strengthen GCPL’s presence in the high-growth-potential

African continent.Godrej Consumer Products’ (GCPL) inorganic growth initiatives got a further
fillip, when the company entered into an agreement to acquire the worldwide rights of Nigeria-
based Tura, a leading personal care brand. Tura will be its sixth acquisition in less than five
years. Since mid-2005, GCPL has acquired Keyline brands (UK), Rapidol (South Africa), Godrej
Global Mideast (GCC), Kinky Group (South Africa) and a 49 per cent stake in Godrej Sara Lee
(India). While these acquisitions have helped GCPL sustain superior growth rates in the past,
Tura’s acquisition is unlikely to be different and should further boost the share of GCPL’s
international revenues (in total consolidated sales) from about 22 per cent in 2008-09.

For now, acquisition of Tura appears to be a strategic fit for GCPL. Tura has been a
household brand for over two decades in Africa, whose products like soaps, moisturising lotions
and skin-toning creams are sold widely. Notably, it has an efficient sales network with over 70
per cent distribution reach in the West African region. For GCPL, which currently has a
relatively stronger presence in South Africa, Tura will further strengthen its presence in the
African continent and also prove to be a solid base for introducing GCPL’s own products in
West African countries. To fully capture the synergies, GCPL plans to put in place a cross-
functional team from India, Rapidol, Kinky and Tura operations

Although fruits from this acquisition may take some time to bear, the African continent
provides a huge long-term growth opportunity for GCPL. While analysts say GCPL’s Rapidol
and Kinky brands (which currently contribute about 10 per cent to consolidated sales) are
growing at more than 40 per cent, Nigeria itself is an important personal-product market with a
population of over 140 million and an economic growth rate of 6 per cent. That apart, penetration
levels are also low in Africa. Thus, they expect GCPL’s African businesses to continue growing
at robust rates for a long time.

Meanwhile, the company hasn’t disclosed Tura’s sales and how much it is paying for the
buy. Reports, however, suggest that Tura’s annual sales hover around $50 million, with
operating profit margins of over 15 per cent.
 Post the acquisition news (over two trading sessions), GCPL’s stock has risen 1.5 per
cent to Rs 274.95. While most analysts await finer details of the deal, they have a ‘neutral’ to
‘buy’ rating on the stock with a price target that ranges Rs 290-320.

International Crops Research Institute for the Semi-Arid Tropics (ICRISAT)

Africa and India will boost cooperation in agricultural technologies for smallholder
farmers in Sub-Saharan Africa, with a view to achieving food security by 2015.

The Hyderabad-based International Crops Research Institute for the Semi-Arid Tropics
(ICRISAT) signed a memorandum of understanding (MoU) with the European Market Research
Centre (EMRC) this month, to facilitate ICRISAT's participation in two key annual Africa
business forums organised by the EMRC - the Africa agri-business forum and the Africa finance
and investment forum.

The MoU was signed at a meeting of the Africa-India economic mission earlier this
month (28 February - 5 March) in Hyderabad. Twelve African countries, including Burkina
Faso, Kenya, Mali, Niger and Sudan, took part in the meeting whose agenda included
agricultural equipment, research, soil and water conservation, bio-fuels, post-harvest
management and knowledge parks.

"We have to keep in mind the interests of the smallholder farmer, and this technology-
based partnership should benefit the poorest of the poor," ICRISAT director-general William Dar
told the meeting.

In November 2009, ICRISAT launched a US$18 million project, funded by the Bill &
Melinda Gates Foundation, to increase food security for smallholder farmers in dryland areas.

The ICRISAT-led project in ten Sub-Saharan African countries and four Indian states,
'Harnessing Opportunities for Productivity Enhancement (HOPE) of Sorghum and Millets in
Sub-Saharan Africa and South Asia' has 50 partners that include theAlliance for a Green
Revolution in Africa, the International Sorghum and Millet Improvement Programme, Africa
Harvest and the West Africa Seed Alliance as well as the Institute d' Economie Rurale, Mali, and
USAID.