Country Profile Information Pack

Global Macro and Political Risk

A summary of Global Macro and Political Risk situation of the 20 African Countries of which Hamilcar Capital focuses on

Introduction

Africa, the world largest and second most populous continent home to 1.1 billion people, is often characterized by poverty, corruption, disease and war. Yet, with another glance visions of color, culture and growth come into mind. In recent years, opportunities for economic growth have been acknowledged and the need for in-country relationships between the private and public sector have become increasingly important.

While trying to understand the continent, which in itself cannot be homogenized and generalized into a single conclusion, understanding the history is important for those wishing to invest in Africa. What is noteworthy about this subject is the progress made by the continent, which is now rising to be one of the fastest growing regions in the world. General signs of development are seen in infant mortality rates, where Kenya, Senegal and Rwanda have seen falls of approximately 8% a year comparable to India which represents one of the fastest growing economies in the world. Notable examples include the decrease in HIV/AIDS, malaria-related deaths and primary school enrollment throughout the continent.

However, despite these advancements generally achieved throughout Africa, some obstacles to development and growth still persist. In his speech to the African Union in July 2015, President Obama highlighted on-going poverty, neglected infrastructure, lack of water and electricity, and corruption and concluded: “Africa’s progress relies on a fragile foundation.” In order to address these issues, it is important for the continent to address the importance of strong institutions that will ignite growth and reforms as well as promote an African Unity vision. Emphasis is also put on the urgency for Africa to shift from commodity-led growth to inter-regional trade as a means of rebalancing the economies within the continent. Undoubtedly, job creation and training should also be prioritized as it ignites growth, reforms and sustains political stability.

In order for Africa to continue its growth and move towards sustainable development, there are six areas that Hamilcar believes are essential. First, Africa must begin to look internally for growth in terms of improving pan- African relations and directing relations with foreign companies towards local job creation. This calls on need to initiate training in order to enhance job opportunities and returns. For example, while Rwanda has a fertile ecosystem, the country is heavily dependent on food imports, thus calling for more training for the farmers to improve their yields. This can be done with the help of institutions and mechanisms that will help facilitate improvements in small-scale farming while also fundamentally pushing for the development of large-scale commercial farming.

Second, with regards to power shortages throughout the continent, Hamilcar Capital believes that in order for further growth to take place, reducing the number of Africans living without sufficient electricity is prominent. Countries such as Botswana, Ethiopia and Ghana, amongst others, must overcome the issue of power shortages as it continues to remain an obstacle for investment and economic growth. Fourth, as a result of impeding effects of climate change, Africa must continue to work with other countries- within and outside of the continent- and multinationals in preparing and adapting. Fifth, African countries must continue to invest in their public health systems. While progress has been made as suggested by the tackle against HIV/AIDs and the recent Ebola epidemic, in Nigeria, a leading model of African growth, only 2% of Nigeria’s GDP is spent on public health.

Ultimately, in order to improve these areas of concern, looking into the political aspects and characteristics is significant, thus calling upon the last two points: building democracy and upholding human rights, and improving security and peace. The call for fair and free elections, freedom of speech, press and assembly and the commitment to Human Rights Protection for all are contributing factors to any form of development to be upheld by African States. This of course will positively impact and improve the security situation as good governance and less corruption will be put into place.

These factors are prominent in understanding the type of investment that is needed in the continent. At the same time, understanding the unique country-by-country dynamics and characteristics is significant as there is no one- size-fits-all policy. As such, Hamilcar Capital has put forth this information booklet for investors, which serves to provide a brief summary of the countries of which Hamilcar Capital invests in.

Foreign Direct Investment (FDI) in Sub-Saharan Africa

In absolute terms, Foreign Direct Investment (FDI) in Sub-Saharan Africa has significantly increased over the last few decades. According to the World Investment Report, FDI inflows to Africa remained at $54 billon in 2015. However, with FDI inflows showing a high degree of concentration in only a few countries the overall performance of the region in attracting FDI is disappointing and there is mixed evidence regarding FDI impact on economic growth in the region. In 2014 alone, FDI projects were estimated to have created 188,400 jobs in Africa; an arguably poor performance considering the rapidly growing population and persistent high levels of unemployment.

Investors are increasingly attracted to Africa’s promising agriculture sector (ahead of mining and metals). Growing investment in agriculture will undoubtedly bring positive returns to Africa, however, many African farmers continue to hampered by wretched transport links, inefficient markets, inadequate facilities, high wastages, amongst other issues. Increase in FDI will provide base for improvements in the economy and society in ways such as enhancing nutrition and health, providing resources to improve rural education, controlling urban migration, and aiding the development of the rural industry. However, FDI alone cannot ensure positive impact on economies, and there is a need for African leaders to drive the structural transformation (such as regional integration, infrastructure development, entrepreneurship and partnership, etc) necessary to achieve inclusive and sustainable growth.

With poverty alleviation and enhancing economic growth prioritized in the agenda, it is essential that there are continuous efforts in improving the investment climate, with emphasis on the reduction of indirect costs to investors and the reduction of mitigation risks. Targeting the reduction of the high costs associated with much of these countries is essential. This is intertwined with enhancing productivity and competitiveness through investment in information and communication technology and higher education. Strengthening the institutional capacity and the scrutiny of public actions is also important in improving investment prospects throughout the region.

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