Sub-Saharan Africa Business Environment Report (SABER)

This report, written by Dr. Anita Spring and Dr. Robert Rolfe of the University of South Carolina, provides a comprehensive examination of Sub-Saharan Africa business conditions. It tracks social, political, and economic trends both for the entire region and its largest markets individually.

SABER 2011 provides annual, up-to-date business environment information for Sub-Saharan Africa (SSA) that includes regional and country summaries, evaluations, and statistical data. SABER studied the GDPs of SSA countries to determine the 20 largest economies. Those selected were grouped into four sub-regions—West Africa, Central Africa, East Africa and the Horn, and Southern Africa. Illustrative data for this 2010-2011 report on these countries focus on current business trends, investments and trade deals, and socio-political events. Detailed quantitative and ranking indicators are used for SABER’s assessments along with extensive research using print and on-line sources and databases. 

Some General Findings
Economic Growth: Before the global recession, Africa’s annual GDP growth rate was 6%. Southern Africa, the hardest hit in 2009, will recover more slowly in 2011, with an average growth of about 4%. East Africa dealt with the global crisis best, and might expect an average growth of 6%; West Africa’s growth will be about 5%; and Central Africa’s will be about 4%.

In 2010-2011, the oil producing countries (Angola, Equatorial Guinea, and Sudan) had the highest growth while Ethiopia had the highest growth for a non-oil country. Nigeria oil growth was stymied by greater nationalization. Single commodity-based countries had high exports and high FDI: Nigeria (99% oil), DRC (96% minerals), Rep. of Congo (99% minerals), Equatorial Guinea (97% oil), Gabon (94% oil), Angola (95% oil), and Cameroon (82% oil).

Agribusiness and agricultural development are booming in Ethiopia, Ghana, Gabon, Mozambique, Nigeria, Senegal, Tanzania, and Uganda. Added value per worker has increased in Angola (134%), Nigeria (86%), Mozambique (64%), South Africa (39%), Ethiopia (27%), and others, while the percent of those active in agriculture has decreased. The Food Production Index has risen (1999/2001 data compared to 2009).

Infrastructure and Telecommunications: Most countries except South Africa are deficient in basic infrastructure (roads, rail, electricity, water systems, schools, and medical faculties). Much of the Chinese FDI and bilateral assistance are directed to this. By contrast, telecommunications are booming. Land-lines decreased and cell phones and mobile banking increased dramatically everywhere. Mobile phone companies are growing by leaps and bounds, a combination of local and government-owned companies, and competitors from India, France, the U.S., South Africa, as well as multinationals like IMB.

Stock Exchanges: There are 11 national and 2 regional stock markets in the SABER countries. Botswana, Ghana, Kenya, Mozambique, Namibia, Nigeria, South Africa, Sudan, Tanzania, Uganda, and Zambia have their own exchanges. Côte d’Ivoire and Senegal are part of BVM, while Cameroon, Eq. Guinea, and Gabon are part of BVMAC regional exchanges. South Africa’s securities exchange regulation was the best in the world in 2010-2011. Exchange Indices showed a banner year in Ghana, South Africa, and Namibia.

Trade with China: China is currently Africa’s largest trading partner; trade grew more than 43% to US$115bn in 2010. FDI increased from US$500mn in 2003 to over US$13bn in 2010. China-Africa co-operation helped Africa reach Millennium Development Goals. China’s “no political strings attached” approaches have been widely accepted by African leaders but widely criticized by African citizens and others. Some question if African countries will emulate the Chinese model (“growing the economy at the expense of political reform”). The U.S. and E.U. worry about corruption, human rights, and environmental issues.

Trade with the U.S.: The African Union asked for the African Growth and Opportunity Act (AGOA) to be extended beyond 2015 and argued for new strategies to increase exports and U.S.-Africa FDI, and that the U.S. help strengthen technical standards in Africa and promote intra-African trade as a platform for increased competitiveness.

Gender Indices: Several African countries rank exceptionally high on the Gender Gap Index in perspective of the world’s countries (South Africa is in 12th place and Mozambique is 25th), a variable that relates to GDP. For ‘Economic Participation,’ Mozambique is 5th and Ghana is 15th worldwide. Botswana ranks first for gender parity and education attainment, Namibia is 34th and South Africa is 43rd. In Political Empowerment, South Africa ranks 9th, Mozambique is 11th, and Angola is 24th. Labor force participation is near parity in many countries, but men and women are paid different rates (lowest pay discrepancy is 10% in Mozambique compared to 58% in Nigeria and 66% in Cote d’Ivoire). Women’s Participation in Parliament is high (South Africa–45%); Mozambique and Angola–39% each; Tanzania and Uganda–31% each; and Senegal–23%).

Some Regional Findings
SABER’s West Africa countries: GDP and FDI are up in Ghana (5th highest growth in the world). Nigeria and Senegal have GDP growth but not much FDI, while Côte d’Ivoire’s declined in both due to the presidential crisis. The business climate is best in Ghana, while Nigeria and Senegal are mixed. Doing Business rankings have improved dramatically in Ghana to 67, as well as jumping 67 points in the getting credit subindex. Nigeria ranked 137 of 183 world countries, Senegal 152, and Cote d’Ivoire 169. In Nigeria, FDI from western oil companies declined, as government signed declarations increasing Nigerian companies’ role in the industry. In Nigeria, China is building economic zones for manufacturing and industrial processing backed by natural resource extraction through FDI projects. Ghana ‘s new found oil is generating FRI, as well as increased government regulations.

SABER’s Central Africa countries: The Democratic Republic of Congo (DRC), Rep. of Congo (Congo), and Gabon have issues with governance and political stability. The region has the weakest infrastructure in terms of roads and transportation, electricity, hospitals, schools and safe water supply. Doing business is difficult in the region, reflected in poor rankings and high corruption. However, FDI is high and related to oil and mineral exploration/extraction businesses. Congo’s economy had the strongest growth in SSA due to oil and DRC’s economy grew due to mineral exports. Equatorial Guinea’s had spectacular economic growth due to oil exported to the U.S. and China. Cameroon’s GDP also rose slightly due to its agricultural commodities and its oil.

SABER’s East and the Horn of Africa countries: The recently elected presidents had little opposition in Ethiopia and Uganda, while in Kenya and Tanzania, the main party and the opposition formed governments of national unity. South Sudan became independent in July 2011. FDI inflows to Kenya dipped, Uganda’s jumped, while Tanzania’s held steady. Ethiopia’s economy grew 9%, the 2nd highest in SSA and 5th highest growth worldwide. Land leasing deals by Saudi Arabia, China, India, etc. were approved by the Ethiopian government as a way to modernize agriculture. Large-scale land deals with China, Korea and Egypt are also taking place in South Sudan. Conducting business became easier in Kenya where the credit rank was raised to 4th in the world. Uganda’s doing business getting credit world rank increased 60 points (from 109 to 49) due to a new private credit sector bureau.

SABER’s Southern Africa countries: Elected democracies in Botswana, Namibia, South Africa and Zambia struggled with opposition parties (in Zambia, the opposition candidate won the 2011 election), and were business-friendly and low in corruption. Botswana ranked as the world’s 33rd least corrupt country. Angola (ranked 163 of 183 countries) and Mozambique was similar, but their authoritarian presidents, as well as high corruption made doing business difficult. The World Bank designated Zambia as was one of the top business reformers in the world (based on a jump in world rank from 84 to 76, with a 36 point jump to 57 in the sub-index starting a business; Mozambique also jumped 31 points in starting a business. South Africa’s world rank was 32; Botswana’s was 52, and Namibia’s was 68. China’s FDI and influx of Chinese workers and settlers increased in Angola, Mozambique, Namibia, and Zambia were related to oil, minerals extraction, construction, and commerce. In Mozambique, the Chinese were also heavily involved in agriculture. Mozambique’s economy had the highest growth (7.8%) mostly due to aluminum exports. Treatments and counseling for people living with HIV/AIDs reached near universal access in Botswana and 65% coverage in Zambia.

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