5 Reasons Sub-Saharan African may hold the Key to Future Economic Development

Sub-Saharan Africa has been a high economic performer over the last few years and continued growth is projected. Ashay Mervyn, a trader responsible for investments in emerging markets, agrees that the future here looks bright. Since Sub-Saharan Africa has recently attained ‘near record’ growth in foreign investment, it seems that investors are convinced.

Here are five of the important reasons why experts believe Africa will shine in the future:

  • Natural resources – as resources in the rest of the world grow scarcer, the untouched reserves in Sub-Saharan Africa will continue to enhance its wealth and influence. Recent economic growth has been fuelled by new oil and gas reserves discovered in Tanzania, Mozambique and other parts of east Africa. The copper rich areas of the Democratic Republic of Congo continue to make it Africa’s largest copper producer and Sierra Leone has large deposits of iron ore, both have helped give the continent an economic boost.
  • Industry – at the forefront of Sub-Saharan Africa’s economic growth, Ethiopia has become one of the main manufacturing centres of the region. Already a strong producer of textiles, Ethiopia plans to expand into other industries including sugar, cement, and leather products. According to Julians Amboko, a research analyst at Starlink Africa, this will be ‘an engine of growth going forward’. Côte d’Ivoire, with the largest economy in West Africa, is also an attractive area for foreign investors interested in high performing exports like cocoa, cashews, and oil.
  • Young population – the vibrant youthful population of sub-Saharan Africa is another valuable resource. Population control methods in China have swung the mean age of that country much older, which may hamper economic growth in the future. Africa on other hand has a young workforce easily capable of supporting the small retired population and growing the economy at the same time.
  • Educated, urbanised population – in the past, raising the levels of literacy and mathematical skills has been a problem for Sub-Saharan Africa, but that is already starting to change. People in this part of the world see improved education as a clear goal for the future. Many areas are also becoming increasingly urbanised. These new population trends have the ability to change poor governing strategies and corruption that have hampered Sub-Saharan Africa in the past.
  • Consumer class – as Sub-Saharan Africa develops a larger consumer class, this will affect world markets, just as the advent of a Chinese middle class significantly changed many companies’ production focus. In the future, African consumers will be an important factor driving global industry.

There are some challenges ahead, but signs already show a trend toward resolving these issues for more uniform economic growth. The 21st century, long thought to be ‘The Asian Century’ may yet turn out to be dubbed Africa’s success story.

The Latest Trends Show a Positive Economic Future for Sub-Saharan Africa

Sub-Saharan Africa has been dogged by a number of negative and outdated stereotypes for years now, stereotypes which mask the growing trend towards strong economic development in this part of the world. On average, African economies increased by 4.5% in 2015, down slightly from recent years due to lower oil prices, but still on track to achieve significant growth before 2017. Ashay Mervyn, trader in Emerging Market Assets and expert on the African economic scene, recognises that some economies in particular have strong potential for stable growth.

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Ethiopia is a major area for foreign investment in textile manufacturing and other industries. This country has a Millennium Development Goal of achieving Middle Income Status by 2025, and many government projects help to add depth and stability to the economy. With a CAGR of 9.7% estimated for the next few years, Ethiopia’s economy is likely to only improve.

The Democratic Republic of Congo (DRC) is also experiencing significant growth, thanks to mineral extracting and manufacturing industries as well as excellent prices for raw materials in recent years.  With the first Millennium Development Goal to eliminate hunger being a major priority, it is clear that the government are actively concerned in the nation’s development. This can also be seen in the country’s strong public programme supporting its natural resource industry. The DRC is on track to maintain an 8.62% growth level over the next few years.

Côte d’Ivoire, Mozambique, and Tanzania are all expected to achieve a CAGR of above 7%. Côte d’Ivoire has a wealth of rich farmland and a climate that favours the production of large agro-industrial crops. Meanwhile new discoveries of oil and natural gas in east Africa promise to sustain growth in Mozambique and Tanzania and may even propel these countries into the World Oil Hub. In 2015, Tanzania’s Energy and Mineral Minister announced a total of 55.08 Trillion Cubic Feet of energy reserves, while Mozambique boasts more than one hundred TCF of natural gas.

These positive economic trends are evident in the attitude of the population. According to a 2015 survey by the Pew research centre, almost half of Sub-Saharan Africans believe their country is on a good track for economic development. Only the Asia-Pacific region ranked higher in the survey (51%), while Europeans rated their economic development the lowest with only 28% seeing positive growth. Figures vary from country to country, with an astounding 89% of Ethiopians affirming that nation’s trajectory, and Tanzania hitting the midpoint of 48%. Overall, the past ten years of solid growth have given Sub-Saharan Africa a strong hope for the future.

Next time, the blog will discuss 5 reasons that Sub-Saharan Africa might hold the key to future economic development – bookmark this page to stay up-to-date.

Colombia’s Emerging Market Status Sparks Global Interest

Despite the recent financial crisis, emerging markets across the world continue to be attractive to investors. Many countries still offer investors the prospect of good returns. One notable example of a country which is emerging as an attractive investment option for investors across the globe is Colombia.

For a long time, the headlines coming out of this South American nation were gloomy and troubling. Political and economic turmoil have plagued the country, but things are changing rapidly. With a much positive political landscape, the economy has stabilised, and foreign investors have renewed confidence.

Like many other emerging markets, Colombia may still have some way to go, but economic experts see the country heading in the right direction. Economic growth has outperformed even those of developed countries like the United States, with Colombia’s GDP growing by over 4.5% in 2014 and 2015.

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To investors and traders in emerging market assets like Ashay Mervyn, Colombia’s turnaround is particularly interesting. For many years, Brazil’s economic might has overshadowed its South American neighbors, but with the powerhouse going through a rough patch of its own, the positive strides made by Colombia offer hope not just to the nation, but to other countries in Latin America.

The turnaround

Mired by years of rebel fighting and an illegal drugs trade, President Juan Manuel Santos made a commitment to ending the rebel conflict. By extending a hand of peace to the rebels, the president is hopeful that a truce will be reached. Peace for the country will have positive economic benefits for the nation, as money spent on defense can be channeled to infrastructure development, health, and education.

The country’s interest rates stand at just above 4.5%, with inflation at 2.8%, the lowest among Latin American nations. Investment rating agencies Fitch, Moody’s and S&P have given an “investment grade” rating on Colombia, something that has spurred an increase in foreign direct investment in recent years.

Economic policies are friendly to business and investment, and a 2014 Heritage Foundation Index of Economic Freedom gave Colombia a score of 70.7, which is much higher than 59.7 – the region’s average. The index looks at four aspects of economic freedom in assigning the grade: limited government, open markets, regulatory efficiency, and the rule of law. Regulatory efficiency in the country was among the aspects that contributed to the high rating, with effective procedures in place for trade and starting a business.

According to the World Bank in 2013, Colombia ranked third among the best countries in Latin America for doing business, and with regulatory and tax procedures mentioned as factors favorable for investors. The abundance in natural resources, including coal and oil, have always been appealing to investors, and it doesn’t hurt that the county has a good trading relationship with the United States that has been enforced by a free trade agreement between the two nations.

A growing middle class

The middle class has risen from 15% to 28% in the past 10 years, in effect showing that millions in the country can access finance and credit, spend more on goods, and demand better infrastructure and services from the government. In 2014, the Colombian government invested some $12 billion in developing infrastructure.

With a growing middle class, international companies are poised to capitalise on the growing need for consumer goods. From personal care companies like Unilever to auto car manufacturer General Motors, more companies are looking to establish themselves in the Latin American country and even get listed on the local stock exchange.

The currency

Colombia’s currency, the peso, has fallen in value against the dollar in recent years. However, central bank officials are quick to point this out as a good thing to the Colombian export market and hopefully even spur more job creation. Because the country has a lower inflation rate than its Latin American neighbors, a falling peso is not necessarily a bad thing.

Areas of concern

The unemployment rate remains an area of concern for President Manuel Santos’ administration, even though the situation has improved marginally since the recession. Security is another area that the government is working hard to improve, with drug cartels and Marxist rebels still a threat to economic growth and long-term stability, though considerably reduced compared to the past. Ongoing peace talks with the Revolutionary Armed Forces of Colombia (FARC) have borne much fruit.

Elsewhere, the country still has some ways to go before it can reach developed nations’ standards of healthcare, quality of life and education. With a continued push for reforms and government initiatives to bring in more investment, this situation may see marked improvement in the next decade.