The continent of Africa is the world’s second largest continent after Asia, with a total surface area, including several surrounding islands of 30,313,000 square kilometres. It stretches from 40 degrees latitude in the north to 34 35′ degrees south and has 54 independent countries – 48 mainland and 6 island states – with an estimated total population of 700 million.
The economic powerhouse of Africa south of the Sahara Desert is South Africa. Through its well developed infrastructure and deepwater ports, South Africa handles much of the trade for the whole southern African region. In 1970 its immediate neighbours, Botswana, Swaziland and Lesotho, and latterly Namibia, signed the Southern African Customs Union (SACU) enabling them to share in the customs revenue from their trade passing through South African ports.
In order to counter the economic dominance of South Africa in the southern African region, the countries to the north of it organised themselves into the Southern African Development Conference (SADC). Member states include those of the SACU as well as Angola, situated north of Namibia, and it’s oil-rich enclave of Cabinda, and Mozambique on the east coast, and the countries of south-central Africa, Zimbabwe, Zambia and Malawi.
The eastern region of Africa is home to the great wildlife reserves of the Serengeti plains and the Rift Valley lake system which stretch across the countries of Kenya, Uganda, and Tanzania. These countries signed the Treaty for Enhanced East African Co-operation to allow for the free flow of goods and people.
Further north lie the countries of the Horn of Africa and the source of the longest river in the world, the Nile River, which flows northwards over 6690 kilometres to end in the Mediterranean Sea. Somalia occupies much of the coastline, while Ethiopia and Sudan are large inland countries. On the coast of the Red Sea are the two independent republics of Djibouti and Eritrea.
The small landlocked central African countries of Rwanda and Burundi form part of an economic union of countries in the central African region. Other members of the Economic Community of Central African States are Cameroon, the Central African Republic, Chad, Equatorial Guinea, the oil-rich Congo and Gabon and the vast country of the Democratic Republic of Congo.
The Economic Community of West African States (ECOWAS) is a solid geographical bloc of 15 states from Nigeria in the east to Mauritania in the west. The countries of Mauritania, Mali and Niger are located in the southern stretch of the Sahara Desert while the remaining countries are splayed out along the coast line. As a result of their respective colonial histories, these countries are divided into French and English-speaking states. The francophone countries include the republics of Benin, Burkina Faso, Togo, the Ivory Coast (Côte d’Ivoire), Guinea and Senegal while the remaining states of Nigeria, Ghana, Liberia, Sierra Leone, and the Gambia have English as their official language. The Republic of Guinea Bissau is a Portuguese-speaking state to the south of Senegal.
North of the Sahara Desert lie 5 predominantly Muslim countries all bordering on the southern shores of the Mediterranean Sea. Moving from west to east are the three countries which form the Maghreb region, the Kingdom of Morocco which has laid claim to the state of Western Sahara (Sahrawi Republic), a former Spanish colony on its southern border, and the republics of Algeria, and Tunisia. The remaining countries are Libya and finally Egypt occupying the north-east corner of Africa and having an extension across the Gulf of Suez into the Sinai Peninsula through which runs the Suez Canal physically cutting off the continent of Africa from the Middle East. Both Algeria and Libya have vast oil and gas producing fields and are active members of the Organisation of Oil Exporting Countries (OPEC).
There are 6 independent island states associated with the continent of Africa. Off its west coast are the Cape Verde Islands off the coast of Senegal. In the Gulf Guinea off the coast of Gabon is the small island state of Sao Tomé and Principé. Off the east coast of Africa is the island republic of the Comores, and Madagascar, the world’s third largest island with an area of 587,041 square kilometres. Further east in the Indian Ocean are the island republics of Mauritius and the Seychelles. Lying close to Mauritius is the island of Réunion, a dependency of France although its economy is closely linked to that of the east African coast and Indian Ocean islands.
Economic Growth and Opportunities
In 1998 real GDP growth was higher in Africa than any other developing region, while inflation was slightly higher than in Asia and significantly lower than other developing regions. An UNCTAD report shows that for every year since 1991, the rate of return on Africa FDI was between 5% and 15% better than the next best region of the world. Half the world’s ten fastest growing economies are in Africa, albeit growing off very low bases.
1999 was not a good year for Africa. Armed conflict increased and looks set to continue. The slow-down in the world economy affected stock markets; caused currencies to depreciate; and reduced foreign exchange income from oil, minerals and metals and agricultural products. Aid to the region is reducing and investors are having second thoughts, leaving many projects on the drawing board. Aids, malaria, cholera and other diseases are rampant. Foreign debt servicing and corruption mean that little foreign exchange trickles through to fund education, health and infrastructure. Tourism and, strangely enough, information technology provide the best hope for the dark continent.
While many write off Africa as the continent of despair, other enterprising individuals and organisations have recognised the huge, untapped potential of Africa and are actively pursuing business ventures across the continent.
Africa’s opportunities, which range in risk from investing in emerging market funds or one of the listed multinationals active in Africa to trading with African partners, include:
- oil and gas (Angola and Libya);
- mining (West and Central Africa);
- privatisations (South Africa and Nigeria);
- international trade (oil producers and SADC);
- infrastructure (pipelines, roads, telecommunications);
- stock exchanges that are mushrooming in many countries
- using educated English and French speaking African nationals
- and leisure (big game + beaches + golf + climate + satellite + Internet + cell + low cost structure = huge telecommuting opportunity).
However, perhaps Africa’s greatest opportunity lies in its biodiversity, which ranges from Sahara desert to tropical jungle, from snow-capped volcanic Mount Kilamanjaro to the beaches of East and West Africa. Then there is the excitement of stalking big game in the African bush to the thrill of whitewater rafting through the gorges below Victoria Falls or the awe of seeing the Egyptian pyramids at sunrise. While MBendi has a vision of Africa one day becoming the telecommuting centre of the world, in the short to medium term, ecotourism provides the opportunity to develop leisure complexes which can take advantage of game parks, golf courses, beaches and beautiful scenery.
This MBendi web site has been created to assist businesspeople around the world to identify, research and act on these opportunities. Because it is widely used by investors, traders, financial institutions and agencies, project managers and researchers, the website also provides an excellent medium for companies wishing to bring their products and services to the attention of this Africa-oriented business audience.
War and Peace
Currently war and civil unrest is occurring in less than 25% of African countries (Algeria, Angola, Burundi, Comores, Congo, DRC, Eritrea, Ethiopia, Rwanda, Sierra Leone, Somalia, Sudan and Uganda). Compare this to Asia (Cambodia, India, Indonesia, Pakistan, Philippines, PNG, Sri Lanka, Tibet) or even Europe (Balkans, Northern Ireland, Russia and Spain).
Risks and Challenges
The biggest challenge to doing business in Africa is the lack of quality information about Africa; the MBendi web site, which you are using as you read this sentence, aims to overcome that shortcoming.
Some of the other challenges of Africa are:
- fluctuating currencies
- bureaucratic red tape, which is slowly getting easier to wade through
- graft and corruption, as much a fault of the non-Africans who pass the brown paper bags as the poor and often unpaid civil servant who accepts the bag
- wars and unrest, though the changes in South Africa are starting to create a ripple of peace and democracy throughout the region
- lack of local capital
- monopolies such as marketing boards, state trading firms, foreign exchange restrictions, trade taxes and quotas and concentration on limited commodities all place a disincentive on exports, thus delinking Africa from the world economy.
- lack of infrastructure, though in areas such as telecommunications and energy, Africa is able to use new technologies to leapfrog more advanced economies
However, none of these challenges is insurmountable; in fact, some entrepreneurs would contend that African risk is lower than that even of North America.