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Trade Boosts Sub-Saharan Economy

Africa

Africa

In its latest regional forecast, The International Monetary Fund noted that Sub-Saharan Africa’s accelerating economic growth is expected to be broad in 2011. In the IMF’s October 2010 report it was revealed that the growth of the Sub-Saharan region — which encompasses 47 countries excluding North Africa — would be 5% this year. The IMF also predicted a 5.5% growth next year. The organization attributed the Sub-Saharan growth mainly to trade with China, as well as other countries in developing sections of Asia and Latin America along with their high levels of reserved and low inflation.

China’s share in Sub-Saharan Africa’s total exports and imports exceeded that between China and most other regions in the world. Over the last 8 to 10 years, China heavily invested in trading oil and mineral in the region, particularly with South Africa, the continent’s largest economy. China also undertook investment projects to improve the infrastructure in terms of dams, bridges and roads. Abebe Selassie, Regional Studies Division Chief in the IMF’s Africa department, said: “The reason why China is interested in Africa is not just for the minerals and oil but because of its high growth.”

Europe and the U.S. remain the region’s dominant trading partners. The U.S. is also heavily invested on the continent, at a level that IMF officials say is on par with China. Africa has become an attractive export destination for major U.S. corporations, such as Coca-Cola, when they experienced stagnant sales in North America. As CEO of Coke, Muhtar Kent said: “We will rely on some of poorest nations to generate the 7 to 9 percent earnings growth we promised to our investors.” That means from the dukas of Nairobi to the “tuck shops” of Johannesburg, Africa’s mom-and-pop stores are main fronts in Coke’s growth plan, not only for the flagship soda but also for the company’s huge stable of waters, juices and other soft drinks. Coke has become the continent’s largest employer, with 65,000 employees and 160 plants. The current presence and the significance of Coke’s business in Africa are far greater than in India and China.

Here are some facts about Africa for U.S. investors and exporters:

  • After China and India, Africa is seen as the next emerging billion-person market.
  • The continent has large niches of consumer spending power.
  • Tourism and telecommunications along with natural resources are hot industries for investors.

Overall trade will continue to be the main driver of Africa’s growth in the future. But the other essential drivers such as political stability and the business climate, including a prudent exploitation of natural resources and the quality of economic management, are also crucial for Sub-Saharan growth in this century.

Ayse Oge is a SCORE counselor and instructor. She is President of Ultimate Trade, International Trade Consulting, Speaking and Training www.goglobaltowin.com